Ireland is now certain to qualify for monetary union, with the second best set of budgetary figures in the EU for 1997. The strong Budget performance is projected to continue this year, with the Government now expecting a surplus of 0.5 per cent on the exchequer finances in 1998, or about £250 million, with debt levels still declining. The Department of Finance has confirmed that Ireland achieved a general Government budgetary surplus of 0.9 per cent of gross domestic product in 1997, compared with an original 1997 Budget projection of a deficit of 1.5 per cent.

The general Government deficit is the measure used in the Maastricht criteria and differs slightly from the more commonly used exchequer borrowing requirement.

At the same time, the Minister for Finance, Mr McCreevy, confirmed that the ratio of general government debt to GDP had fallen to 66.3 per cent from 72.7 per cent a year earlier.

The only country with a larger budget surplus last year was Luxembourg, with a surplus of 1.7 per cent and a debt ratio of only 6.7 per cent.

According to Mr Oliver Mangan, bond economist at AIB, the figures are further confirmation that the public finances are in good shape. He added that there will probably be a further overshoot of the projected surplus this year, with tax revenues likely to come in higher than expected. "The surplus will probably be closer to 1 per cent," he said.

The Government is also predicting a debt level of 61 per cent at the end of this year.

The figures will be used by the European Commission and the European Monetary Institute to compile their reports on the prospective members of the single currency. It is now certain that Ireland meets the budgetary requirement set out in the Maastricht criteria.

Both bodies will recommend Ireland as a first round participator in the currency. The only possible outstanding issue is the exchange rate criteria, which says that member currencies must have traded in a stable fashion in the ERM for the previous two years. However, in the first draft of the Commission's report it is understood that the issue is not specifically referred to in relation to Ireland.

The pound has been out of line with the bulk of EU currencies and at one stage last year was trading at almost 13 per cent more than the French franc. However, it has come back in recent months and is now very close to its central rate in the ERM band.

The EMI's report may not be so sanguine. It is acting as an agent for the central banks of all the countries and some of these are thought to be nervous about us participating, particularly without Britain.

Their fear is understood to be the possibility of Ireland going into the next recession with a much harder landing than the other EU countries, particularly if sterling devalues significantly in the meantime.

Nevertheless, it is unlikely that these reservations will ever make it to the EMI's final paper. Most of the other states are understood to take the view that Ireland is aware of the risk and knows there will be no unilateral bail out from the rest of the EU.