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DUBLIN, June 8 (Reuters) - Ireland's government on Thursday struck a three-year pay deal with public sector trade unions which it said would help restore industrial peace and could use up a significant amount of funds available for tax cuts and spending increases next year.
Ireland's economy has grown faster than any other in the European Union for the past three years, but the centre-right ruling Fine Gael party was punished in an election last year by voters who felt they were not feeling the benefits.
The country has been hit by a string of strikes by public sector workers in the past two years after relative industrial peace during the country's 2010-2013 bailout.
The deal will restore 90 percent of public sector workers to the pay rates they enjoyed before cuts imposed during the country's financial crisis, and see benefits increased by between 6 and 7 percent over the period.
The deal, which must be approved by union members, will "put pension provision on a more sustainable footing and secure industrial peace," Minister for Public Expenditure Paschal Donohoe said in a statement.
It will cost 887 million euros ($995.13 million) over the three years, he said.
The 178 million euros of additional expenditure in 2018 will use up a significant amount of the estimated 500-550 million euros of resources the finance minister has said will be available for expenditure increases and tax cuts, although it will likely take up a much smaller percentage in 2019 and 2020. ($1 = 0.8913 euros) (Reporting by Conor Humphries; Editing by Toby Davis)