Brian Lenihan Jnr (Dublin West, Fianna Fail)

The deterioration in the economy's competitiveness relative to that of our main trading partners has been driven by a combination of factors. These include a strong euro, the global rise in commodity prices and wage increases in excess of productivity. The relatively high rate of inflation we have experienced over the last number of years has also played a role. At this stage, price levels here are in excess of 20% above the euro area average.

Improving our competitive position is essential to facilitate a rebalancing of the economy towards more sustainable, export-led growth and to maintain Ireland's attractiveness as a location for inward investment.

While external factors such as the price of oil and exchange rates have an impact on domestic costs, these are beyond our control. As such, we must seek to control those costs which we can influence. We must also take steps to improve productivity.

In support of these objectives, the Government is committed to maintaining an appropriately low burden of taxation on capital and labour, and has implemented a range of policies aimed at improving competition in product markets and flexibility in the labour market. Furthermore, despite the recent weakness in the public finances, this Government will continue to prioritise investment under the national development plan that enhances future productivity. These measures will equip the Irish economy with the skills, infrastructure and operating environment needed so that we can take advantage of the global pick-up when it emerges.

While my Department, along with the Tánaiste's Department and the National Competitiveness Council all take an active role in monitoring competitiveness developments on an ongoing basis, I would point out that national competitiveness is not solely a matter of Government policy. It is a shared responsibility of all the social partners — Government, employers and unions. Regaining our competitive position, which as a small open economy is critical to our economic success, will require each of us to play our part and work together to this end. This means ensuring that externally driven price increases do not become embedded in our system as that only creates a vicious cycle from which no one wins. In this respect, the willingness of the various parties to compromise and adopt a realistic approach to wage developments in the recent pay talks is welcome.

See this speech in context