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News : Irish Last Updated: Feb 26, 2013 - 9:26 AM


Tuesday Newspaper Review - Irish Business News and International Stories - - February 26, 2013
By Finfacts Team
Feb 26, 2013 - 9:20 AM

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The Irish Independent reports that  one in seven – or 40,000 – public servants faces a cut in their basic wage under the new Croke Park II deal.

Now more than 290,000 public sector workers will be warned the new deal is the best they can get as they prepare to vote on the package of €1bn payroll cuts.

Government and union leaders have already begun selling the deal to public servants by warning it is the best option to avoid an across the- board pay cut.

The higher paid face a major hit under the deal finally hammered out in all-night talks.

Those earning over €65,000 a year face cuts ranging from 5.5pc to 10pc.

The alternative is a government imposed unilateral pay cut, likely to be in the region of 7.5pc for everybody – instead of the one-in-seven hit in Croke Park II.

Unions began their sales pitch within hours of the deal being struck, as they prepared to ballot members in the coming weeks.

Government figures admitted there had been concessions in the talks, including sparing the lowpaid from direct pay cuts, targeting higher earners and the scaling back of cuts to premium pay.

But this deal is gone if the agreement is not voted through. “All bets are off in that case,” a senior government source said.

In a message to members, SIPTU said the alternative to the talks or exiting the process, as some Public Service Committee Congress Unions chose to do, "is to incur a pay reduction across all elements of pay".

The deal was struck without the Irish Nurses and Midwives Organisation (INMO), the Irish Medical Organisation (IMO), the Civil and Public Services Union (CPSU) and UNITE.

The Garda Representative Association (GRA) and the Association of Garda Sergeants and Inspectors (Agsi) walked out when briefing sessions to start the negotiations were held several weeks ago.

But yesterday the Public Service Executive Union was one of the first off the mark to remind members that Taoiseach Enda Kenny would bring in legislation to cut their pay again, if they did not sign up.

"This union took part in the discussion with the stated objective of maintaining the guarantee of no compulsory redundancies and no cut in pay rates," said general secretary Tom Geraghty.

"There will be no further cuts in our members' pay rates and the commitment on redundancies has been reaffirmed."

However it is understood the deal will allow for compulsory redundancy in some very limited circumstances – such as when the public servant cannot or will not be redeployed, or is severely underperforming.

But other avenues must be exhausted before compulsory redundancy is considered.

Mr Geraghty noted that members feared they would exceed the threshold for the 'higher paid' pay cut, but this had not occurred, while increment cuts were not as bad as feared.

Unions won a number of sweeteners for their members that will help get the deal over the line, including the unravelling of a pension levy introduced by the previous government.

All public servants will get a small relief on the levy of €125 per year.

Plans to increase public servants' working hours by five hours a week were also scaled back.

In addition, the Government dropped plans to increase the distance public servants could be redeployed to 80km, from 45km.

IMPACT emphasised that management's opening position was a straight cut to pay scales for those earning €60,000 a year, "if not lower".

It said the Government had threatened to act on this regardless of whether there was a wider agreement.

Although it said the €65,000 threshold that was eventually set for a pay cut was a "political" decision, the union had got a guarantee that pay for anyone earning less than €100,000 a year may be restored in future.

Payroll

The executive committees of 19 public sector unions will meet shortly to decide whether to recommend the deal, which will be rolled out from July if it is passed.

Tanaiste Eamon Gilmore indicated this will be the last time the Government will look to reduce the public sector payroll.

Attempting to reduce the anger of public sector workers, he floated the possibility of talks on restoring some lost pay after the 2016 General Election.

"I believe we will be in a different place and those discussions will be about the improvement of conditions," he said.

The Irish Independent also reports that New York-based investment firm Royalty Pharma has made a $6.6b (€5bn) approach to Irish drug maker Elan.

It is seeking to scupper the drugmaker's plan to spend most of the proceeds from a major drug sale on deals and instead give the money to shareholders.

Royalty Pharma, which buys royalty streams of patented drugs, said today it planned to offer $11 per share, a 4 percent premium to Elan's closing share price on Friday in New York, where the company has its primary listing.

Elan announced earlier this month it would raise more than $3.25 billion by selling its interests in its main drug, multiple sclerosis (MS) treatment Tysabri, to U.S. partner Biogen Idec and effectively reinvent itself by splashing most of the cash on acquisitions.

Royalty Pharma, however, said the risks associated with this plan were substantial, prompting it to offer Elan shareholders a "simple and clear choice" with a cash proposal it said represented the full value of the company today.

Elan shares in Dublin were up 8.9 percent at €8.68 euros ($11.42) by 1200 GMT. The firm, in which U.S. group Johnson & Johnson is an 18 percent shareholder, said it would not make a comment on Royalty Pharma's proposal for the time being.

Deutsche Bank analyst Richard Parkes said the small premium suggested by Royalty Pharma might deter Elan's shareholders.

"But it's not totally unreasonable," he added.

"I think investors are now faced with a straight question of whether you lock in the value at a small discount to asset value or you have faith that management can deliver on its planned strategy of acquiring assets."

Royalty Pharma said it had not received a formal response from Elan and had been unsuccessful in its efforts to engage with the company since making contact with it on Feb 18.

It added it was "surprised" by Elan's announcement on Friday that it planned to return $1 billion to shareholders by buying back some of its shares, because it did not address the proposed offer.

Following the agreement to sell Tysabri - which accounted for almost all of Elan's revenue - the Dublin-based company will still receive a royalty on its sales.

Strategy dispute

Elan said last month it had already spoken to several companies about potential deals and would look to move quickly over the next 12-18 months.

Royalty Pharma countered that good assets in the industry were in short supply and that Elan's senior management had little experience in making acquisitions.

It reserved the right to reduce its proposal, should Elan strike any deals or buy back shares.

Royalty Pharma, whose portfolio includes rheumatoid arthritis drugs Humira and Remicade, last year paid $761 million for a stake in Biogen's MS treatment Tecfidera.

Royalty Pharma said it planned to finance the possible offer through a combination of available cash and debt.

It said it was working with financial advisers led by J.P. Morgan and lenders led by BofA Merrill Lynch to put in place the necessary debt financing on the possible Offer.

There had been speculation in 2012 that Biogen might try to buy Elan outright, following the failure of the Irish company's Alzheimer's drug bapineuzumab, which it was working on with Johnson & Johnson and Pfizer.

The Irish Times reports that retired public service staff who receive annual pensions in excess of €32,500 face further cuts under the new Croke Park agreement to tackle the public sector pay bill.

The deal, which is being resisted by major health unions, was signed yesterday morning after talks continued throughout Sunday night.

While draft background documents to the deal also suggest that compulsory redundancies could apply in certain circumstances where staff could not be redeployed and who declined voluntary redundancy, unions insist the final version of the agreement, which is due to be published later today, does not include reference to compulsory redundancies.

The threshold for pension cuts set out in drafts of the agreement is half the €65,000 threshold at which pay cuts of 5.5 per cent will kick in.

The pay reductions rise progressively to a cut of 10 per cent from salaries above €185,000. Pay increments will also be frozen under the new deal.

It is understood about 80 per cent of public service pensioners receive less than €30,000, so the pension reduction will apply to a relatively small but significant number of retirees.

Exact level of cut unclear 

However, the exact level of the pension cut remains unclear.

The draft agreement, seen by The Irish Times, said the parties noted that the Government was planning to align cuts to pensions paid to retired personnel to the reductions being put in place in pay for serving public servants under the new agreement.

The Labour Court recommendation has not been published in full so far, although it is expected to be released today. The Department of Public Expenditure made only a passing reference to the situation in relation to retired public service staff in its official briefing note on the deal.

Those facing cuts include former taoisigh, former ministers and other office holders.

As a result of the pay deal, Taoiseach Enda Kenny will see his €200,000 salary reduced to €185,350, while Tánaiste Eamon Gilmore will see his €184,405 salary drop to €171,308.

Following the 2011 referendum on judicial pay, the salaries of judges will also be decreased under the new deal.

The Government, which said it would have to introduce legislation to underpin the agreement, expects a campaign of resistance from unions.

“These proposals constitute a fair and balanced agenda to repair our public finances,” Minister for Public Expenditure Brendan Howlin said. “All public sector workers have already made a significant contribution to our economic recovery. However, these further measures are absolutely required to achieve a sustainable payroll cost.”

Unions to meet 

The executive committees of most public service unions expect to meet in the coming days to consider the Labour Court recommendation on the deal. By the weekend it should become clear whether unions are to ballot members and what recommendation, if any, they are making on the proposals.

However, many of the unions that left the talks process before the agreement was reached showed no sign of changing their stance. Whether they ultimately decide to take industrial action remains to be seen. The Irish Medical Organisation said the proposals “confirmed we were right to walk out of the talks”.

The executive council of the Irish Nurses and Midwives Organisation will meet on Thursday to agree its next steps.

Fianna Fáil public expenditure spokesman Seán Fleming said the test that should apply was whether the deal was fair.

The Irish Times also reports that the family of bankrupt businessman Seán Quinn has claimed the insolvency of Irish Bank Resolution Corporation means the courts must urgently lift orders freezing their accounts below €50 million each and preventing them transferring assets in their international property group. The bank’s undertaking for damages on foot of which it got those orders is now “valueless”, the family claims.

Alternatively, the family says the special liquidators of IBRC must lodge up to US$500 million in court to meet any claim for damages should they win the case.

Mr Justice Peter Kelly said the matter was urgent and he would hear it next Monday. The price of an injunction is an undertaking for damages from the party seeking that injunction and it would be wrong to permit a “worthless” or “hollow” undertaking from an insolvent entity, he said.

Aoife Quinn said in an affidavit it was clear from recent remarks of IBRC special liquidator Kieran Wallace that any claim the Quinns may have on foot of the bank’s undertakings for damages will rank as “an unsecured debt which Anglo will be unable to satisfy”.

Considerable loss 

The freezing orders has caused considerable loss to her family and it is “no longer just, equitable or conscionable” that they remain in place, she said.

The orders had led to termination of standing orders and direct debits on the accounts of herself, her siblings and other family members which had led to non-payment of a range of expenses. The “most striking example” was that mortgage payments on Seán Quinn jnr’s home were not paid. KBC Bank had appointed a receiver over that property, she added.

They were unable to contemplate new business ventures or employment, to maintain ordinary banking facilities and were delayed in getting the full legal advice necessary.

The family claims the appointment earlier this month of special liquidators to IBRC, formerly Anglo Irish Bank, means it cannot honour its undertaking to pay them damages should it lose its case against them over alleged stripping of some US$455 million assets from the Quinn’s international property group (IPG).

Transferring assets 

Therefore, they claim, the bank is not entitled to orders obtained so far in its case, including orders of July 2011 restraining them transferring IPG assets and orders of July 2012 appointing receivers over their personal accounts and assets.

When Martin Hayden SC, for the Quinns, moved the family’s application yesterday, Shane Murphy SC, for IBRC, said he needed to take instructions from the special liquidators.

The full hearing of IBRC’s action alleging family members were involved in a scheme to put assets in the IPG beyond its reach has been deferred pending proceedings against former Anglo chairman Seán Fitzpatrick and executives Pat Whelan and Willie McAteer.

The Irish Examiner reports that there is going to have to be significant EU treaty change within the next few years to enable further EU integration, according to the EU Commissioner for Economic and Monetary Affairs, Olli Rehn.

If there is an EU-wide treaty change, then it would mean a referendum in this country, which would be a huge challenge either for this Government or the next administration.

“In the medium-term — 18 months to five years — we envisage further integration involving treaty changes. Our guiding principle is that any steps towards increased solidarity and mutualisation of risk would have to be combined with increased responsibility; that is, with further sharing of budgetary sovereignty and deeper integration of decision-making,” said Mr Rehn.

The European commissioner was in Dublin for a conference organised by the chairpersons of finance committees across the 27 EU parliaments. The event was chaired by Labour TD Ciarán Lynch.

The representative from the Finnish parliament, Kimmo Sasi, said some form of debt mutualisation in the form of eurobonds is essential if the eurozone is to survive. However, underlining the extent of the challenges that lie ahead, it is very unlikely that the Finnish electorate would agree to such a move, said Mr Sasi.

French senator Philippe Marini asked Finance Minister Michael Noonan what the update was on harmonising corporate taxes throughout the region.

Mr Noonan said proposals for a common consolidated corporate tax base would be released towards the latter end of Ireland’s EU presidency, which finishes in June.

Mr Marini said it was vital that progress was made on it. However, “the view in France is that Ireland’s [12.5%] corporate tax rate is too low. But it isn’t the only problem — there is the ‘Dutch Sandwich’ as well.”

Companies such as Google have avoided huge tax obligations by diverting large profits through Ireland and Holland.

Ireland remains implacably opposed to any harmonisation of the corporate tax rate, although the Government has agreed to engage in discussions.

Mr Noonan said it was very important that EU states follow through on an agreement reached at asummit last Jun 29 to break the link between sovereign debt and member states’ banking systems. The issue of legacy debt remains unresolved. Countries like Ireland want the ESM to take over legacy bank debt, although this idea is opposed by Germany, Holland and France.

What to do with legacy bank debt is being looked at by a special committee set up by the eurogroup of finances ministers and it will report shortly, said Mr Rehn.

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