The Minister for Finance, Mr McCreevy, and his UK counterpart, Mr Gordon Brown, led opposition to a European Commission proposal at the weekend that would have led to the introduction of VAT on children's clothes and shoes.
The issue came up during the weekend meeting of EU finance ministers and central bankers in Stresa, Italy, where the commission was putting forward a proposal that it said was "technical" in nature and therefore did not require unanimity amongst the ministers.
It is understood Mr McCreevy expressed the view that the measure being proposed would lead to the ending of the zero rating here on children's clothes and shoes and, therefore, was a matter affecting tax rates and required unanimity.
Mr Brown was also strongly against the move. "Poor families would have to pay more and we won't have it. I now believe the proposal will be dropped within months," he said after the meeting
Mr McCreevy had complained to the commission about the proposal during a meeting in July. "The Irish view remains that measures such as this require unanimity," said a spokesman for Mr McCreevy.
But the talks were dominated by discussion of France and its budget deficit. The French finance minister took some of the sting out of attacks on its deficit but Paris will still have to work hard to save its reputation and that of the EU stability pact.
If the matter is not resolved by January, 2004, then the issue of whether to penalise France could arise when the Republic is holding the EU presidency.
In a concession yet to be fleshed out, Mr Francis Mer offered to cut France's deficit below the limit allowed by the EU Stability and Growth Pact in 2005, a year earlier than Paris's previous target.
"That was good for the atmosphere but we are more interested in France bringing its deficit below 3 per cent in 2004," said Dutch Finance Minister Mr Gerrt Zalm, one of France's strongest critics, along with Austria's Mr Karl-Heinz Grasser.
The Minister for Finance, Mr McCreevy, said the rules of the pact had to be adhered to though he was in favour of some flexibility being involved.
"We can't let one member-state do what they like," he said. He added that any possible fine on France for breaching the rules was "a long way off".
The European Central Bank President Mr Wim Duisenberg said after the weekend meeting that the euro-zone economy will not get into its stride before late next year and warned that currency adjustments - code for a dollar crisis - would make matters worse.
In comments that will fuel expectations that ECB interest rates will remain at their roughly 50-year low of 2 per cent well into next year, Mr Duisenberg warned that the recovery would be a long haul. - (Additional reporting Reuters)