Minister for Finance Brian Cowen has warned that demands for high pay rises in the current round of pay talks could result in Ireland pricing itself out of the international market.
Speaking at the National Infrastructure Summit in Dublin today, Mr Cowen said Ireland's competitiveness remained a key factor in our ongoing economic success and ability to maintain a low-tax regime.
He said this must be taken into account by all sides in the current round of pay talks.
"We can only pay ourselves what productivity allows if we are to maintain our competitiveness," he said.
He also warned of linking pay increases to the inflation rate. "We have no option but to benchmark our wages in this way and to keep increases down to the common rate of inflation, or at, or below, the increase in pay rates in our main competitors," Mr Cowen said.
Ireland's inflation rate was at a three-year high of 3.8 per cent in April as measured by the Consumer Price Index (CPI), compared with 2.5 per cent in January.
"If we price ourselves out of international markets then the inevitable result will be the loss of jobs."
As a result, the Government will have less resources to finance vital infrastructural projects and other capital investments.