The Minister for Arts, Sport and Tourism, Mr O'Donoghue's declaration that "rip-off Ireland is a myth" has been sharply condemned by Fine Gael, who accused him of not knowing the reality.
Speaking in Killarney, Co Kerry on Friday night, the Minister said charges that tourist prices in Ireland are too high are endangering the country's international reputation and could hit the Irish economy.
"It's going to have international repercussions. No tourism industry in the world runs itself down," Mr O'Donoghue said at the opening of the €25 million Brehon Hotel.
However, Fine Gael TD, Mr Phil Hogan rejected the Minister's declaration: "He has shown a stunning lack of awareness of the cost of living challenges that face ordinary Irish households every day.
"What chance has the consumer got if this is what a front line Minister is saying about rip-off prices?" said Mr Hogan, Fine Gael's spokesman on enterprise, employment and trade.
"Sticking your head in the sand is not an appropriate policy response from Government. When faced with the clear cut facts that Ireland has become one of the most expensive economies to live and work in, the Minister wants us all to simply pretend that it just isn't so.
"The 50,000 visitors to the Fine Gael consumer website www.ripoff.ie could easily explain the reality behind the Minister's myth.
Between 1997 and 2001, the Republic of Ireland went from being 3 per cent cheaper than the European Union average to being 15 per cent dearer: Irish customers, in all areas of the marketplace, are being ripped-off.
"The Government and the trades' unions agree increases that can fuel increased local charges and prices," he said. "There is nobody directly representing the ordinary consumer," he added.
Fine Gael, he said, wants all Government-controlled price increases kept to the rate of inflation or below "so that the Government is not part of the problem."