The mood among EU memberstates is hardening against Ireland following the Govern ment's response to the proposed reprimand over the December Budget.
Germany and France are expected to resist any attempt to water down the criticism of Ireland's economic policies at next Monday's meeting of EU finance ministers.
EU diplomatic sources suggest that if the Minister for Finance does not publicly accept the censure recommendation, the Commission will come under pressure to propose new sanctions against states that stray from agreed policy guidelines.
The EU can take no sanction against Ireland if the Government ignores its warnings. But the EU Economic Affairs Commissioner, Mr Pedro Solbes, hinted yesterday that if peer pressure failed to move Mr McCreevy he would consider proposing new measures.
"It is too early to say what we will do if our system does not work . . . If in the future we consider that something new ought to be proposed we will do this but now is not the moment to do it," Mr Solbes said.
The Commission President, Mr Romano Prodi, yesterday defended the criticism of Ireland's economic policies. "There are certain parameters which all governments have subscribed to, including the Irish one," he said.
"These parameters were clear. For three years we had been warning Ireland that they were deviating from these lines. The deviation now has reached such a point that we were left with no alternative." Some of our EU partners are understood to have been taken aback by Mr McCreevy's robust defence of the Irish position and an article by the Tanaiste, Ms Harney, in the Financial Times has been viewed as provocative. Within the Commission and in some member-states, including Germany, the Tanaiste is perceived to have given "two fingers" to the proposed reprimand.
German officials are understood to have been especially annoyed by Ms Harney's warning that the reprimand could have an impact on Ireland's ratification of the Nice Treaty.
Mr Prodi acknowledged that the move to censure Ireland might be bewildering to many Irish people in view of the State's economic success. But he insisted that the Commission had to do its job as guardians of the Community approach to European affairs.
"While this was a painful decision, and might seem strange to the layman, we hope this decision is one that can be understood by even the Irish mass media. If we find ourselves in the same situation at another time I can guarantee we will act in the same way because it is a question of our job and our credibility," he said.
Mr Prodi was speaking in Brussels after Mr Solbes announced proposals to enhance economic policy co-ordination in the euro zone. Under the plan, euro zone finance ministers would meet more frequently and would co-ordinate policies more closely.
Finance ministers would present key points in their budgets to the euro group, as the 12 euro zone ministers are called, in advance of an announcement in parliament and would take the group's comments into account .
The European Central Bank (ECB), which has long resisted proposals to strengthen the euro group, is understood to have accepted the need to co-ordinate economic policies more closely. The ECB is among the strongest supporters of the action against Ireland, on the grounds that it is important to set a precedent that will discourage others from breaching policy guidelines.
Irish officials say they will work through the weekend to persuade other EU memberstates to oppose the reprimand, or at least to dilute the text. They say that, despite pressure from our EU partners, Mr McCreevy will not climb down from his defence of the Budget.
The leader of the Labour Party, Mr Ruairi Quinn, last night said the Taoiseach should take responsibility for the dispute with the EU and should act to limit the damage to Ireland's national interests.
"The Minister for Finance must ensure that he does not damage Ireland's overall interests," he added.
