The Taoiseach said this morning the latest economic report from the Economic and Social Research Institute (ESRI) endorsed the "main emphasis" of Government policy.
The Medium-Term Review predicts buoyancy is set to be restored by 2005 and that the current downturn should end within 18 months.But the report also warns that recovery could be seriously threatened if the Government fails to address the issue of competitiveness.
Such policy failure could cut living standards by 10 per cent by 2010, the authors of the ESRI's Medium-Term Review say.
In a statement this morning Mr Ahern said he welcomed the report's emphasis on competitiveness. "The report endorses the main emphasis of Government economic policy," he said.
The ESRI report also says that a further substantial rise in the euro against the dollar and sterling could derail recovery.
The review's central forecast sees economic growth rising back towards 6 per cent towards the middle of the decade, before settling into sustainable annual expansion of about 3 per cent after 2010.
The recovery will, according to the ESRI's economists, be based on renewed health in the global economy which will help to stimulate demand for Irish goods.
This will result in a growth rate "well above the dreams of our EU neighbours" with any economic "underachievement" in the first half of the decade offset by above-potential expansion from 2005 on, the review concludes.
The analysis foresees the restoration of full employment by 2010, with skilled services to fuel growth at the expense of the manufacturing sector.
The Fine Gael leader, Mr Enda Kenny, called on the Coalition to acknowledge its policies were having a detrimental impact on the economy. The Labour leader, Mr Pat Rabbitte, said the report was an indictment of the Coalition's economic incompetence.
"By overheating the economy during the boom and in the run-in to the last election, Fianna Fáil and the PDs pushed up costs and prices across the economy. This undermined our competitiveness, resulting in a slowdown in growth and the flood of job losses which we are now seeing," Mr Rabbitte said.