Jimmy Deenihan
Ceist:129 Mr. Deenihan asked the Minister for Finance his policy on wage claims which go beyond that agreed in the Programme for Prosperity and Fairness and which seek to regain the ground lost to inflation. [14607/00]
Written Answers. - Wage Claims.
I am aware that the most recently published inflation figures are higher than expected when the terms of the programme for prosperity and fairness, PPF, were being negotiated.
As Deputies are aware, this increase has been due to a number of factors, which include: the sharp increase in oil prices, the fall in the value of the euro, the budget increase in excise duty on tobacco and an increase in underlying domestic inflation. Thus a large part of the recent increase in inflation reflects exceptional factors. These factors will become less significant over time and, as a consequence, it is expected that inflation will fall in the second half of this year. The extent of this fall will depend on the value of the euro and future oil price developments.
However, this agreement is for three years and I am confident that over the remaining part of the agreement inflation will fall well below current levels. In this context I think that the appropriate policy response is to fully implement the terms of the PPF and I am confident that the agreed pay increases combined with promised tax reductions will provide for continued gains in real disposable incomes.
It is this Government's view that unsustainable wage and price developments would threaten our economic prosperity. Our objective is to ensure that the increase in inflation does not become entrenched and that concerns about overheating are addressed. This means that the terms of the PPF must be strictly adhered to. This is the best way of sustaining the economic and social progress that we have achieved.