Increased competition is vital

GOVERNMENT policy should focus on encouraging fostering competition in all aspects of Irish economic life in order to increase cost competitiveness, leading economist Dan McLaughlin said urged yesterday.

Speaking at an American Chamber of Commerce Ireland function in Dublin, the chief economist at Bank of Ireland also hit out at the culture of dependency which exists in Irish society and industry.

"Official policy should now concentrate on enhancing productivity via better management of the National Development Plan, maintaining a high rate of capital investment in public infrastructure, and by a commitment to fostering competition in all aspects of Irish life," he said.

Mr McLaughlin's comments came just days after Taoiseach Bertie Ahern told the Irish Management Institute's annual conference in Killarney that Ireland needs to underpin its development efforts with a more competitive cost base.

"For too long, those who have enjoyed a privileged position in Irish society, shielded from the pressures of international competition, have had it too easy. I want to send out a clear message this morning that those who are living off Irish productivity and output growth, rather than contributing to it, had better get real," the Taoiseach said.

Yesterday, a comparatively upbeat Mr McLaughlin said: "Ireland is at a relatively high price level within the EU, reflecting the high GDP per head rich countries have high prices and equating this with competitiveness is false, as productivity relative to costs in a traded sector is the key. On that basis, Ireland cannot revert to being a low-wage economy."

Mr McLaughlin decried the culture of dependency in Ireland.

"Ireland's dependency culture extends from the individual to the corporate world, with too many industries still looking to the Government, which means the taxpayer bailing them out when market conditions turn against them."

Mt McLaughlin added that said the Irish economy appears to have weathered the weak global economy better than others in the euro area, with no serious loss of equilibrium.

"Unemployment has risen only modestly, thanks to continuing employment growth, and the flexibility of the labour markets has ensured a marked deceleration in wage inflation, which belies the claims of those who warned of a free-for-all in the absence of a partnership agreement.

"This flexibility will limit the deterioration in competitiveness and result in a fall in price inflation," he said.`