BUSINESS had responded well to severe challenges over the past number of years and "there is a real sense in which we now know that this economy can deliver to its potential", according to IBEC director general, Mr John Dunne. But he warned that much firmer control on current Government spending was essential.

In a New Year statement, Mr Dunne said IBEC looked forward with confidence to 1997.

The year just ending was a good one for the economy, he said, "with continued strong growth, low inflation and consistently good employment increases, despite continued external pressure via currency problems and the ongoing problem of BSE for the beef and associated industries".

But Mr Dunne warned that "to sustain this performance, business will need to be given scope and encouragement to adapt to new challenges - this must - imply much firmer control on current Government spending".

By the end of 1997, "we shall know what the initial EMU scenario will be", said Mr Dunne.

For the purpose of business planning, we had to assume that Ireland would be among the first, entrants to EMU, he said. "This will pose significant challenges to all in business."

IBEC, with the support of the EU Commission, is launching a euro awareness campaign for member companies from January 1997 to help companies in their preparation.

"We look forward also to using the new programme, Partnership 2000, to focus policy even more sharply on competitiveness," he said. A new competitiveness review mechanism is included in the programme and Mr Dunne said IBEC would use it "to direct attention towards business priorities in managing a competitive economy.