The Government has called for wage restraint during a plenary meeting of social partners two weeks after receiving a 14 per cent increase in its own pay.
In his address at Farmleigh House in Dublin today, Tánaiste Brian Cowen said a "realistic approach" to wage demands is necessary if Ireland wants to maintain its competitiveness and living standards.
Tánaiste Brian Cowen
He also warned against complacency and said that an "effective management" of the current slowdown is in everybody's interest.
Mr Cowen said that for the economy to continue to grow at 4 per cent by 2010 correct decisions need to be taken now and the external economic picture must not worsen.
He warned of the threats from external pressures on the Irish economy including high oil prices, a weakening of the dollar and the risk of a recession in the US.
Today's meeting of the social partners comes ahead of the next round of pay talks, due to get under way early next year provided for in Towards 2016 partnership agreement.
Mr Cowen told delegates that in preparing for the negotiations it is important that expectations are "kept in line with the economic realities we face". He said: "The national partnership agreements have served us well over the last decade, and I would hope that this well-tested approach can once again be relied upon in helping us meet the emerging challenges we now have to face as a small open economy".
Mr Cowen also pointed out that the public service paybill accounts for around half of all current expenditure. However, he said that any future pay increases in the sector rely upon the co-operation of members with measures to make the public service more user-friendly.
The Taoiseach Bertie Ahern told the meeting that if social partnership still has value then it is about "helping to manage change".
Mr Ahern said that although legitimate interests must be addressed and the rights of individuals and the common good be protected, it "does not mean that we back away from necessary change, any more than we can insulate what happens in Ireland from the global reality of which we are part".
The meeting came ahead of the Irish Congress of Trade Unions' publication of its pre-Budget submission this afternoon.
Last month significant pay rises for politicians, judges and senior civil and public servants were announced. They included a 14 per cent pay rise for Taoiseach Bertie Ahern which will increase his annual salary by €38,000 to €310,000.
After the meeting IBEC Director General Turlough O'Sullivan said that government and the social partners must do everything possible to control inflationary pressures in the economy.
"Our pay and non-pay costs must be brought back into line with trends in our trading partners... we must all ensure that the factors which are under our domestic control do not in any way further add to inflation," he said.
Meanwhile, Fine Gael's Leo Varadkar responded by saying that wage restraint should begin at home the Government should lead by example and refuse to accept the recent pay award.
"With health cutbacks, record murder rates and spiralling unemployment and inflation rates it is clear that the Taoiseach and his Ministers have not delivered value for money and to call for others to exhibit wage restraint is breathtakingly hypocritical" he added.
