The Taoiseach, Mr Ahern, has urged caution, flexibility and realism with regard to Ireland's future. He said that while the economy continued to do well, Ireland could not always "walk on water".

The annual rate of inflation rose to 5.6 per cent last month, up from 5.4 per cent in March, Central Statistics Office (CSO) figures showed.

Speaking at the inaugural annual lunch of the employers' group, IBEC, in Dublin yesterday, Mr Ahern told delegates that Ireland could not always achieve growth rates of 10 per cent. This is the figure Ireland has achieved for the last four years and is more than three times the EU average, he said.

The Taoiseach said he expected the economy to continue to do well for the length of the current social partnership programme but warned Ireland was entering more uncertain times and urged the social partners to continue to be flexible and work together.

"The economic environment has become more challenging," Mr Ahern said. "It is worth reminding ourselves that such changes can be sudden and without a lot of notice. The key to meeting the challenge is to recognise it and adapt to it."

IBEC president, Mr William Burgess, said that expectations within the economy were "dangerously high" despite the very real improvements that have been achieved. Mr Burgess said he was appalled by the decision of the Minister for Finance to abolish the employers' PRSI ceiling.