The key ingredient that would give Ireland power to ride through the present international recession and come out stronger is for us to be flexible. At times of change, those who can rapidly adjust are those who survive and prosper.

There are first rate people working in Ireland's public services, but they work within rigid structures that would never have survived if they had to compete. In 2001, taxpayers had to pay an extra 23 per cent on day-to-day services - but it would be difficult to maintain that there was a corresponding improvement in services.

We are now told by the Government that spending will increase by 10.5 per cent in 2002. Unless there are policy changes, however, this target is likely to be way short of the mark. It is, therefore, time to call a halt.

Pay in the private sector is determined by what customers pay for goods and services. Price increases are effectively impossible. For instance, I spoke with a businessman last week who told me that eight years ago he was selling a dozen items for £10 (€12.70); today he is selling the same dozen items for £8.80. Yet, we think we can go on paying ourselves more - as if we lived on a different planet to the rest of the world.

The new benchmarking arrangements are an attempt to tie the public service into the reality of the market-place. It would, however, be very beneficial for all concerned if people could move jobs freely between the private and public sectors. There is probably no better way to change culture and bring a customer focus to all activities in the workplace.

What made Ireland unusual was not that we voted against the Nice Treaty, but that we got a chance to vote at all; if there had been a referendum in all states it would have been lost elsewhere as well. I have no doubt that a "yes vote" was the path to a more prosperous Europe. Clearly, there is unease in Ireland and Europe that the central structures have little relevance to the people they purport to represent.

A great strength of the American Union is that its people and institutions act as if they really believe in subsidiarity. Americans delegate upwards to the Federal government only those functions that are demonstrably better administered on a central basis for the entire United States. I don't believe European institutions would have lost the confidence of peoples in Ireland and other states if we had worked to keep power at the most local level in the same way.

For example, if European institutions were to actually live what they profess, Ireland would not need to struggle against the EU bureaucracy just so we could maintain the low tax regime that Irish people want. Similarly, much EU workplace legislation is unnecessarily prescriptive. We need flexible systems operating from the bottom up, not the top down.

Why is it that the EU Commission continues to produce regulations making it more difficult for the enterprise sector to be competitive? Wouldn't it be better if they were to produce an instrument prescribing more flexibility in the workplace, rather than less?

Ireland is effectively grinding to a halt. In Dublin, the absence of underground public transport has forced people to use cars, which has resulted in traffic paralysis. Motorists negotiate a system designed to drive them off the roads.

Ireland is, in fact, responsible for its own paralysis.

People, for instance, insist on preserving planning processes which add years to motorway construction.

Most people want mobile phone coverage everywhere, but . . . no masts.

Most political parties accept that Ireland needs a spatial strategy, prioritising development in particular towns and cities. But no one will say which towns in advance of an election, for fear of offending the excluded ones.

This is the only country I know of that regards waste management as an environmentally negative issue, and so we delay and block incineration.

So we wait for everything, as the rest of the world forges ahead. We cannot go on like this, always finding reasons for not carrying ideas forward. It is time for our institutions to be modernised, for our politicians to be less distrustful of the electorate's judgment, and for all of us to be prepared to do things in new ways. Successful businesses are those that do precisely that.

Turlough O'Sullivan is director general of the Irish Business and Employers' Confederation