MANY European states are ignoring the key issues for long term economic prosperity because of a preoccupation with issues, such as European Monetary Union, according to British Treasury Secretary, Sir Terence Burns.

Speaking at an investment seminar in Dublin yesterday, Sir Terence warned that Europe had been slow to privatise, to tackle expensive subsidies to some industries and less than "wholehearted" in its commitment to the benefits from trade and investment flows.

"I do worry that these ideas are now often less welcome in parts of Europe than they are in many other parts of the world", he said.

Well functioning economies must be successful across a range of policies, he told delegates at the seminar organised by Ulster Bank. "Virtuous or vicious circles mean that we have to make progress on all fronts", according to Sir Terence.

Striving to achieve low inflation and stable public finances, European economies must also remain concerned about the provision of education, health care and pensions, he said.

While "strains and stresses", such as continuing high levels of unemployment and inadequate levels of savings, will continue to create pressures for various economies, Sir Terence said, he was still optimistic that sound economic management could be achieved.

"At the same time, my underlying concern is that we are dealing with a fragile process.

Mr Ron Amy, chief executive designate of the Alexander Consulting Group, raised his concerns about the size of pension liabilities of governments worldwide which, he believes, will make a significant impact on future taxation policy and the wider investment markets.

In seven major economies, he warned, the governments' pension liabilities were now far larger than their national debt.

In Ireland, Mr Amy said the problem had been partially addressed by encouraging voluntary participation in funded pension schemes through tax relief on contributions. But, with only 37 per cent of the workforce in pension funds, he believed the only solution was to introduce compulsory pensions provision.

Continuing the pensions discussions, Ulster Bank's head of, investment, Mr Gavin Caldwell, criticised the lack of sufficient investment opportunities for the growing number of pension funds in the economy.

"The increasing number of pension funds being set up by new multinationals is increasing the flow of capital for such investment, but, ironically, there is a lack of quoted investment opportunity to invest in more quality Irish companies", he said.

By 2000, Mr Caldwell predicted, the total value of Irish pension funds would have risen from £16 billion to £25 billion.