Spending by Fianna Fáil and the Progressive Democrats in the run-up to the general election inflated the economy and eroded competitiveness leading to job losses, Mr Pat Rabbitte said today.
Addressing the Cobh Chamber of Commerce, the Labour leader pointed to a comment in the ERSI report released today which noted that: "The major fiscal stimulus provided over the period 2000 to 2002 greatly aggravated the inflationary pressures already present in the economy".
He was sharply critical too of the Government's overall economic approach: "The financial rule that you 'only spend it when you have it' actually means you overheat the economy in good times and you make things worse in bad times," he said.
However, Mr Rabbitte said different rules had to apply for infrastructural investment because it was crucial to future non-inflationary growth.
To remedy the State's infrastructural deficit, Ireland needed to step outside the terms of the Stability and Growth Pact and borrow to fund major projects, he said.
"Future jobs were being put at risk in the name of a pact which everyone knows will have to be reformed, probably sooner rather than later".
The failure to deliver the National Development Plan on time and in full was a political failure and a funding failure, Mr Rabbitte said.
Recent job losses meant manufacturing employment was now 7,400 lower than in 1997 when the current Government came into office, he added.
There was indirect support too for the unions at Aer Rianta and CIÉ the latter who are engaged in a "no-fares" day protest against planned reforms by the Minister for Transport, Mr Brennan.
"You have to be clear how competition will work in practice before you deregulate. . . . Sometimes it is re-regulation, not deregulation [that is required]".
"But instead, Minister Brennan seems intent on privatisation and competition for the own sake, with no attempt to present and adequate case. . . . That kind of bulldozer approach is just as ineffective as is refusal to contemplate change".
Mr Rabbitte also appealed to the business community to look beyond the stereotype and consider the party as a possible future ally.
Admitting that "business as a whole does not necessarily think Labour or vote Labour", Mr Rabbitte said high public services were what the party was about and urged the business sector to "look again at what Labour policies mean for Irish business".