Increases in prices and pay must be brought into line with other euro zone countries if Ireland is to remain competitive, the chief executive of Forfás said today.
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He was speaking at the launch of the Forfás report on consumer prices, prepared by PricewaterhouseCoopers, which revealed Ireland to be among the most expensive countries in the euro zone, having rapidly become more expensive since 1995.
Details from the report were reported in The Irish Timesearlier this week.
The Tánaiste Ms Harney called the report disturbing saying price increases in dentists', doctors' and opticians' fees, medical products, pubs and restaurants, package holidays and hairdressing, should be examined.
Forfás Chief Exutive Mr Martin Cronin said the growth of the Irish economy had led to accelerating increases in pay and prices in this country.
"We should not allow this to become a wage-price inflationary spiral which would ultimately threaten employment and incomes through undermining the competitiveness of Irish industry and reducing the attractiveness of Ireland as a location for foreign investment," he said.
In 1999, Ireland was the fourth most expensive country in the euro zone after Finland, Germany and France, and the seventh most expensive in the EU overall.
PricewaterhouseCoopers projections to February 2002 suggest Ireland may now be more expensive than Germany and France, putting it in second place after Finland.
Prices in the UK, Denmark and Sweden, which are not part of the euro zone, are also more expensive than in the Republic, the report says, but it does not go into this in detail, as the brief was to examine the euro zone states.
Prices and wages have grown substantially due to the State’s economic success, with the average take home pay of Irish employees estimated as the third highest in the euro zone.
Ms Harney warned: "It underlines the fact that recent trends in prices and earnings threatens both our competitiveness and our ability to maintain rising living standards.
"It identifies a number of areas of concern - particularly in the services and distribution sectors - that will require close examination and action by the competition and regulatory authorities."
Ms Harney, who is also the Minister for Enterprise, Trade and Employment, said it was encouraging that the study had concluded that the change over to the euro had not be used in general to introduce excessive hikes.
But she added: "It did identify a number of areas where price increases were in excess of normal trends such as dentists', doctors' and opticians' fees, medical products, pubs and restaurants, package holidays and hairdressing.
"There is a need to examine the degree to which there are unjustifiable restrictions on competition in these sectors."
The survey pointed to the need for greater competition and the speedy implementation of the Government's regulatory reform agenda, she went on.
"It emphasises the need to focus on maintaining our competitiveness in terms of prices and labour costs if we are to sustain our recent economic success."
She pledged to submit proposals to the Government to address issues raised by the report "in a comprehensive manner".
Additional reporting PA