PUBLIC spending will have to be more tightly controlled if current economic growth is to continue, the chief executive of one of the country's leading banks has warned.

AIB Group chief executive Mr Tom Mulcahy said the overall thrust of the economy was buoyant and positive. However he said, there was a growing sense that we were reverting to a "live now and pay later" lifestyle.

"We should not allow ourselves to be blinded by all this good news and, to sustain the current growth environment, we require greater discipline in our national finances," he said.

Mr Mulcahy, who was addressing the Small Firms Association (SFA) annual conference in Dublin Castle yesterday, said there was a real danger that Ireland's policy makers might be lulled into complacency, "fuelled by the feel good factor and the fact that we can afford more because of our booming economy".

He said it was up to business to ensure the Government kept control of spending.

He warned that Government by itself could not increase employment. "Economic activity is the only really sustainable creator of employment," he said. "What the Government must do is to provide the enabling infrastructure and environment."

Mr Mulcahy warned that the EMU would signal the biggest changes ever seen in business and its impact on Ireland would be enormous. "Quite apart from the exchange and interest rate issues, there will be a series of adjustments required in terms of technology and staff retraining," he said.

"All of us need to be engaged in some type of EMU stress tests for our businesses to identify not only opportunities but also potential weaknesses or operational difficulties as we prepare to conduct business post 1999."

He said the reality was that no matter what happens "the status quo is not an option".

Mr Mulcahy also said that the Irish attitude to failure must change. "We must recognise that failure is a valuable source of information feedback."

Mr Mulcahy also said those whose business was sensitive to interest rates if the company was highly geared or had a lot of bank borrowing tied up in capital investment - would do well to research whether they could find a competitive fixed low rate.

He said he would "go so far as to suggest" that "if your business is under pressure at today's rates, then there is an urgent need to re-examine your business fundamentals".