There is no basis for the notion that the economy is on the first turn of an inflationary spiral, the Taoiseach has said. And Mr Ahern stressed the most effective way of containing inflation was vigorous implementation of the Programme for Prosperity and Fairness (PPF).

Addressing the annual conference of the Chambers of Commerce of Ireland in Dublin yesterday, he acknowledged there were inflationary pressures in the economy and it was important to be conscious of them.

He said most commentators predicted inflation would moderate significantly later in the year and acknowledged that the Government had implemented a series of medium-term measures to sustain a low inflation environment.

Irish inflation figures for April are due out next week and analysts said yesterday that the rate was likely to fall, if only marginally, to 4.5 per cent from 4.6 per cent.

"One only has to look at the wide range of measures in both the National Development Plan and the PPF for evidence of a collective determination to overcome supply-side constraints in the economy which can have an indirect but, nevertheless, significant impact on inflationary pressures," Mr Ahern said.

He added these were being complemented by other measures such as the continued liberalisation of markets and sectors which would yield greater price competition. But he emphasised the importance of adherence to the PPF as the single most important measure to combat inflation.

"The Government and the social partners share strongly that view and, in itself, that constitutes solid ground to contend that there will be significant moderation in our inflation rate. Therefore, together the Government and the social partners will monitor development and discuss the options which are available to secure the low inflationary conditions provided for in the PPF."

The Taoiseach said, as a society, the Republic had overcome many major obstacles, such as high levels of unemployment, but faced new challenges. "I believe the necessary policies and processes are in place to enable us to meet them successfully. Above all, imagination and commitment are needed to secure positive outcomes."

The president of the Chambers of Commerce of Ireland, Mr Tom Clarke, told the conference that Irish companies were not prepared for the more competitive environment that would result from the enlargement of the European Union. He warned that the enlargement debate needed to broaden from talking simply about ensuring that Ireland retained a Commissioner to one about the sort of business environment required in five years when possibly another 10 member-states join the EU.

"As costs rise in Ireland and our corporation tax advantage will be eroded by other states following our example, we have got to find new ways of maintaining our competitive edge."

Mr Clarke said Ireland would not hold the same edge as far as an outside investor was concerned unless it started to plan now for the impact that enlargement would have on the economy. "That means significant investment in education and training and ensuring that we keep our costs down."