The Central Bank is almost powerless to halt the rise in borrowing which is on course to make Irish people amongst the most indebted in Europe.

Mr Maurice O'Connell, the recently re-appointed governor of the Central Bank told the Oireachtas Joint Committee on European Affairs yesterday that the bank "is concerned about the rapid expansion of credit" but "does not have authority to impose ceilings". He added that imposing a ceiling would simply discriminate against local lending institutions as "borrowers are free to do business with outside lenders and more and more outside credit institutions with no base here, are prepared to offer their services here", he said.

The bank is monitoring lending practices carefully and insisting that banks look at their ability to cope with an economic downturn, he told the all-party committee of TDs and senators.

Mr O'Connell said that private sector credit has been growing by more than 20 per cent a year for the last number of years, although there were signs at present of a modest decline in the pace of growth. "At this point outstanding borrowing by the private sector in Ireland as a proportion of GDP is coming close to the euro-area average. If we continue to expand at an exceptional rate over some years ahead we may well run ahead of the average," he said.

The governor briefed the committee on the outlook for the Irish economy and preparations for the full introduction of the euro next year. He also defended the performance of the European Central Bank, of which he is the Irish member. He said the two year old bank had been "significantly successful" in its primary objective of achieving and maintaining price stability.

He acknowledged that the bank had not been entirely successful in communicating with other European institutions including the euro-group of finance ministers and the European Parliament.

"It takes time to get the political and banking authorities working in tandem in communicating a consistent message," he said.

He declined to be drawn on the European Commission's recent criticism of the Government's handling of the economy.