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THE Government desperately needs to renegotiate the Croke Park agreement, scrap increments and reduce allowances, small business representatives have said.

ISME said that, although indicators for the domestic economy were positive, businesses were still struggling with a lack of government stimulus.

"The 'up-and-down' or 'zig-zag' profile of the indicators clearly shows an economy bouncing along the bottom and striving for growth, and a long way from the competitive economy aspired to," Isme said in a statement.

"While the Q4 figures are to be welcomed, the struggle by the SME sector is evident and the significant constraints of government-influenced cost increases, the lack of SME bank finance, and the lack of real savings under Croke Park continue to inhibit the economic recovery.

"The private sector can no longer pay for the costly state sector and the elephant in the room -- the Croke Park agreement -- must be renegotiated to bring greater and faster cost reductions," Mark Fielding, the chief executive of ISME, added.

The organisation said that the Government needs to push banks to ensure that credit is available for SMEs and to boost export support services.

It called on the State to continue outsourcing some of its services to SMEs and reduce state-controlled business costs.

The entire social welfare system needs to be reformed to "make it more profitable to work", ISME said.