The Tánaiste Ms Harney today defended Ireland's economic policies against criticism from the European Commission and suggested the Commission could learn from Ireland's success.
Writing in today's Financial Times, Ms Harney said the £1.2 billion of tax cuts proposed in the budget would add only 0.13 percentage points to inflation after three years and its effects in the euro zone would be "virtually nil."
"The Irish government had to balance the risk of consumer price inflation against the need to allow moderate wage growth under a national pay deal, and to continue tax reform to ensure future competitiveness," she said.
She said the disagreement is based on the treatment of small open economies within the larger European economy. "The small open economy model is one which the Commission could usefully study further" she added.
She claimed that Ireland's inflation was driven largely by external factors such as the price of oil and the value of the euro.
She pointed out that Irish inflation was falling and that a budget surplus of four per cent of gross domestic product was projected up to 2003.
In a carefully-worded criticism of the Commission's handling of the censure Ms Harney said "Difficulties can arise when the Commission's view becomes a matter of national controversy."
It was important, Ms Harney said, that a "temporary, narowly-based disagreement did not deflect Ireland from its growth goals within the wider European Union."