Economics:  'Though April showers may come your way, they bring the flowers that bloom in May." The more we move into April, the more that phrase looks over-optimistic from the Government's point of view.

Once again the rate of inflation has edged above the 5 per cent mark, according to data published by the Central Statistics Office last week. That was the inflation figure for March. April's inflation figure, due out in the first week of May, is likely to be the same or higher as a result of the knock-on effects of the European Central Bank's (ECB) decision to raise interest rates in March.

More interestingly is the fact that in that same week, ECB president Jean-Claude Trichet will be in Dublin along with the ECB governing council.

While he won't announce another rate hike, he is likely to signal that another one is on the way in June, putting a dampener on the Government's pre- election mood music.

(Just ahead of that meeting, the publication of the exchequer returns for April will show more fully the impact of the property market slowdown on Government tax revenues.)

When he gives the usual press conference after the governing council meeting, Trichet is likely to repeat that mantra that the biggest threat in inflation comes not from a temporary rise in inflation itself but from what central bankers call "second-round effects".

With inflation, as measured by the consumer price index (CPI), now running at more than 5 per cent, Irish workers realise that the average annual rate of pay increase granted under the latest partnership agreement, 4 per cent, involves a loss in real income of 1 per cent.

Following a call by the nurses for a 10 per cent pay rise, the Irish National Teachers' Organisation has now called for the terms of Towards 2016 to be renegotiated to award higher rates of pay rises.

This is the beginning of what Trichet fears: the onset of "second-round effects" whereby high inflation moves from being a once-off occurrence into a self-sustaining vicious circle.

At the beginning of the decade, Irish inflation rose to about 5 per cent a year before falling back to 2.5 per cent in 2005.

That was good luck. Once again inflation has risen to more than 5 per cent - 5.1 per cent to be exact, according to last week's CPI.

Using the so-called harmonised index of consumer prices that measures inflation in a standard fashion across all EU states - and, importantly, does not take account of mortgage interest rate rises - the Government says inflation is really 2.9 per cent.

In making this argument, the Government does itself few favours. In a State with 80 per cent home ownership where mortgages are mostly variable- rate products, changes in the rate of interest are a major influence on the cost of living.

As a measure that tries to capture that cost, the CPI is a valid measure of inflation in this State.

Without "second-round" effects, CPI inflation should start to decline as the year progresses.

With a bit of luck - and no more than one further quarter- point ECB rate rise - inflation should average about 4 per cent this year.

If unions and the Government hold their nerve, public sector workers will at least be compensated for rises in the cost of living as measured by CPI inflation this year.

If the Government takes seriously reform of the services and public sectors, there is no reason why inflation should not fall back to more reasonable levels in subsequent years.

That policy will bear fruit in two important ways.

As well as keeping wage growth down and restoring Ireland's competitiveness, it will also lower pressure for public sector pay increases that are a drain on the taxpayer, thus making election promises on tax and spending that much easier to deliver on.

If, on the other hand, the Government loses its nerve and caves in to pressure for greater pay - either before or immediately after the election - then all hell could break loose. A cave-in before the election is unlikely.

All eyes will be on the second benchmarking report due after the election.

Likely to be abused as a Trojan horse for stealth increases in public-sector pay, that report could end up putting the final nail in the coffin of Irish competitiveness. This approach would be very mistaken.

The memory of the last benchmarking pay award, another post-election decision, is still fresh in the memory of many voters.

There is a way in which the Government can solve emerging pressures on the public sector pay front and keep its budgetary arithmetic in order - namely by accepting the following principle: starting with the next benchmarking round, pay increases awarded to the public sector over the norms agreed under social partnership should be self-financing, ie paid for by cost-cutting in the public sector itself.

Take the example of teachers' pay. There are certainly many dedicated teachers who are paid too little money. To address the problem and help towards funding pay increases for lower-paid teachers, I would suggest ending the practice whereby the taxpayer funds public servants attending their trade union conferences.

Second, stop the practice where teachers going into the Dáil have their jobs held for them indefinitely. Third, the widespread practice of paying several teachers in the same school a principal's salary should stop.

If the next benchmarking process results in these kinds of trade-offs, it will restore the dented credibility of social partnership.

If it indulges in old-fashioned pork-barrel politics, there will be two effects. First, the economy will be damaged, second, the credibility of the Government will be damaged, and seriously so.

Of course the next government might be tempted to give public-sector unions what they want soon after the election on the basis that it will have five years for the private sector to forget. That would be a mistake.

As the still-fresh memories of the first benchmarking exercise show, the private sector's memory is getting longer.

As both economic news and opinion polls soundings increasingly suggest, there is a growing chance that the next government will not last to full term.