The president of the European Central Bank has again questioned Irish budgetary policy, saying he concurred with warnings about the Government's strategy.
A day after calling the Minister for Finance, Mr McCreevy's defence of his Budget "fantastic", Mr Wim Duisenberg reiterated concern about the Government's strategy.
Speaking at a press conference to explain why the ECB had left interest rates unchanged in the face of a possible recession in Germany, Mr Duisen berg said the ECB looked with some concern on expansionary Irish budgetary policy.
He said the ECB was concerned about budgetary policy, particularly in an economy where there were signs of overheating. "We concur with warnings that have been given against that policy."
However, he also said he included Ireland in the list of countries where "highly positive developments have taken place in the recent past".
In a pointed lecture on "one size fits all" monetary policy, Mr Duisenberg warned that high rates of national inflation were a matter of concern. Irish inflation is now only the fourth-highest on an EU-harmonised basis, with the Netherlands, Portugal and Spain all reporting bigger price rises.
Mr Duisenberg pointed to excessive wage increases, an unsustainable expansion of profit margins, or an expansionary stance in fiscal policy as matters for concern.
He did not say he was referring to Ireland, but observers said the intent was clear.
"It was very pointed," said Davy Stockbrokers' chief economist Mr Jim O'Leary.
Mr Duisenberg said national economic policies must contribute to avoiding a situation that would need to be reversed later.
Yesterday, the Portuguese government bowed to pressure to cut spending in line with demands under the broad economic guidelines. Mr Duisenberg added: "For the euro zone to function smoothly, well-balanced national economic policies should complement the single monetary policy."