Ireland has been a model in making effective use of structural funds but is now "in some ways a victim of its own success," the President of the European Commission has said.
In an address to the Seanad, Mr Jacques Santer added that, in a era of great change everywhere, it was "rare to find any period of such profound transformation which has been as successfully managed as here in Ireland".
Saying that, in his position, he had to be cautious about what he said before the matter was considered by the European Commission, Mr Santer declined to comment specifically on the Government's regionalisation proposal.
But he quoted comments from the Taoiseach earlier this month when Mr Ahern said Ireland was moving towards a situation in which receipts from the EU budget would decline and contributions to the budget rise: "That is not a sign of failure on Ireland's part, but a sign of success".
Mr Santer addressed senators yesterday after a lunchtime meeting with Mr Ahern at Government Buildings, during which the two men discussed a range of matters including Agenda 2000, next month's EU summit in Austria, and Northern Ireland.
Mr Ahern also told the president that proposals for CAP reform remained unacceptable to Ireland, and informed him of the Government's attempts to reverse the decision to abolish duty-free, most recently by enlisting the support of the new German government, which takes over the EU presidency in January.
In the Seanad, answering a question from Senator Joe Costello (Lab), Mr Santer said the duty-free issue was "like the Loch Ness monster - it keeps coming up again". He was aware of all the arguments for its retention, but added that unless the EU finance ministers decided unanimously to reverse the 1991 decision, the Commission had no choice but to abolish duty free at the end of next June.
During his address, Mr Santer warned that one of the main challenges facing the EU was to build an effective common foreign security and defence policy.
The economic strength of the union contrasted with the "timidity" of its approach to Bosnia and Kosovo, he said.
"The British Prime Minister Tony Blair is quite correct that we must do better in the future. The union is paralysed by procedure, over-caution and timidity. Houses burn in Kosovo, atrocities are carried out on our borders or in former colonies of the member-states. Yet any peace agreements that are brokered are done by the Americans."
The EU had to have the capacity to act decisively outside its borders in defence of common interests, he added.
"Likewise in defence. Taking fully into account the sensitivities of all the member-states, a common European defence capacity has to be built up on rational industrial standards."
But he dwelt at length on Ireland's recent success, which he said was, "to use a German word coined to describe the rebirth of Germany after the second World War, a true wirtschaftwunder".
In praising Ireland, he said that coming himself from the EU's smallest state, he had a "controversial" explanation for it: "Namely that smaller countries have been, by the very nature of their size and because of the scale of the external forces bearing upon them, more able to forge social consensus on the right combination of economic and social policy."
Ireland's social dialogue had been a major contributor to its economic breakthrough, and to some extent had arisen from a "sink or swim" situation.
"I do not want to suggest these matters have been easy to resolve - far from it. But the costs of non-agreement are particularly prohibitive for small countries. The footloose international investor will not invest in areas of social pandemonium."
