* Retailer slashes prices at Irish stores near UK border
* Prices cut on 12,500 products by average 22 percent
* Weak sterling has sent shoppers flocking to N. Ireland
By Padraic Halpin
DUBLIN, May 5 (Reuters) - Tesco slashed prices at 11 stores in the Republic of Ireland by an average of 22 percent on Tuesday in a bid to stop shoppers flocking to Northern Ireland to take advantage of the weakness of sterling against the euro.
The retailer said price drops on 12,500 goods -- including milk, meat and poultry -- at stores near the border brought the price gap with supermarkets in Northern Ireland, a part of the United Kingdom, to its lowest level since 1979.
"This substantial investment will enable us to compete in the long term with prices north of the border and will remove the incentive or the need for consumers to travel, which has been bad for jobs, local economies and the national economy," Tony Keohane, Tesco Ireland's Chief Executive, said in a statement.
A 20-percent rise in the euro against sterling over the last two months of last year, combined with lower VAT and lower costs of doing business, saw sales at Northern Irish retailers surge into 2009.
Asda and Sainsbury's share of the Republic of Ireland's grocery market rose by more than 300 percent year-on-year in the 12 weeks to March 22 despite neither operating south of the border, researchers TNS Worldpanel said last month.
Tesco does not have as strong a presence in parts of Northern Ireland close to the border and saw its share fall half a percent to 25.7 percent over the same period.
The world's No.3 retailer, which last month posted a 10 percent rise in profits, said it would introduce the lower prices in other parts of Ireland in the near future.
"We have retained all the familiar Irish products and brands (and) we fully expect these levels of customer support for Irish products to sustain for the future", Keohane said.
(editing by John Stonestreet)