The president of the European Central Bank which sets interest rates for the euro zone, Jean Claude Trichet, has showcased Ireland as an example of how countries can succeed within the euro area. However, he sounded a note of caution on property prices.
In an interview with The Irish Times he also said that the present oil-price increases were less likely than previous rises to damage economic prospects, and expressed confidence that Britain would join the euro zone in the future.
When asked why growth was slow in Europe despite the introduction of the euro, Mr Trichet said that economic reform was holding back Europe's economy and pointed to Ireland as an exception.
"There is an overwhelming consensus of academic institutions that the call for structural reform - made not just by us but also by the commission, IMF, OECD and others - is not matched by delivery. Those who have been doing these reforms have been magnificent performers. I quote Ireland," he said.
However, in a comment that can also be interpreted as applying to Ireland, he indicated that action was needed to tackle overheated property markets.
"Although not alarming at a euro-area level, we have a lot of good reasons to follow up and monitor closely what happens in countries of the euro area. In some countries of the area - which are very dynamic and have a lot of real growth - there is a case for as appropriate national action as possible to calm down the market," he said.
Mr Trichet said that present oil price rises were not as serious as those experienced in the 1970s and 1980s. But the ECB would be vigilant to ensure that their effect was contained.
"It would be very damaging to the European and world economy if oil-price spikes would become enshrined in inflationary expectations and thus lead to higher permanent inflation", said Mr Trichet.
Oil prices have reached record highs in recent weeks, prompting fears of economic slowdown and inflation. Representatives of the G7 countries meet in Washington later this week to discuss oil prices and imbalances in the world economy.
In the last year the ECB has resisted several calls, among others from outgoing German chancellor Gerhard Schröder, to lower interest rates to stimulate growth in the euro zone. But the ECB has maintained the view that it can best contribute to growth by keeping inflationary expectations, and inflation, low.
"There is a strong consensus amongst central banks on the necessity to strongly anchor medium- and long-term inflationary expectations. The credibility of the central bank in being able to deliver that anchoring is key," he said.
Mr Trichet expressed confidence that the euro zone would expand its present membership of 12 to all EU members, including Britain. "I hope that at some time the United Kingdom will enter into the euro area. I have no doubt on that in the medium term. And I also am very confident that all the 25, and one day 27, will be members of the euro area".
Commenting on the recent controversy surrounding Italian central bank governor Antonio Fazio, Mr Trichet said the ECB could not remove Mr Fazio from his position, but that the bank stood for transparency and a level playing field in the operation of financial markets.
"Our position is crystal-clear. First, we are inflexibly attached to the single market, to the level playing field and to not taking account of nationalities", said Mr Trichet.
Mr Fazio sits on the ECB governing council in his capacity as Italian central bank governor and recently faced calls for his resignation over alleged favouritism in the recent takeover battle for Italian bank Banca Antonveneta.