Joan Burton (Dublin West, Labour)
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Question 142: To ask the Minister for Finance his views on the impact of rising inflation, increasing interest rates and increasing fuel costs on the partnership talks; and if he will make a statement on the matter. [19262/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Inflation, as measured by annual changes in the Consumer Price Index (CPI), was 3.8% in April. A large part of the recent pick-up in the inflation rate is due to external factors such as higher oil prices and interest rate increases by the ECB.

On Budget day, my Department forecast that CPI inflation will average 2.7% in 2006. This forecast was calculated using the usual technical assumption of unchanged interest rates. My Department will publish new forecasts in the Autumn.

Talks on a new national partnership agreement to follow Sustaining Progress are ongoing and it would be imprudent to make any detailed statement at this stage about these talks. I will say that I am concerned about the decline in cost competitiveness in recent years which is having an impact on employment in the exposed sectors of the economy. We must maintain and improve the attractiveness of Ireland as a location for inward foreign direct investment.

Fundamentally, the cornerstone of a new agreement must be the protection of the long- term competitiveness of the country. If pay increases under the next agreement are not kept at a moderate level and do not take account of pay levels in competitor countries, we will see job losses in vulnerable parts of the private sector.