IBEC has reservations about another partnership deal, says the group's director general, Turlough O'Sullivan

The success of the economy cannot be taken for granted. Further increases in living standards, better quality public services and infrastructure development, all depend on continued growth in the productive sector.

But the fact that there is a potential for growth does not automatically mean the economy will grow. Indeed, the Central Bank made this point in its latest quarterly report and has clearly identified excessive and uncompetitive wage growth and inflation as Ireland's Achilles' heel.

IBEC has been drawing attention to this for some considerable time. Competitiveness seems to have slipped off the national agenda. This is potentially disastrous for all of us.

IBEC has reservations about entering into a future partnership agreement unless it can urgently address the key objectives of improving our competitiveness and delivering on commitments effectively. Due to all the problems experienced with PPF, business confidence has suffered and future plans for investment and job creation are being very closely scrutinised. Many multinational corporations have questioned our sanity when we continued to pay ourselves as much as twice and three times the norm in the US, the UK and the EU.

Such increases will maintain price pressures domestically and undermine exports and future foreign investment. IBEC believes a radical course correction is required if Ireland is to continue to prosper.

Two key factors will impact heavily on this:

• Putting competitiveness firmly back on top of the policy agenda. In pay terms, this means low single figure increases, in line with trends elsewhere. It also means changing behaviour on the shop floor.
• Delivering a more effective and efficient public service, with prudent control of current spending and full and timely delivery of the capital infrastructure elements of the National Development Plan.

The unions contend that wage levels in Ireland are lower than in some other EU member-states. Of course they are. But the unions should remember that living standards here are now well ahead of the EU average. To appreciate this you only have to consider the number of cars on our roads, the number of mobile phones, foreign holidays, restaurants and pubs and general level of wealth our citizens enjoy. We are a young nation with a very short track record of success and we have one of the lowest tax regimes in the EU. These factors must be taken into account in any fair comparison.

In the event that we cannot get a modest and certain national wage agreement later this year, negotiations will take place at enterprise level. Employers withdrew from national agreements in the early 1980s when pay inflation was out of control and flexibility and change could not be secured without substantial extra payments.

The economy was in a perilous state with high unemployment, high public spending, penal taxes, high interest rates and no investment. In the years from 1982 to 1988, employers worked with employees to tackle these difficulties at individual enterprise level.

Social partnership has served us very well for a very long time, but I believe that it is not the "how" that matters but rather the "what" in terms of the measures that are necessary to address our current problems. I have a sense that there may be a need to repeat the experience of the early 1980s next time, to make the important connections between pay levels and competitiveness of enterprises once again.

At that time, employers and employees working together succeeded in bringing down pay settlements by about 50 per cent and putting in place flexible work practices and fast responses to change that drove our subsequent success.

In doing so, they created the environment, which made it possible to face up to the problems of high unemployment, penal taxation and rampant government spending. I am sure that the recent partnership process and all the success that followed it would not have been possible without this experience.

Tomorrow: SIPTU vice-president Jack O'Connor responds