The European Commission has issued a warning about problems facing the Irish economy.
The report highlights the effect of the downturn in the housing market, the loss of competitiveness of Irish exports and growing concerns about future pension payments due to the ageing population.
The essential message is that Ireland is on a transition to lower growth and that there has been a deterioration in public finances.
From a sound surplus in 2006, the Government is expected to be in deficit in 2008 and Ireland runs the risk of that increasing in subsequent years. The commission says the poorer outcome for the public finances in 2007 reduced the room for manoeuvre in 2008.
This means that over the next few years the Government will have to keep a close eye on public debt and will have to cut Government spending.
The slowing domestic demand has been coupled with problems facing Irish exports. These are due to the weakness of the dollar and sterling and the increasing costs at home of producing Irish goods. The report also says the Government's inflation forecast for this year appears to be 'on the low side' in the light of higher food and energy prices.
The report is mandatory under the Growth and Stability Pact, which governs members of the euro zone. It focuses mainly on public debt and public spending.
