The European Commission is expected to issue a strong rebuke to Ireland today over last December's Budget, calling for "remedial action" to limit the risk of higher inflation.

The EU Commissioner for Economic Affairs, Mr Pedro Solbes, last night circulated to his fellow commissioners a draft report on the Irish economy understood to be strongly critical of the Budget's tax cuts.

The Food Safety Commissioner, Mr David Byrne, sought last night to persuade his colleagues to tone down the criticism of the Minister for Finance, Mr McCreevy.

But a Commission source told The Irish Times that those opposed to Mr Solbes fell well short of a majority on the Commission.

Mr Solbes argues that, although Ireland fulfilled the terms of the Stability and Growth Pact, the Budget breaches the EU's Broad Economic Policy Guidelines. The 1999 guidelines, agreed by Mr McCreevy and other EU Finance Ministers, stated that the Government should "be ready, already in 2000, to use budgetary policy to ensure economic stability given the extent of overheating in the economy [and] gear the budget for 2001 to this objective".

In January last year, EU Finance Ministers, including Mr McCreevy, approved an assessment of the Irish economy that repeated this warning. The Commission and many of Ireland's EU partners are concerned that the Budget's massive giveaway will fuel inflation.

Mr Solbes is understood to have argued last night that, in the interests of the EU as a whole, Ireland must not be allowed to flout agreed economic policy guidelines. The Commission cannot take any concrete action to enforce its opinion but it can propose that Ireland should be censured with a "formal recommendation".

By calling for remedial action to reverse the expansionary effects of the Budget, the Commission could put pressure on Mr McCreevy to reverse some of the tax cuts.

At a meeting of European finance ministers in Brussels last week, Mr McCreevy mounted a robust defence of his economic policies. He argued that the latest figures showed inflation was slowing and claimed that his Budget shored up social partnership in Ireland.

The Minister has been openly scornful about the threat of a sanction from the Commission and suggested that some of his critics are motivated by envy of Ireland's economic success.

Ireland's friends at the Commission will continue lobbying to have the criticism softened until the Commission meets at 9 a.m. today.

If the Commission proposes a "formal recommendation", the issue will go to EU finance ministers for approval when they meet on February 12th.