EU commissioner Charlie McCreevy has said that "unpopular and unpalatable decisions" would need to be made over the next few years if Ireland is to manage its deficit back to sustainable levels.
Speaking at the Institute of International and European Affairs in Dublin today, the EU Commissioner for Internal Market and Services, said that governments that were slow to act to curb borrowing, and create a basis for sustained future recovery risked "getting trampled all over".
However he said much of the criticism levelled at Ireland in the international financial press was "unjustified and unbalanced".
"This country starts out with a very low debt to GDP ratio. We have a substantial national pension reserve fund," he said.
Mr McCreevy also said the European Commission, world leaders and industry would need to rebuild trust over the next five years if economic recovery is to take place. This would not be easy, he warned.
He said there was a need to ensure transparency and adequate risk management, adequate oversight and crisis management, and international cooperation.
"We need healthy financial markets. Without them, we will not recover. But we also need - and are getting - changes in the way that those markets are regulated," he said.
"We need reform of the international financial institutions and adequate monitoring and surveillance mechanisms. We need to work together in the bad times, not just the good ones."
Mr McCreevy said a balance was needed between regulation and preserving dynamic markets.
Speaking about the bank bailouts, he told the gathering that more money would probably be needed to unblock lending to the private sector.
He warned against stirring up protectionism through conditions imposed by governments on banks in return for state aid, saying it would create new barriers in the internal market.
The money needed by governments to finance these bailouts and stimulate economies looked likely to put significant upward pressure on government bond yields in the years ahead, he concluded.