European Commissioner for Economic and Monetary Affairs Joaquín Almunia has warned that Ireland's "diverging inflation rate" remains a serious challenge to the economy.
Mr Almunia said economic and monetary union has brought macroeconomic stability to the Irish economy and helped it weather a number of shocks such as the ICT bubble and the consequences of September 11th.
But he warned that, along with the rest of the euro area, Ireland had to face the challenges of globalisation and the costs of an ageing population, as well as questions of competitiveness in the euro area.
The commissioner, who is on a one-day visit to Ireland for talks with Minister for Finance Brian Cowen,
praised what he called Ireland's economic transformation and current budget surplus, and the Government's initiatives in increasing investment in R&D.
Mr Almunia is to address the Economist Group at the Institute of European Affairs in Dublin.