The new German government has so far disappointed industry but could seize a chance to put matters right by following the Irish example, the IBEC annual conference heard yesterday.
Mr Hans-Olaf Henkel, the head of the Federation of German Industries, said the Republic's low corporate tax rates and labour costs, and its related attractiveness to investors, showed that growth was possible without inflation.
"The first 130 days of the redgreen government have been very disappointing for industry. Instead of quick and decisive reforms, there has been a false start in almost all fields of policy," Mr Henkel said.
With the resignation of Mr Oskar Lafontaine as finance minister, however, the German government now had a chance to start afresh, he added.
"Even in an economic environment characterised by globalisation and increased international disturbances, it is still possible to be economically successful. Ireland is one example," he said.
Pointing out that the Republic had seen unparalleled growth since 1992, Mr Henkel said the low level of company tax, longer hours worked by Irish labour for less pay and the low level of Government borrowing and spending had generated the success.
Prof Paul Krugman of the Massachusetts Institute of Technology also compared the Republic's labour costs to the 80 per cent higher rates of Germany, and quipped: "The modern German economic miracle is that there are any jobs at all in Germany."
Mr Krugman said that, while the current growth rate at around 10 per cent was unsustainable because "at a fundamental level, you just run out of Irishmen", there appeared to be a natural, medium-term rate of GDP increase of more than 4 per cent.
He dismissed suggestions that the Irish economy could suffer an Asian-style meltdown, because its circumstances, particularly the level of debt, were significantly different.
"Also, it may be unfair, but the financial markets have a double standard and they do not panic when a first-world country slumps," he added.
The deputy secretary-general of the OECD, Mr Herwig Schlogl, said there were weaknesses in the Irish economy, especially in its over-reliance on foreign investment and technology.
"Unfortunately, there continues to be a dualistic structure in the economy," Mr Schlogl added. "It is uncertain whether much further growth can be expected from foreign direct investment."
Opening the conference, the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney, made a strong defence of the Republic's low corporate tax rate and promised to resist any attempt from other EU countries to force the rates up.
"I would say to people in Europe, if you see low tax rates working for Ireland, then why not try them yourself?"
