The European Commission said today that its concerns about Ireland’s budgetary policy have receeded.
The Commission said recent external shocks were slowing down the Irish economy considerably and thereby reducing inflationary pressures.
The EU said much of the force of the inconsistency addressed in the EU’s recommendation on Irish budgetary plans issued in February have therefore been reduced.
"Despite these developments overheating is diminishing very slowly and underlying inflation still persists. Continued vigilance in the preparation of the 2002 budget is therefore justified," it added.
After a period of record growth, indicators point to a marked slowdown of the Irish economy in 2001.
"The Irish economy is now expected to grow by around 6 per cent in 2001, more than 2 percentage points lower than envisaged in the macroeconomic assumptions of the December 2000 update of the Irish Stability Programme," it added.
"The outlook for 2002 is very uncertain but growth is likely to be below its medium-term sustainable rate," it said.
"Fiscal stance in 2002 should provide evidence that fiscal policy is being directed towards stability," the EU concluded.