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Matt Cooper: Handball? The union terms are more foul

It was a week to cringe at what we have become: a country that cannot react maturely to the difficult and unpleasant situations in which it finds itself, preferring instead short-cuts and scams that masquerade as solutions.

The Football Association of Ireland's (FAI) request to Fifa that Ireland be accommodated as the "33rd team" at the 2010 World Cup was embarrassing, but even that wasn't as bad - or as important - as the trade unions' suggestion that giving public servants 12 days of unpaid leave next year would solve our financial crisis.

Our sporting humiliation was played out in public because Sepp Blatter, Fifa's president, blew the whistle and could not disguise his mirth at our pleas. One can only guess how the lenders who support this country, the European Commission and European Central Bank, reacted in private to the disclosure that the union idea was being given serious consideration by Brian Cowen's government, at least until the public reacted with horror.

The FAI's action shows that we are incapable of dealing stoically with injustice, or even measuring its scale. Yes, we were cheated by Thierry Henry, but that happens in life as well as in sport, and there are times when nothing can be done to undo the damage. Seeking a replay was one thing, but asking to be admitted to the tournament as a wild-card addition was idiotic.

It was impossible for Fifa to adopt the proposal on either practical or ethical grounds. How, for example, would teams who qualified fairly for the World Cup react to being placed in a five-team first-round group from which only two would qualify? Why should the other four teams in an Irishenhanced group be handicapped when if any country should be punished it is France?

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The charitable explanation is that the FAI aimed high, hoping to secure some compensation for the Henry incident. But it never expected its pitch to become public, which is why it is so angry with Blatter. Nonetheless, the damage to Ireland's image in world football - which had been raised by the sympathy aroused after Paris - has been notable. We were made a laughing stock, as the reaction of the assembled press to Blatter's disclosure emphasised.

The trade union movement does not blush as easily as the FAI. It knows that the government is seeking a permanent reduction of €1.3 billion next year in its public-sector pay bill as part of an attempted €4 billion reduction in the gap between its annual spending and income. Rather than agreeing to pay cuts or abolition of allowances such as overtime, the unions suggested that public servants take an additional 12 days' unpaid leave next year. Estimates as to how much this would save ranged from €300m to €800m. That would leave a huge gap to be filled, while raising serious questions as to how this idea would work in practice.

If adopted, the unpaid-leave plan would have represented the worst of all worlds. The workers would have lost nearly 5% of their pay in 2010, but the state would also lose as services would have been reduced. In addition, the unions wanted full pay restored the following year, meaning the ambition of reducing the public-sector pay bill permanently would not have been addressed.

It isn't just the private sector or politicians (including Fianna Fail TDs) who were outraged by the inanity of it all. Many public servants know that, if their job is to be meaningful, then it has to be performed. The trade union movement reacted badly to the volley of criticism hurled in its direction on Thursday, having spun the line to its members that a positive response from the government to the unpaid-leave plan was the reason for deferring a planned national strike.

Some union leaders then lost their heads, suggesting those outside the talks process - such as democratically elected politicians - should "shut up" because they did not have the full facts as to what was going on. But it was the unions that flagged this particular proposal publicly, not the government.

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The unions are interested only in doing what they can on behalf of their members and are rightly distrustful of the government's economic positions, given its role in getting us into this mess in the first place. But trade union officials cannot escape responsibility for the disaster we are facing: it was they who demanded increased spending on public pay and employment that is no longer affordable because taxes, particularly from the property bubble, have disappeared.

There is an air of unreality about the unions' demands, particularly the belief that borrowing will always be available to the government, irrespective of its cost. It is a stunning example of wishful thinking because any objective analysis of the causes of the bust is that excessive borrowing and reckless lending was a dominant factor. Why then do people think we can borrow more to rescue ourselves? Why are we unable to face reality?

The government's reputation as an economic manager is in tatters and any remnants will disappear entirely this week if it botches the budget. Despite's Friday's events, that still seems likely. The government has managed to establish €4 billion as an agreed figure for the reduction next year, but it is likely to need to borrow another €20 billion in 2010 anyway. It is committed to reducing its borrowing by a further €4 billion the following year, but how can we have confidence in that target given its struggles to get over the first hurdle?

On top of everything, the National Asset Management Agency (Nama) may prove to be a debacle, ultimately costing a multiple of whatever reductions are made in our annual borrowing. Various property and banking experts are admitting quietly that there is no chance that the €77 billion of loans to be purchased by Nama are worth anything like the €47 billion that the government has claimed, never mind the €54 billion the government will pay in bonds under its long-term assessment of the likely future value of the loans. A combination of European Commission action and Nama means that AIB will inevitably fall into full state control next year and Bank of Ireland may not be far behind.

While Nama seemed to be a clever idea when introduced, swapping bank loans for state bonds that could be presented to the ECB in exchange for cash, it is not going to work now. A year has been wasted, during which the banks could have been nationalised and real work started on dealing with their problem debts. It would be politically difficult for Brian Lenihan to admit now that Nama can't work but his, and more importantly the state's, long-term reputation would be damaged less by admitting to honourable failure.

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No matter how embarrassing the last week has been, it will be nothing to the sense of humiliation we will experience if we have to hand over control of our economy to the International Monetary Fund (IMF) via the ECB. The spectre of the IMF is held up as something of a bogey and nobody really takes it seriously. Now, for the first time, I'm wondering if it might take the IMF to rescue us, because we simply don't seem capable of doing it ourselves.

matt.cooper@sunday-times.ie