For a mature economy like Ireland, innovation in relation to both products and processes is a key determinant of long-run productivity growth and, therefore, living standards. Much has been done in recent years to increase the amount of R&D carried out in this country and improve the innovative capacity of the economy and there is clearly scope for further improvements in this regard.
However, there are compelling reasons to suggest that inflation in the euro area will go up only gradually. They include a legacy of private and public debt that was too high, which led to a fall in economic activity and an increase in unemployment. More recently, global developments which are having a negative impact on inflation have added to this.