Taoiseach Bertie Ahern has warned that the issue of rising costs, including wages, must be addressed if Ireland is to continue to prosper. Claire Shoesmithreports.

Addressing the Ibec president's biennial lunch in Dublin, Mr Ahern said there had been a deterioration in Ireland's cost-competitiveness in recent years, and arresting this trend would be key to growth prospects. He stressed that the economy continued to grow strongly, although he admitted there was likely to be a return to more conventional growth rates next year and beyond.

"Employment is strong. Investment levels are high. Inflation is falling. These are all positive signs for our medium-term economic outlook," he said.

However, he also warned that sustainable increases in living standards can only be attained through supplying goods and services to the global economy, something that required costs to be kept under control.

"This must be a key consideration when we come to consider the next phase of negotiations on pay under Towards 2016."

Asked by reporters about his own 14 per cent pay increase revealed yesterday, Mr Ahern insisted it was the result of a review by an independent body.

Mr Ahern also called on business representatives to support the proposed reform treaty that was agreed last week in Lisbon.

"Ireland has been a huge beneficiary of EU integration, and the Union continues to be crucial to the State's future well being. That is why a more effective EU is in Ireland's best interests."

However, he also stressed his opposition to corporate tax harmonisation across Europe, saying it was neither necessary nor good for Europe.