'Rising wages help to damage competitiveness'

The Minister for Finance and the National Competitiveness Council have warned that Irish competitiveness is under threat.

The downturn in the global economy, heightened uncertainty following the terrorist attacks in the US and rising wages are all undermining the Republic's competitive position.

According to Mr McCreevy, wage and cost developments generally must not be allowed to add to the State's exposure on the competitiveness front. "We must adapt our expectations to meet the new economic environment," he said.

Addressing the Seanad yesterday, he also warned that "prudent management" of public finances was necessary to weather the present "stormy conditions". The Minister said that export growth would be unfavourably affected and that a further weakening of the dollar would make Irish exports less competitive and reduce export growth further.

According to the latest data released yesterday by the Central Statistics Office, manufacturing trade remained static in August. Irish exports to and imports from non-EU countries both fell marginally. Unadjusted exports were 2 per cent higher at £2.08 billion (€2.6 billion), while imports were 18 per cent lower at £1.15 billion.

Predicting that growth this year and next year would be lower than previously forecast, Mr McCreevy said policy should be geared to positioning the Republic for a recovery in the international environment.

"We need to prioritise public spending towards programmes which improve the long-term capacity of the economy to benefit from the eventual improved conditions."

Mr Brian Patterson, chairman of the Competitiveness Council, also insisted that tackling infrastructure was crucial to underpinning medium-term competitiveness.

"It is important that we deliver the National Development Plan on schedule and resist any pressure to cut back when the public finances start to get tighter." He also stressed the importance of upgrading the electricity system.

He also stressed the importance of upgrading the electricity system. " We need more generation capacity, and an overhaul of the transmission and distribution systems, while at the same time ensuring that market liberalisation proceeds successfully".

The council is particularly concerned about telecommunications. "We have set ourselves the objective of being a hub for e-business. But how can that be possible when we do not have competitive broadcast access at this late stage?".