The Minister for Finance has not ruled out increased borrowing next year as the Exchequer finances turn down.

Speaking after an address to the Leinster Society of Chartered Accountants, Mr McCreevy admitted that "the underlying balance next year will not be as strong as previously". But he declined to rule out allowing the Exchequer finances to move back into deficit.

"We will have to wait until December 6th but we have to consider the circumstances next year as well as the very large amounts needed for infrastructural development."

He again insisted that the Government would ensure that all areas of public spending were value for money. But he also pointed out that continued investment in infrastructure was needed to ensure renewed economic growth in the future.

The Minister also admitted it was easier to deal with expectations when there was not such buoyancy in the public finances.

Asked whether the Government could increase its supervision offer to secondary school teachers, Mr McCreevy insisted that the offer which the Government put on the table was very generous

"The Government was not two years ago, is not now nor will it in the future, put in jeopardy the national agreement."

Overall, according to McCreevy, there are challenges to be overcome if the Irish economy is to maintain its competitive position.

"Even before the horrendous events of September 11th, there is no doubt that the major world economies - the US, the EU and Japan - were experiencing a slowdown. The recent terrorist attacks in the United States seem likely to further dampen global economic prospects, with a recovery in the US not now generally expected until the middle of 2002 at the earliest."

This would have "adverse implications" for the economy but the Irish economy "can pass through these short-term difficulties".