Taoiseach warns prices are going to keep rising as inflation nears 40-year high

Micheál Martin gave his most stark assessment yet of continuing inflation, after it hit a near 40-year record of 8.2pc in May.

“Prices will go up. We don't have specifics on by how much,” Mr Martin said after an EU summit meeting which concentrated on the energy emergency on the second day of leaders’ talks.

The ban on importation of Russian fuels will feed into higher prices on the wholesale market as countries compete for supplies from elsewhere, officials admit.

The higher cost of transport will then inflate the cost of goods when they arrive in the shops, while the effect of Ukraine’s ruined exports of grain will add further to food prices.

“We weren't that dependent on Russian oil. So from the Irish perspective it doesn’t affect our supplies in particular,” the Taoiseach said.

“But it will affect the whole the overall market and clearly there is an energy crisis out there, the likes of which we hadn't seen for quite some time - for some decades.”

Mr Martin added: “I think we have to be honest with people and say that this is the reality facing us because of this war.”

On pay pressures as a result of the coming price rises, the Taoiseach said the Government had begun exploratory talks with the social partners “in respect of the unique set of circumstances that we find ourselves in now because of the war”.

There was also a “supply and demand imbalance” coming out of Covid-19 which was adding to inflationary pressure, he said.

The response “does involve pay and a range of other issues, but I would welcome that exploration,” the Taoiseach said.

"I think it's worth pursuing, because given the circumstances we are in, a collective societal-wide response is better for the country rather than different sectors pursuing it on single issues, right across the board,” he said.

Mr Martin said he thought it would be “more coherent” for the country to approach the issue in a collective way, but made no specific mention of private employers and a possible mirroring of the public sector outcome.

“That's what we will explore, to see if that can be achieved,” he said.

Mr Martin was asked about discount provider Iberdrola pulling out of the Irish electricity market and whether this would put upward pressure on prices or at least feed into inflation for many families.

He said Iberdrola had 32,000 customers who would now have to move to other providers, but the company would be staying involved in renewables and had some interesting partnerships in this area, “which is where Ireland really has to move, in terms of the offshore wind agenda.”

Bur Mr Martin said the pullout “reflects the broader challenges within the energy sector now because of the extraordinary price increase brought about by the war in Ukraine”.

There were “really significant challenges for companies at the moment,” he added.

The EU leaders had a significant discussion with the president of the African Union today on the threat of famine, Mr Martin said, saying it was another consequence of the war.

“The potential of famine and starvation is over and above what could happen in terms of food shortages in Africa,” he said.

“And the concern there is that there's a million tonnes of grain stuck in the Ukraine that can't get out. There are talks underway to see if that grain can be released.

“There’s a very profound shortage. There are also big issues for fertiliser for those countries in terms of their own self-reliance and developing their own farm income. So that's another significant consequence.”

Mr Martin added that food shortages “will happen, unless fairly rapid interventions can happen to release the grain from Ukraine, and various routes have been pursued”.

"The most optimal one would be the sea route,” he said.