The EU Commission is not unhappy with the rate of corporation tax in the Republic, according to the director of Monetary Affairs at the EU Commission.

Mr Herve Carre told the Oireachtas Joint Committee on European Affairs yesterday that he had never "heard a word of criticism" about the Republic's corporation tax rate in the EU Commission. He said that, while the Commission has some worries about "harmful tax competition" within Europe, definitions of this phrase tended to differ between member states.

He added that a harmonisation of corporation tax rates "is a long way off" and was a political question rather than an economic one.

Mr Carre was responding to a comment from Mr Sean Barrett (FG), who said that the EU Commission should not interfere in taxation matters of member states.

Mr Carre said if the Republic decided to increase expenditure on infrastructure it would not necessarily mean going outside the Maastricht criteria which stipulate that debt has to be within 60 per cent of GDP.

"Yes, you need to spend on infrastructure but the 60 per cent ratio does leave room for manoeuvre," he added.

Mr Carre was also asked about the Republic's inflation rate and said that the single currency did allow for "certain regional differences".

He said the Commission had "no problem" with inflation in the Republic and he expected it to fall significantly in the next year. Current levels were simply the result of recent high economic growth.

Members of the committee expressed concern about the possible damaging effects of the decision of Britain, the Republic's largest trading partner, not to join the single currency.

Mr Carre said he expected the Republic's trade with continental European countries to increase, particularly Germany.