A pay deal which chases inflation would be bad for Ireland, and put more jobs at risk, according to IBEC Director General Turlough O'Sullivan.

He said the only way to maintain jobs in the current climate, is to moderate pay growth.

Mr O'Sullivan said: "The only way to maintain jobs is by controlling costs, moderating pay growth to low single figures, maintaining labour market flexibility, embracing change, driving public sector reform, delivering productivity, improving R&D performance, effective capital investment in infrastructure, training/education and upskilling and adding value to what we produce.

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"It is not sustainable to suggest that pay should chase inflation," he said.

Ireland exports 85% of everything it produces in goods and services. With consumer spending, construction activity and net export growth slowing in 2008, Mr O'Sulivan added: "We cannot further undermine our ability to trade successfully with the outside world.

"Pay is one of the few economic factors that we have within our own direct control," he said.

(VB/JM)