The Cabinet has agreed the publication of legislation to allow for the setting up of a new agency to raise billions of euro for new roads and other developments without breaching EU borrowing limits.
The National Development Finance Agency (NDFA) has been heavily promoted by the Minister for Finance, Mr McCreevy, and was one of the key elements of Fianna Fáil's economic platform during the general election.
It is expected that the agency may be able to borrow €2 billion a year for National Development Plan projects, none of which would have to appear on the Government's Exchequer borrowing figure. Half would be excluded from the general Government debt, the guide used by the European Commission to judge the health of the EU's 15 economies.
Under the Stability and Growth Pact, the 15 EU states, including Ireland, have agreed to keep Exchequer borrowing below 3 per cent of gross domestic product at all times.
The EU's statistical office, Eurostat, raised questions about Portugal's adoption of a similar scheme recently and has demanded more information before it is ready to sign off that country's accounts.
It is hoped that the NDFA will provide much of the nearly €500 million extra needed to keep National Development Plan projects on track.
During the election campaign, Mr McCreevy said that the NDFA would find the "optimal" way of funding National Development Plan projects, if necessary by competing with private financial institutions. The Government's plans have been strongly criticised by the Opposition and by IBEC.
The Cabinet was warned that the EU would count all of the agency's planned €10 billion worth of borrowings as national debt in calculating its economic performance.
A Government spokeswoman said yesterday that the Bill was agreed at yesterday's Cabinet meeting and was expected to be published within days.
At one point, the Taoiseach, Mr Ahern, had proposed that the agency should be used to raise money to develop the National Stadium. However, because of opposition from the Tánaiste, Ms Harney, he had to drop that idea.
While the Government had hoped that the agency would be running by January 2003, sources said last night that it would be the middle of next year before it became operational.