The Minister for Finance, Mr McCreevy, faces unprecedented criticism from other EU finance ministers over last December's Budget which officials say breaches commitments he made last year.

The European Commission will next week issue its annual assessment of Ireland's budgetary outlook and officials predict it will include a tough warning about the effect of the Budget on inflation.

The economic and financial committee made up of senior EU civil servants severely criticised economic policy at a meeting last Thursday. A source close to the EU Commissioner for Economic Affairs, Mr Pedro Solbes, said that although Ireland had fulfilled the terms of the Stability and Growth Pact, the Budget appeared to breach the EU's broad economic policy guidelines.

The 1999 guidelines, agreed by Mr McCreevy and other EU finance ministers, stated that the Government should "be ready, already in 2000, to use budgetary policy to ensure economic stability given the extent of overheating in the economy [and] gear the budget for 2001 to this objective".

In January last year EU finance ministers, including Mr McCreevy, approved an assessment of the Irish economy that repeated this warning. The Commission and many of Ireland's EU partners are concerned that the Budget's massive giveaway will have the opposite effect to that specified in the guidelines.

"The general feeling is that it will fuel inflation," the Commission source said.

Irish officials were taken aback by the intensity of criticism levelled against them at the meeting last week. The committee, made up of senior treasury officials from all euro-zone states, prepares the agenda for the monthly meetings of EU finance ministers.

Although Ireland accounts for only 1 per cent of the eurozone's economy, EU officials are concerned that, by ignoring official warnings and flouting the agreed guidelines, the Government is setting a dangerous precedent. Larger EU member-states are said to be eager to make an example of Ireland in advance of EU enlargement to include weaker economies in central and eastern Europe.

Some smaller member-states fear that if Ireland is allowed to renege on its commitments larger member-states could follow suit - with much greater consequences for the euro-zone economy as a whole.

Mr McCreevy is expected to mount a robust defence of the Government's economic policies at a meeting of EU finance ministers on February 12th. He will argue that Ireland's debt to GDP ratio is the second lowest in the EU and that strong surpluses are being run.

The Minister will point to inflation figures to be released on Friday that are expected to show price rises falling back to 6 per cent in December from 7 per cent the previous month. He is also expected to argue that the Budget helped to shore up social partnership, a process of which the Commission has been very supportive in the past.