Over the past year the annual inflation rate has risen from 1.2 per cent to 5.2 per cent and the gap between Irish and euro-zone inflation has widened from one to three percentage points.

A spate of recrimination and confused analysis has followed this news. The name of the game is to round up the usual suspects. The Minister for Finance has been given his share of the blame for having introduced an inflationary budget and imposed higher taxes on tobacco. He has tried to deflect attention by pointing to a range of other factors including high oil prices and price gouging by publicans. Commentators who emphasise the disproportionate impact of the weak euro on the Irish economy are closer to the nub of the matter. But what are we to make of the European Central Bank telling us that it has done all it can to ease inflationary pressures and now it's up to us to sort the problem out at national level? Among the remedies that have been proposed are potentially damaging ones such as indirect tax reductions and price controls.

The only plausible national policies being advocated are measures to increase competition throughout the economy. But does anyone really believe that liberalising the licensing laws, freeing up more land for development and issuing more taxi plates will lead to a sharp fall in our inflation rate? Those who opposed Ireland's adoption of the euro in 1999 may be tempted to claim they foresaw the present predicament. True, some warned in 1999 that lower interest rates were not appropriate for the booming Irish economy. But the main concern of the europhobes was that we would suffer a deflationary "asymmetric shock" if sterling weakened relative to the euro. Attributing the recent surge in inflation to the large exchange rate depreciation and the simultaneous decline in real interest rates is certainly more convincing than the populist analysis of politicians and trade unionists. But what are the policy implications of blaming our membership of the euro zone for the rise in inflation?

Some may say that we should "think the unthinkable" and abandon the euro. This is not a realistic prospect. In any event we cannot be sure that an independent Central Bank of Ireland would be hard-nosed enough to contain inflation by choking off the boom. We should therefore assume that we remain in the euro zone and consider the longer-term implications. The European Central Bank is committed to maintaining "price stability", interpreted as an average inflation rate of 2 per cent or lower in the euro zone.

While euro-zone inflation is now running at 1.9 per cent, the ECB is quick to point out that when energy prices are excluded it is running at an annual rate of only 1.1 per cent. Nonetheless, the bank felt it appropriate to raise interest rates this month by 50 basis points in order to ensure that its target was met.

Despite its initial floundering, it is safe to bet that the ECB will achieve price stability over the medium term. From an Irish perspective, it is crucial to understand that the basic logic of our joining the euro zone has not been undermined by the recent rise in our inflation rate. In the long run, Irish inflation cannot continue to run 3 per cent above the euro-zone average.

Even more fundamentally, Irish inflation cannot continue to rise relative to euro-zone inflation. We do not face the prospect of inflation spiralling out of control, as might have been the case were we not anchored by the euro and the anti-inflation commitment of the ECB.

If the gap between the Irish and euro-zone inflation rates were to persist or widen over time, Ireland would become a progressively more expensive place in which to live and do business. Imports would soar and exports slump. These deflationary forces would tame Ireland's relatively high inflation. This is the automatic mechanism that will ensure that, in the long run, inflation rates will converge in the monetary union. The operation of this mechanism is illustrated by the experience of the United States. Although significant inflation differentials do occur between booming and depressed US regions, there is a tendency for regional price levels to converge over time to their initial levels relative to the national average.

We may expect that a similar mechanism will operate in the EMU. Higher inflation is likely to persist here only as part of the process of adjustment to the new monetary union. Over time Irish inflation will fall back to the 2 per cent target set by the ECB. We must not now lose sight of the fact that the long-run prospect of price stability as a reward for having adopted the euro has not been undermined by the recent surge in Irish inflation. But the danger is that the long run beloved of economists may prove too remote for politicians with their eye on the next election.

The worst outcome would be if they lost faith in the benefits of monetary union and resorted to damaging palliatives in response to what is essentially a transitional problem.

Brendan Walsh is professor of economics at University College Dublin