The European Commission's proposed economic guidelines, which would require the Government to offset the inflationary impact of last year's Budget, should be changed, the Minister for Finance, Mr McCreevy, told EU finance ministers in Brussels yesterday.
The finance ministers were holding their first meeting since the Commission published its proposed guidelines.
Mr McCreevy told the gathering of ministers that developments in the Irish economy during recent months meant that the Commission's aim of avoiding overheating could be achieved without cutting public spending this year.
"Things are very different now than they were in June", he told reporters after the meeting.
The Commission's guidelines state explicitly that the Government must introduce "countervailing budgetary measures during the current fiscal year" to offset the effects of last December's Budget. The guidelines also stipulate that the 2002 Budget should contribute to an "orderly easing of the pace of demand".
The Commission does not specify the nature of the action the Government should take, but officials have indicated in the past that postponing elements of the National Development Plan could have the desired effect.
Mr McCreevy cited foot-and-mouth disease restrictions and the effect of the US economic downturn on Irish exports as factors which were slowing growth and dampening inflationary pressures.
He said there was no question of the Government changing its economic policies.
"I believe Irish economic policies are the correct ones. I stick to my guns the whole time", Mr McCreevy added.
The Commission's proposed guidelines will be discussed by treasury officials from the 15 EU member-states before being sent back to the finance ministers for approval next month.
The British Chancellor of the Exchequer, Mr Gordon Brown, launched an angry attack on the Commission's demand that he should abandon plans to spend more on education and health.
Mr Brown insisted that he would press ahead with his spending plans regardless of the guidelines and claimed that the Commission did not place enough importance on investment in key public services.
