The Cabinet meeting tomorrow to discuss competitiveness takes place against a difficult economic backdrop. Growth has slowed sharply, unemployment is rising and conditions remain poor in most international economies.
So far the Irish economy has survived the downturn reasonably well, but there is no doubt that deteriorating competitiveness is now a serious threat, requiring much more focused attention from the Government.
This year's Budget gave an upward push to the inflation rate at just the wrong time. In the meantime increased charges from a range of public sector bodies have also contributed to inflationary pressures. Against this background, the Taoiseach's recent statement that the inflation rate needs to fall to 2 per cent needs to be backed up by quick action, if it is to have any credibility.
For a start, a clear message is needed that Budget 2004 will not add unduly to inflation and that the Government will do all in its power to address other price pressures. Part of this must be a strategy to hold down public sector charges, whether they be utility bills, television licence fees or whatever.
Of course the Government does not have direct control in many of these areas. But it can have a key influence both by the messages it sends and by setting the regulatory and competitive environment. Clearly, for example, there is a need to re-examine the electricity sector, where new competition has been slow to arrive.
There is also a wider competition agenda to be pursued. Here there are signs of progress, but the next year or so will be crucial, as the Government receives reports from the Competition Authority on key sectors of the professions. Here again the Taoiseach's words in his recent IMI speech must be backed up by action.
Finally, the Cabinet needs to look at a range of other broad competitiveness issues. One of the most important is infrastructure. There is merit in discussing the recent suggestion by the Tánaiste, Ms Harney, for borrowing to fund major projects - a concept supported for some time by some members of the Opposition, particularly the Labour Party.
However there is one crucial caveat. Borrowing is only justified if the projects involved generate a proper economic or social return and if they can be carried out on time and within a reasonable budget. The experience of recent years - involving lengthy delays and massive overspending - suggests that there is work to be done before these conditions can be guaranteed. The aim must now be to get the formula right quickly, to allow vital infrastructure projects to proceed.