Tánaiste Brian Cowen has warned of the dangers of the country's pricing itself out of the international marketplace.
Speaking at the McGill Summer School in Donegal last night, Mr Cowen also called for restraint in wage deals in the private and public sectors.
The Finance Minister said it was vital that Ireland retained its competitive advantage to enable the country to continue attracting foreign investment and jobs.
He said we should not respond to the current increase in headline inflation - an increase which he insisted stemmed from external factors - by pushing wage rates higher.
Improving competitiveness required a partnership approach and private business had a responsibility to innovate and invest, he said.
Trade unions and the public sector also had responsibilities to modernise.
