The minimum wage in the Republic will become the third highest in the EU next February, according to the Small Firms Association.

The director of the association, Mr Pat Delaney, said the Republic has "lost the plot" in terms of competitiveness and that the comparative size of the minimum wage here was symptomatic of this.

The €7 per hour rate due to be introduced in February 2004, will place the Republic third highest after Luxembourg and the Netherlands.

Based on a 39-hour week, the monthly figure for someone on the minimum wage in Luxembourg would be €1,369. For the Netherlands the figure would be €1,269, according to Mr Delaney.

The figure for here will be €1,183 next February.

That will make the rate in the Republic twice that of Spain and Greece and three times that of Portugal, he said. The rate here will be five times that of Hungary, 20 times the rate in Bulgaria, and 25 per cent higher than the rate in the US, Canada and Japan.

Mr Delaney said the February increase would damage employment prospects further and result in thousands more unskilled and part-time jobs going unfilled.

"It is imperative for the competitive position of Ireland that wage levels are decided in a competitive labour market," he said.

Mr Delaney said that establishing wage levels "by diktat rather than market forces is proving to be a negative employment strategy".

He said the fastest growing economy in the EU was Spain, where the monthly minimum wage is €451. He said surveys by his association of its members had found that about one quarter said the minimum wage was amajor problem.