The persistently high rate of price inflation has provided greater impetus for the Governement to tackle anti-competitive practices and introduce reforming measures

The Tánaiste, Ms Harney, led the charge to block a joint venture between the Republic's two biggest financial institutions and, for now, seems to have headed off any imminent merger between AIB and Bank of Ireland. She wanted the banks' proposal - to bring together their information technology divisions into a new company - to be examined by the Irish Competition Authority to ensure its impact on the economy could be fully considered.

The banks decided to abandon the project, saying they could not live with the uncertainty of a prolonged investigation.

But given that the Irish Competition Authority would probably have completed its work within one month, it seems more likely that the banks knew they could not overcome the political opposition that had materialised.

The banks had been at pains to point out that the joint venture was not a pre-cursor to a full merger between AIB and Bank of Ireland even though the latter had been publicly championing the rationale for creating one large Irish-controlled financial institution.

It was a timely and successful intervention that included opposition from Ireland's 15 members of the European Parliament and is the type of action that is now being increasingly demanded of the Government.

The coming together of AIB and Bank of Ireland, even in a very limited way, sparked fears of a return to a time when Irish banks were accused of operating a cosy cartel maintaining high charges for customers who had little choice.

The injection of competition from foreign-owned banks has forced all of the financial institutions to live with more modest profit margins, particularly on mortgage lending, and to provide more keenly priced services. Other sectors of the economy where competition has been enhanced have yielded similar dividends for Irish consumers, the most tangible example being air travel.

Much work has been done in recent years on this front and the recent beefing up of the powers afforded to the Competition Authority underlines a commitment by the Government to tackle further problem areas.

The persistently high rate of price inflation in the Republic has provided greater impetus for the Government to tackle anti-competitive practices and introduce reforms that will help to contain the level of price increases.

Last week the Department of Finance highlighted "inadequate" levels of competition in some sectors of the economy as one of the primary causes underpinning rapid growth in price inflation here. In its Economic Review and Outlook, it pointed to barriers to entry in some sectors and suggested the Government will have to look at fresh measures to stimulate competition if it is to contain inflation.

These observations echo those previously offered by the Organisation for Economic Co-operation and Development (OECD) in its Economic Survey of Ireland 2001.

It referred to the steady progress that has been made in reducing barriers to entry and entrepreneurship and to improving the openness of the Irish market in recent years, but suggested that competition policy still needed to be strengthened.

The Government has largely implemented the OECD's recommendations in sectors such as gas and telecommunications and is working to address problem areas that continue to attract the Paris-based organisation's attention.

Last year the OECD fingered the legal profession as a priority.

It recommended the removal of impediments to competition amongst solicitors, or between solicitors and barristers, and the need to provide incentives to ensure solicitors' clients can have access to competitive fees from barristers. The control of education and entry to the profession was also mentioned as warranting examination.

At the moment, Indecon, the economic consultants hired by the Competition Authority, is conducting an initial investigation of fees charged by professionals in the medical, legal and construction sectors.

The consultants are also examining restrictions on entry to the professions and are expected to present their findings to the Competition Authority in the late autumn.

The watchdog body, which now has greater powers of investigation and can call on the Garda to help it to uncover and punish anti-competitive practices, will take some time to examine its findings and decide on the most appropriate course of action.

The insurance industry is also to come under close scrutiny in the months ahead amid growing public anger about spiralling costs. A joint study of the industry by the Competition Authority and the Department of Enterprise, Trade and Employment has been proposed. Its terms of reference are due to be finalised shortly and work could get under way in late September.

A spokesman for the Department said it had also been undertaking detailed analysis of the report prepared by the State's industrial policy agency, Forfás, earlier this year which reported "unusual price increases" in doctors' fees, hairdressing charges and the price of beer in licensed premises during the euro changeover period.

Reports such as this have focused attention on the need to urgently tackle inflation in the economy.

Forfás estimated that the Republic was the second most expensive place to live in the euro zone. Last week the Department of Finance stated that inflation, as measured by the Consumer Price Index, would be in the region of 4.5 per cent for 2002 as a whole, which is around twice the average within the euro zone.

The resilience of consumer price inflation poses the greatest threat to Ireland's economic growth prospects and must be urgently addressed.

All Ministers will be under pressure to be seen to be doing something to bring inflation under control. There are limits to what competition policy can do in areas such as health and education which consistently record large monthly price increases.

IBEC has called for the Competition Authority to undertake regular examination of Irish prices compared with those in other EU states in co-operation with the Director of Consumer Affairs.

Such a comparison may find that the prices of many Irish products are not out of line with those in other EU countries or are driven by cost pressures in Ireland, but that certain products are more expensive. The underlying cause for this could then be analysed, it argues.

The investigations that are under way and indeed developments such as the deregulation of pharmacies are positive steps which will have an impact on prices.

The focus has now turned to competition as a remedy for inflation but it is not a quick-fix solution and its impact will be felt only in the longer term. It will take some time for greater competition amongst pharmacies and the professions generally to yield results for consumers.

As a result, great political resolve will be necessary if competition policy is to prove effective as a measure to combat inflation.