The Tánaiste and Minister for Finance, Brian Cowen, has warned of the dangers of Ireland pricing itself out of the international marketplace.
Speaking in Donegal, Mr Cowen also called for restraint in wage deals in the private and public sectors.
The Minister for Finance also said it was vital that Ireland retain its competitive advantage to enable the country to continue attracting foreign investment and jobs.
He warned that Ireland should not respond to the current increase in headline inflation, an increase which he insisted stemmed from external factors, by pushing wage rates higher.
Mr Cowen said there should be cool headedness and restraint on the wage front in both the private and the public sector.
He said improving Ireland's national competitiveness required a partnership approach and private business had a responsibility to innovate and invest to that end.
He said trade unions and the public sector also had responsibilities to commit to the modernisation agenda.
Mr Cowen's comments come amid growing concern about Ireland's slippage on the international league table of competitiveness.
