By Andrew Bushe
DUBLIN — The Irish government is considering ways to increase competition in an effort to cut rising prices. The move follows a report from a state agency that found that the cost of living in Ireland is now the second-highest in the euro zone after Finland.
The report by Forfas, the industrial advisory body, concludes Ireland moved from being the eighth-dearest of the 12 euro states in 1995 to the fourth in 1999 and the second by February of this year.
Taoiseach Bertie Ahern told the Dail that “greater competition and regulatory reform are absolutely essential to keep order on prices.”
“We have been rising in the rankings for the last seven or eight years, so the fact that we are second does not surprise me,” he said.
Tanaiste Mary Harney described the report as “disturbing” and said it pointed the need to focus on price and labor costs competitiveness.
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“It underlines the need for greater competition and the speedy implementation of the government’s regulatory reform agenda,” she said.
The findings have wide implications for attracting tourists and new industrial investment and will have a major bearing on wage demands by trade unions.
Opposition parties have accused the government of taking its eye off the ball in relation to spiraling prices.
The study used purchasing price parity calculations designed to show the real cost of living to consumers when compared with the amount of money they earn.
On this basis, it calculated Ireland is now second only to Finland in terms of expensive places to live in the euro zone.
In 1999, Ireland was slightly cheaper than France and Germany, but the report found that by this year it had overtaken the two main euro zone member states in the cost-of-living league.
Prices in Britain, Denmark and Sweden, which are not part of the euro zone, are also more expensive than in Ireland, but it does not go into this in detail, as the brief was to examine the euro zone states.
The report was ordered in February after allegations the euro changeover had been used to push up prices.
It found there was no widespread profiteering but identifies sectors where prices rose unusually sharply during the changeover period.
These included dentists, doctors, opticians, pharmaceutical products, movies, package holidays, beer, spirits and soft drinks in bars, restaurant meals, hairdressers and the provision of services to householders.
“There is a need to examine the degree to which there are unjustifiable restrictions in these sectors,” the tanaiste said.
Dermot Jewel, chief executive of the Irish Consumer Association, said people should not be surprised by the Forfas findings, since in every single instance in its surveys prices had gone up.
“Prices are unrealistically and unaffordable high, that’s the problem we have got to tackle,” Jewel said. “We have been shouting and roaring about this for months.”
He said consumer power was limited in dealing with the problem and government intervention is needed.
Jewel said that while they knew prices were high, the association had not realized they had risen to such a level.
David Begg, secretary general of ICTU, said there is a widespread belief that official statistics don’t reflect what was happening on the ground.
He said the range of sectors where profiteering is taking place is extensive.
He said he does want a wage/price spiral created, but when workers are framing wage claims, they have to consider the cost of living.