Ireland at top of 'most expensive' euro league

Ireland is now "almost on a par with Finland" as the most expensive country in the eurozone, according to a new report on competitiveness and price inflation.

The National Competitiveness Council's Statement on Prices and Costs, which was published yesterday, found that in the four years to May 2004, the average price of Irish goods and services rose by 22 per cent above the EU average.

Consumer price inflation in Ireland exceeded that in both the euro zone and the EU-15 for the past seven years, rising by 17.5 per cent between December 1999 and December 2003.

This compared to an EU-15 average of 8.4 per cent over the same period.

Restaurants and pubs were said to be the biggest contributors to Irish inflation, accounting for 25 per cent of total inflation in the five years to January 2004.

Alcohol and tobacco (13 per cent), housing, water and fuels (11 percent), recreation and culture (11 per cent) and food and non-alcoholic beverages (10 per cent) were other key contributors.

"Decisions by Government, its agencies and regulators", including VAT increases and price rises in State-regulated goods and services like electricity and telecoms, were said to have added 7.9 per cent to the total inflation rate in the five years to January 2004.

"Most Irish inflation over this period has been generated domestically, and is not as a result of rising prices for imported goods," the report stressed.

Mr William Burgess, chairman of the NCC, said the research "confirms the widely-held belief that Ireland is an expensive location for both business and consumers".

He added: "Ireland's ascent through the consumer pricing ranks is partly due to fluctuations in the value of the euro, which is out of the control of Irish policy makers.

"But it also stems from high domestically-generated prices, particularly in the non-traded services sector. Decisions by Government, its agencies and regulators have also contributed adversely to inflation.

"This has damaging implications for the enterprise sector, and the ability of Irish firms to compete in foreign markets."

On consumer prices, the report said Ireland was the most expensive country in the eurozone for food, non-alcoholic beverages, tobacco and rentals for housing, and the second most expensive for alcoholic beverages, restaurants and pubs.

In a European-wide survey last March of low-priced stores, Ireland was found to be the most expensive in the eurozone for 10 out of 33 basic foodstuffs, namely mineral water, potatoes, lettuce, oranges, apples, peaches, lamb chops, potato chips, table salt and biscuits. It was also most expensive for four out of 14 non-food consumables, i.e batteries, toilet tissue, shampoo and toothpaste.

The report described the services sector as the "principal driver of Irish inflation".

In the five years to January 2004, 68 per cent of national inflation occurred in sectors that were not easily tradable internationally, such as retailing, education and professional services.

In the 12 months to January 2004, such sectors were said to have generated 80 per cent of national inflation.

In the same 12 months, the goods and services with the highest rates of inflation were water supply and refuse services (25.4 per cent), postal services (13.5 per cent), hospital services (11.1 per cent), second-level education (10.3 per cent) and outpatient services (7.2 per cent).

On fixed-line telephone costs, Ireland ranked sixth least-expensive out of 15 OECD countries. "In terms of a combined basket of national and international business calls, Ireland's performance is also relatively strong, and is ranked fourth (least-expensive) out of 15," the report said.

Ireland was, however, found to be more expensive than the EU average for a range of mobile phone charges.

The NCC, established in 1997, will give detailed recommendations on how to tackle inflation in its Competitiveness Challenge report, due out this year.