World's elite gathers for Davos 2014

Youth unemployment EU's 'single biggest crisis': Irish PM

Catherine Boyle and Holly Ellyatt
European single market must 'realize potential': Irish PM

European Union politicians need to focus on what is important: youth unemployment and the single market, Enda Kenny, Taoiseach (Prime Minister) of Ireland, told CNBC.

"The single biggest crisis facing the European Union is youth unemployment," he told CNBC in an interview at the World Economic Forum in Davos.

"The EU has got to make decisions that will help the single market rise to its potential."

His comments come at a time when neighboring U.K. Prime Minister David Cameron has been making noises about renegotiating its relationship with the EU, partly in response to increased success by right-wing rival the U.K. Independence Party in the polls.

Louisa Gouliamaki | AFP | Getty Images

(Read more: Why foreign investors are buying into Ireland)

"The bigger picture is that Europe is one of the most important trading blocks on the planet, and we need to realize that potential," Kenny cautioned.

(Read more: Bankers warn against loss of U.K. EU influence)

He also warned of the danger of complacency in Europe, as the continent returns to slow growth following the debt crisis.

Ireland exited its 85 billion euro ($114 billion) international bailout program in December 2013 to much fanfare, with Finance Minister Michael Noonan telling CNBC at the time that there was a sense of achievement that the economy was recovering after a period of harsh austerity measures and an overhaul of the banking system.

(Read more: Ireland leaves bailout)

Its problems have not disappeared, however. Kenny acknowledged that mortgage debt to banks is still a big issue for the country. He also pledged to replace all the jobs which had been lost during the crisis by 2020, and to attract back some of the young people who emigrated during the crisis.

Ratings agency Moody's last week showed international faith in the bailout exit when it upgraded Irish government debt to investment grade from "junk" with a positive outlook, citing the economy's growth potential and restored market access as the main drivers.

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Ireland's finance minister told CNBC in Davos that he was not complacent, however.

"We're very prudent and modest and we'll continue to grow the economy and create jobs...but we've a lot to do," Michael Noonan told CNBC on Wednesday.

He added that Ireland would do all it could do improve its credit rating further. "On the [bond] spreads, our ambition is to be part of the north European high credit-rating group of countries and we're moving into that space now and we'll take every economic and fiscal action that's necessary to stay in that position."

- By CNBC's Catherine Boyle and Holly Ellyatt. Twitter: @cboylecnbc and@HollyEllyatt.