A team from the European Commission will visit Ireland shortly to check whether the Irish Government is complying with its recommendation earlier this year to curb what it believed was an expansionary Budget last year.

The Commission team, which may be headed by new economic and financial director general Mr Klaus Regling, will meet the Minister for Finance, Mr McCreevy as well as officials and probably other observers.

The recommendation earlier this year called on Ireland to take "countervailing" measures in the current year to negate last year's expansionary Budget.

However, no such action has yet been taken and the earliest that the Government is likely to act is within the terms of the next Budget.

One variable which has changed since the unprecedented rebuke of Ireland by other EU member-states, is the growth in the economy, which has slowed dramatically, in line with our main partners.

With inflation also moderating, the dangers of the economy overheating have lessened considerably. There is some hope that the Commission will be persuaded to see this slowdown as effectively a countervailing measure. That would provide all concerned with an out, and leave them free to examine this year's guidelines and the upcoming stability pacts.

However, it is not yet clear whether this would satisfy the Commission which may not want to be seen watering down its rules substantially. However, so far the team is thought to have an open mind and will be in Dublin to "see, understand and then judge".

The Department will also be keen to point out that consumer price inflation has fallen back from its high earlier this year. However, it is not clear that the Commission will focus at all on consumer prices as that focus led to criticism from commentators that they had failed to understand the Irish economy properly.

In fact, the real focus is on the cyclically adjusted Budget surplus. As Prof John Fitzgerald of the ESRI explains the real surplus might well be lower than anticipated now because of the economic downturn but the cyclically adjusted one will not be changed.

Irish officials hope the difficulties which Germany and Portugal in particular are facing will make a further reprimand for Ireland unlikely. The German economy is doing so badly that its deficit is likely to be higher than was envisaged when the broad Economic Policy Guidelines for this year were set.

In addition, last week ECB president Mr Wim Duisenberg drew a clear distinction between those states which are running deficit and those running a surplus. This could prove to be in Ireland's favour. However, according to Mr Fitzgerald, forcing Germany now to bring back its deficit through spending cuts or tax hikes would only exacerbate its problems.

Following the visit to Dublin the team will report back to the Economic and Financial Committee at the end of September. A report will then be furnished to the finance ministers for their meeting in mid-October.

It is not yet clear what form this will take, but the most likely options would appear to be either a further note praising Ireland for now complying with last year's broad economic guidelines or another recommendation. However, this will be a matter for the finance ministers themselves.