No recovery without improved competitiveness

When Claude Trichet talks, people listen. When he talks about interest rates his audience becomes particularly attentive. So last week, even though the world knew there would be no rise in interest rates, analysts and commentators, not to mention ordinary mortgage holders, found themselves reading the Trichet tea leaves for signs of future rate policy.

Trichet takes advantage of these occasions to highlight pressing economic matters. Last week the subject was Ireland and Greece, which, he said both needed structural reforms. In particular, he said, we need to improve competitiveness.

We know this. The National Competitiveness Council (NCC), among others, has been saying it for years. In the past this necessary debate has been stifled by calls for lower wages, calls which tend to polarise opinion.

Happily Trichet's latest comments coincided with the latest report from the NCC, and wages levels didn't even make it onto the council's priority list.

Instead it focused on a number of practical suggestions which would make us significantly more competitive. Some, such as the need for better broadband. Others, such as a call for greater competition among solicitors may take some people by surprise.

When the Competition Authority carried out a comprehensive review of the professions a few years back, only the legal profession came in for sustained criticism. Barristers reacted with a comprehensive reform programme. Solicitors reacted by calling for the head of the Competition Authority to step down.

It is now up to the Government to decide how long the restrictive practices prevailing among solicitors will be allowed to go on. Some of the reccomendations seem to run contrary to Government policy.

The NCC calls for much greater support for the Competition Authority. Yet the Government is actively working to abolish the Competition Authority with its functions to be subsumed into a new agency covering competition and consumer advocacy.

In the past few days it has emerged that this new body will also include a Grocery Ombudsman, a development which should worry competiton advocates. The Irish retail market may not suit farmers but the aggressive competition has been very good for consumers.

The Aldis and Lidls around the country have not only forced down prices but have prompted greater innovation among competitors. One worry is that a Grocery Ombudsman might tip the balance away from the consumer. Another is that its office may be used by the international food suppliers, which can only lead to upward pressure on prices.

The NCC says we should be enhancing the skills of those in employment. Yet the Government has moved most of the funding available for on-the-job training to training for the unemployed. This is also a key area but debate is needed on whether we should be prioritising training the unemployed for jobs that do not existing, over training that leads businesses to employ more people.

Even the broadband comments should stir debate. The NCC is calling for the development of broadband in key cities. Rural business and rural areas lacking in business should be worried about any policy which diminishes their chances of getting access to modern networks.

Of course our broadband problems run much more deeply that the debate about rural/urban prioritisation. And in these straightened times it does not seem unreasonable to make sure our cities have the levels of service they need.

The report majors on well-understood themes, that any recovery must be export led; that we need to invest in education; and that we need to reform the public sector.

The point is that it is not just the NCC telling us this. It is the ECB. It is the international investment community. There is a strategy to minimise the length of time it will take us to recover. What is needed now is to put it in place.

Tom McEnaney is associate editor at Business & Leadership.To receive Tom's weekly opinion column free to your inbox, subscribe to The Business Week ezine.