Finance Minister Brian Cowen has told The Irish Times that the Government will take account of oil price increases and their impact on the economy in its next forecasts.

"We do have to recognise that oil prices have doubled in the last few months so we are heading into an era of higher energy prices," said Mr Cowen, who was attending a meeting of EU finance ministers in Manchester.

He also repeated the agreement by ECOFIN that EU governments should avoid using tax measures in an attempt to stabilise oil prices. Mr Joaquin Almunia, EU Commissioner for Economic and Monetary Affairs, recognised at the meeting that oil prices would impact negatively on Europe's economy, although not by as much as in the 1970s and 1980s.

Mr Cowen defended the decision to leave the government's growth expectations unchanged in its latest forecasts. "My department's assessment was that domestic demand was performing more strongly than expected, as indicated by the stronger data for tax returns, retail sales and housing construction. When we come to the budget we'll have more data to include in our forecasts," said Mr Cowen.

Addressing the issue of globalisation, Mr Cowen said this challenge was accelerating, making the need to respond more urgent. "In the context of globalisation there is no doubt from an Irish perspective that we are very much in favour of a free trade environment. It is the integration of the world and European economies that made our own economic model successful."

While expressing support for the Lisbon agenda - which seeks to make Europe the world's most competitive and dynamic economy by 2010 - Mr Cowen questioned the manner in which it was pursued.

"The goals of Lisbon are right but the methodology doesn't appear to be working. We won't have time to deal with these challenges five years from now. The situation is developing more urgency. We need to communite that to people," said Mr Cowen.