The Minister for Finance, Mr McCreevy, remains a supporter of the Stability and Growth Pact. Mr McCreevy, who takes over the presidency of the EU council of finance ministers in January, is "a strong advocate of the Stability and Growth Pact", a spokesman said yesterday.

He believed the pact should be enforced properly and that appropriate penalties should be applied equally to all states, whether big or small, the spokesman added.

The pact declares that budgets should be kept in balance in the long run and the deficits should not exceed 3 per cent of gross domestic product.

The Republic was the subject of criticism by the European Commission in 2000, when Brussels officials argued that the budget surplus should be larger given the strength of the Irish economy at that time.

Mr McCreevy has called in the past for a "more flexible" interpretation of the pact, particularly in relation to borrowing for capital investment. However, as he takes over the influential position of president of the EU council, the Minister is not giving any indication that he will support fundamental changes to the pact favoured by some critics who argue that it is overly restrictive.