Ireland can sustain low unemployment and high rates of growth for many years, according to Dr Arthur Laffer, adviser to former US president Ronald Reagan.

Dr Laffer, who was addressing Goodbody Stockbrokers 2001 policy seminar, insisted that if Ireland could keep its low tax rates it could continue to outperform the rest of Europe and much of the world.

In evangelical form, Dr Laffer insisted that the downturn in the US would not derail Irish growth prospects. He added that Irish assets were not yet fully valued. "Ireland is the location. Asset values will continue to increase and increase even faster if the US does better."

However, he admitted job losses were likely among the high-tech companies situated here but these would be replaced by higher value-added companies.

"Ireland can become a far more sophisticated producer. There will be a shift to more sophisticated production and to much greater valued added. There is a long way to go. Ireland is in a similar position to Japan from 1950, when it produced plastic toys, to 1985 when it was producing the highest end electronics."

One result will be that wages will continue to increase sharply. "This shift to more capital and sophisticated intensive production will mean far higher wages and higher rates of return. As a result, Ireland can keep low unemployment and rapid growth for many years."

But he warned that continuing low taxation rates were a prerequisite for this. He also called for a reduction in the higher rate of personal income tax, insisting that the rate should come down towards 28 per cent in order to attract the best management and engineers to the State.

"We did this in 1980s America and it did not do any harm."

Dr Laffer warned that high inflation would be a fact of life for Ireland as a member of the euro. "The only way to get low inflation is to break with the euro zone or persuade the other member-states to adopt Ireland's low tax, pro-growth policies."

He called on the Irish authorities "not to let Brussels destroy" Irish prosperity in the name of inflation.

"The collateral damage of bad economics is misery. Brussels does not understand, but Ireland has found the answer and should not give up."

The priority for the European Central Bank, said Dr Laffer, should be to strengthen the euro. "No one wants to hold or invest in a weak currency."