Economy needs to recover ‘lost competitiveness’

THE Irish economy needs to recover its lost competitiveness rapidly if it is not to slip into a long period of recession.

That was the stark message to Government from the chairman of the National Competitiveness Council (NCC), Don Thornhill.

His comments followed publication of the NCC’s “Competitiveness Benchmarking Report” which says rising costs have seriously undermined the ability of this economy to compete internationally.

“Without appropriate action, it is entirely possible for the Irish economy to enter a prolonged period of depressed economic activity and for the convergence of Irish living standards on other high-income countries to unwind”, he said.

Fine Gael’s spokesman on energy, Simon Coveney, accused the Government of undermining the economy.

“This report is further proof that government policies are dragging Ireland down.

“As the National Competitiveness Council points out, non-pay costs in Ireland compare poorly with other countries across a range of business inputs especially in utilities such as electricity, communications and waste.

“Sky-high energy costs are hammering Irish business and the lack of next generation broadband infrastructure is leaving Irish firms at a severe disadvantage,” he said.

Ireland now has the second most expensive industrial electricity prices of the EU with industrial electricity prices 34% above the EU average.

The broadband situation was also unacceptable, he said.

“Instead of keeping prices high, I urge Fianna Fáil to take Fine Gael’s policies on board,” he said.

Fine Gael would reform semi-State companies and finance the construction of a modern new infrastructure in energy, water and IT to provide “the basis for new economic growth and position Ireland at the forefront of the energy revolution that is about to take place worldwide,” he said.

Rising unemployment could also present a challenge, the NCC said, with jobless figures significantly above the OECD average and younger and lower skilled workers particularly vulnerable.

We need to target export-led growth as a sustainable strategy to maintain living standards gained in recent decades and to secure long-term prosperity, the report said.

It added that the turmoil in global financial markets and the exposure of Irish banks to bad loans in the declining property sector “is affecting Irish firms in terms of their ease of access to finance and its cost”.

With regard to the cost of credit, the majority of loan types in Ireland were more expensive than the Eurozone average in 2009 Q1, the report said.