Each of our EU partners will support a proposal to reprimand Ireland over December's budget when finance ministers meet in Brussels on Monday, according to diplomatic sources.
Irish officials hope that some member-states may speak in support of Ireland during the meeting but they privately acknowledge that nobody except the Minister for Finance, Mr McCreevy, will vote against the censure proposal.
Some EU sources suggested yesterday that Mr McCreevy's isolation could be so complete that he will choose to abstain. However, sources close to the Minister said he would vote against the recommendation. "There will be a vote and there is a consensus among all EU states, including Great Britain, in support of the Commission's proposal," said one senior diplomatic source.
The British Prime Minister's statement this week, outlining a timetable for taking Britain into the euro, has made it politically undesirable for Britain to join Ireland in opposition to our EU partners. The most that Mr McCreevy can hope for is that Britain and possibly Sweden will abstain.
In his defence of his budgetary strategy, Mr McCreevy is likely to cite new inflation figures, published yesterday, which showed the annual rate down to 5.2 per cent last Monday. And when the EU harmonised measure is applied, Dutch inflation now exceeds the Irish rate.
The Tanaiste, Ms Harney, said last night inflation was still the bugbear which could threaten economic success. She said the Government had played its part in the fight against inflation and that the latest figures confirmed the principal factors affecting the Consumer Price Index were external.
However, while most economists agree that inflation will continue to fall back over the year, and will average between 4.25 per cent and 4.75 per cent, some support EU economic affairs commissioner, Mr Pedro Solbes's contention that the underlying trend is upwards.
Monday's "formal recommendation", which most member-states want to make public, will not specify what measures Mr McCreevy should take to reverse the inflationary impact of his budget.
Mr Solbes said this week that he expected action this year and warned that the Commission would monitor Ireland's economic development during the coming months.
The EU believes that Ireland's economy is overheating and that, by creating demand without increasing supply, the budget is likely to exacerbate the problem.
The argument between the Government and the EU has focused attention on the cohesion funds Ireland continues to receive from Brussels. A German MEP has suggested that the transfers should be temporarily frozen to assist Ireland in overcoming the problem of overheating.
The vice-president of the Bundesbank, Mr Juergen Stark, said this week that subsidies from Brussels account for between 2.5 per cent and 3.5 per cent of Ireland's GDP each year and that they could be contributing to inflation. He also claimed that, if purchasing power is taken into account, Ireland now enjoyed a higher per capita income than Germany.
