Union attacks Ahern's economic assessment

Taoiseach Bertie Ahern was today accused of being out of touch with reality after claiming high inflation was a sign of a strengthening economy.

With consumer prices rising at 3.9 per cent annually, the highest in around three years, the ATGWU trade union labelled the Taoiseach's assessment bizarre.

Michael O'Reilly, regional secretary of the union, warned the new social partnership deal Towards 2016was being undermined by high inflation before the ink was dry.

"New interest rate rises, higher energy costs and increasing property prices will wipe out the proposed wage increases. If the Taoiseach believes this is a sign of boom times then he is completely out of touch," Mr O'Reilly said.

The union boss said at the height of the economic boom in the mid-1990s, inflation remained low because growth was based on manufacturing and exports.

He said the difference today was that growth is based on property and consumer debt. "Inflation is a warning that this can't continue," he said.

"Just as in 2000, it is looking likely that the new pay deal will have to be renegotiated.

"Except this time it will have to be done before it's even approved. Otherwise, trade unions will be faced with a choice of opting out of the agreement or being stuck with real wage decreases and a decline in their members' living standards," Mr O'Reilly said.

Towards 2016proposes a 10 per cent pay increase for workers, in four phases, over 27 months.

It also includes a range of measures designed to underpin employment standards and combat exploitation of workers.

But Mr O'Reilly has claimed average earners would be just a few euro a week better off after tax and inflation, while the low-paid provision would amount to just 80 cent per week.

PA