The Minister for Finance has warned against higher-than-agreed pay rises for public sector employees which could damage Ireland's international competitiveness.
In a speech to the Patrick MacGill Summer School in Glenties, Co Donegal this evening Minister for Finance, Brian Cowen said this type of wage inflation could threaten the number of people in employment.
"It is important that we do not price ourselves out of the international marketplace. For that reason, it is absolutely vital that we do not respond to the current increase in headline inflation, an increase which is largely caused by external factors such as energy prices and interest rates, by pushing wage rates higher."
"The damage to our competitiveness of higher energy and interest costs would be compounded if we pushed wage growth higher too."
"Cool headedness and restraint are what are required in wage-setting expectations and behaviours at all levels of both the private and public sectors," he told attendees at the summer school.
Minister Cowen also said that future pay increases under benchmarking would be dependent on significant changes in work practices.
"There is a particular responsibility on the public sector to work to improve Ireland's competitiveness. This requires a real, active commitment to the modernisation agenda."
While coy on tax changes in the next Budget Mr Cowen said low taxes were a cornerstone of Ireland's economic success.