The fiscal criteria for EU member-states laid down in the Maastricht guidelines and the Stability Growth Pact should be re-examined, according to Economic & Social Research Institute research professor, Mr John FitzGerald.

Speaking after a meeting of the economists group of the Institute of European Affairs yesterday, he said: "It's not clear you need as prescriptive a limit as you have at present." He said it would probably have been better to have revisited the issue last year rather than in 2002 when the current limits were coming under pressure.

But he said it was in Ireland's interest that an appropriate mechanism was developed for achieving the necessary co-ordination of fiscal policy within the euro area. "Trying to have tight rules is just not on, but what we have at the moment is fiscal policy which isn't particularly co-ordinated by the EU Commission," he said. Ireland had suffered in the past from inappropriate fiscal policy in the EU, particularly during German reunification, and it could suffer again in the future, Mr FitzGerald added.

The existing instrument for co-ordination was ineffective because it lacked an appropriate economic focus and the mechanisms to ensure that such co-ordination was implemented, he said.

Developing such mechanisms could be particularly important for the smaller members of the area, he said. "Inappropriate fiscal policy in Germany could have an impact on us through raising interest rates," he added.