Bernard Durkan (Kildare North, Fine Gael)
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Question 16: To ask the Minister for Finance if, in the context of budget 2009, he has identified and addressed any or all of the issues that heretofore have created a lack of competitiveness in the economy here; and if he will make a statement on the matter. [38697/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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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 that we have experienced over the last number of years has also played a role. At this stage, price levels here are more than 20% above the euro area average.

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

In recognition of this, and notwithstanding the need to underpin the sustainability of the public finances, the Government took a number of steps in Budget 2009 aimed at supporting the economy's competitiveness. These included re-affirming our commitment to the 12.5% rate of corporation tax and maintaining and enhancing pro-employment business tax reliefs. We are also continuing to prioritise productivity enhancing investment under the National Development Plan. These measures will ensure that the Irish economy is well placed to 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, however, solely a matter of Government policy. Rather 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 commendable. In addition, it will be important to ensure that improvements in external factors that impact on domestic costs, such as falling oil prices, are passed on.