European Commissioner warns that Irish economy is overheating

Commissioner Pedro Solbes, Issued inflation warning to Ireland

The European Economic Affairs Commissioner has warned that the Irish economy is overheating and that planned tax cuts could make the situation even worse. In a speech delivered to the Institute of European Affairs, Pedro Solbes said that inflation is accelerating, particularly in the housing market.

In a speech delivered to the Institute of European Affairs, Pedro Solbes said that inflation is accelerating, particularly in the housing market. He added that the commitment to cut taxes over the next three years, together with an already generous wage agreement could exacerbate an already overheating economy. Ireland's annual inflation rate was 4 per cent in January, the highest in the European Union. Mr Solbes warned that it is essential that price stability in Ireland should not be called into question.

The warning comes as growth figures from the central statistics office show that the economy grew at a rate of 7.8 per cent in the second quarter of last year. The Minister for Finance, Charlie McCreevy, yesterday predicted the current boom in the Irish economy would continue, despite the worst inflation figures in a decade.