When the Minister for Finance, Mr McCreevy, put the Budget through Cabinet, reports suggest, he did not get much of an argument from colleagues about its potential macroeconomic effects, particularly on inflation. Not so in Brussels, however, where the Government's generous fiscal strategy has been criticised for contributing to overheating.

And the Republic, its success acknowledged, was not alone in being rapped over the knuckles by the Commission and then by finance ministers under the system of peer review by which fellow euro states jointly monitor each other's performance in the context of their Stability Pact obligations.

Under the new Commissioner for Economic Affairs, Mr Pedro Solbes, the criticism has become blunter and more specific. He makes no bones about calling for a postponement of next year's promised tax cuts and even of pay increases.

"The pacts [national pay rounds] have done very well in the past," he argues, "and the idea of reducing taxation in the long run is a prudent one. But it is true that it is one that we have insisted in the last discussion [at the Council of Finance Ministers] that probably these ideas could be postponed a little bit." He acknowledges the dilemma faced by Mr McCreevy. The launch of the euro and the ECB's "one size fits all" interest rate policy is necessarily painful if a member-state is out of kilter with the predominant economic cycle.

Nevertheless, he insists, the other side of the coin is that the Republic certainly owes some of its economic success to the euro, and policy-makers must simply use fiscal instruments instead. Does he think Mr McCreevy will postpone tax cuts? "It is not possible to say. This is for the Government. But this is what we consider in technical terms as necessary from the point of view of the economic analysis."

The congenial, soft-spoken Mr Solbes (57) is a popular former Spanish Socialist minister for finance, and earlier for agriculture, with a long experience of EU affairs. He studied European economics in Brussels, served in the Spanish mission to the EU as an official, was part of the Spanish EU accession negotiating team, and was later charged with EU relations as a junior minister. Mr Solbes is in Dublin today to meet Mr McCreevy and then will be addressing other political leaders, officials and business leaders at the Institute for European Affairs.

Is the system of peer pressure functioning effectively as a means of co-ordinating economic policy?

"My experience, after being some years outside the Council, is that the creation of the euro-11 in the context of monetary union has seen a very important progress in the right direction," he says.

It is an open forum where ministers speak freely. "We try to be critics, not in the sense of creating problems for national governments, but to say to them that `while you are doing this, which could be OK from this point of view, it has certain inconveniences. There are experiences in other countries which are relevant'."

The drive to closer voluntary co-ordination is an imperative arising out of the euro, whose launch, he insists, has been "very smooth, a great success, in the sense of not only the introduction of the unified monetary policy, but also in the sense of being used more and more for different type of activities in the financial markets . . . corporate bonds, public debt, etc."

The EU was also successful in avoiding excessive currency fluctuation in the run-up to the launch, although he acknowledges that some "excessive optimism" at the time may have resulted in the euro's subsequent decline in value.

"Secondly, and the main explanation, the behaviour of the euro was based on a certain behaviour of the American economy and the European economy. And it is true that in 1999 the Asian crisis did not have such a negative impact on the American economy. And Europe did not do as well as we have thought."

Although the decline in the euro's value has some inflationary impact, he believes its main significance is psychological rather than economic. Within the euro zone the fundamentals - deficit and debt reduction, fiscal consolidation, and inflation - are right.

But the struggle for structural reform goes on, and next month's Lisbon special summit will see the EU once again attempting to devise the policy mix that will allow it to emulate the US entrepreneurial culture without losing its social model.

"We have to pass from stability to dynamism. That does not imply that we have to forget stability - it is the necessary point of departure." He speaks of the need for prioritising a knowledge-based society and an entrepreneurial culture, the completion of the internal market in financial services, and for the EU to take a new look at not just the quantity but the quality of its public spending and taxation.

"In the case of taxation perhaps the most interesting debate is what happens with charges on labour, for example," he says. "We must establish a model more friendly to labour and more friendly to entrepreneurship."

This morning he is meeting Mr Philip Hamell, chairman of the Euro Changeover Board, to emphasise the immediate challenge of targeting small businesses this year as part of the rolling preparation for the January 2002 launch of notes and coins.

He believes most larger firms have already got plans in place but "as for small and medium-sized enterprises, on the contrary, my view is that most of them are not adapted. "Which is understandable as they not unreasonably paid so much attention to the Y2000 effect that they have postponed the issue."

Next year he would like to see a campaign in schools - children, he believes, will then help their parents - and one targeted at those most likely to have special difficulties - the old, the blind and the less educated.

He is also concerned to get across the message that although old notes and coins will be in circulation for two months in 2002, January 1st is the date on which all accounting must go over to the euro.