Kieran O'Donnell (Limerick East, Fine Gael)
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Question 33: To ask the Minister for Enterprise, Trade and Employment when, in view of the recently published Central Bank financial stability report 2007 highlighting Ireland's deterioration in competitiveness and the National Competitiveness Council annual competitiveness report 2007 showing Irish consumer price levels almost 20% higher than the EU-15 average and inflation growing faster than the EU-15 average, he will implement the NCC recommendation in their report to develop a national programme to restore cost competitiveness; the steps he will take to establish this programme; and if he will make a statement on the matter. [2383/08]

Micheál Martin (Cork South Central, Fianna Fail)
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The Central Bank Financial Stability Report 2007 referred to by the Deputy looks essentially at the soundness of the financial system. The Report makes clear that Irish credit institutions do not have significant exposures to the sub-prime market, either directly or indirectly. In relation to overall competitiveness, while acknowledging that our strong competitiveness position up to recently has undergone some decline, the report refers to the continued strong performance of inward FDI flows.

The Consumer Price Index (CPI) was 4.9% on average in 2007. The euro area measure of inflation, the Harmonised Index of Consumer Prices (HICP), was 3.2% for Ireland for the 12 months to December 2007. This was the same as the euro area average for the same period. The Central Bank, in their Quarterly Bulletin published last week, forecast inflation (HICP) to ease further to 2.5% in 2008.

While this is welcome I should point out that we have no control over some of the factors influencing inflation, such as oil prices, the exchange rate and mortgage interest rates. In this regard, it is important to ensure that our domestic cost base does not undermine competitiveness. I agree with the NCC that, as part of our economic policy, seeking to maintain low inflation, promoting competition, the pursuit of sensible incomes policy, and keeping public spending growth at sustainable levels in the medium term are important. Doing this will allow us to keep the burden of taxation low, thus helping to maintain competitiveness and to maximise our economic potential. These are all part of our strategy to improve the cost environment and to enhance competitiveness. In the context of the forthcoming pay talks it will be critical to ensure that labour costs are managed so as to enhance productivity, support employment creation and to safeguard competitiveness. Furthermore, the Government's last three budgets have been clearly non inflationary as a measure to help the cost environment for business.

I would also mention the Anti-Inflation Group which was reconstituted under Towards 2016 with the same membership and mandate as under Sustaining Progress and meets regularly. The Group has actively engaged with the Central Statistics Office (CSO), the Competition Authority, the National Consumer Agency and the Commission for Energy Regulation (CER) with a view to co-ordinating and driving the fight against inflation on an informed basis.