Taoiseach Brian Cowen has said the Government would work constructively with the EU Commission when it begins formal proceedings against Ireland over the high level of borrowing in next year's Budget.
Economic Affairs Commissioner Joacin Almunia said today that he intended opening an excessive deficit procedure against Ireland.
The Government will be expected to say how it will cut borrowing levels over the next three years.
Fine Gael has said the EC's warning has sounded the death knell for Budget 2009.
The party's Finance Spokesman, Richard Bruton, said it was now becoming more likely that the Government will have to present another, more realistic, Budget in the first half of next year.
Under EU rules, governments are supposed to keep borrowing below 3% of Gross Domestic Product, but in the Budget last month, the Government said it needed to borrow the equivalent of 6.5% of GDP.
That is far in excess of what is recommended.
Move designed to embarrass Govt
The overall borrowing requirement of the Eurozone next year will be 1.8% of GDP.
The excessive deficit procedure is designed to embarrass governments into reducing their borrowings back into line with the rules.
It is effectively a public rebuke for the way the way the public finances have been run by the Government.
The Commission and other governments will want to see a plan from the Government detailing how it will bring borrowing levels down over the next three or four years.
The Commission has estimated that Irish public finances will swing deep into deficit, with a shortfall equal to 5.5% of output.
However, the Commission has forecast that the situation will only get worse, estimating that the difference between Ireland's spending and revenues will rise to 6.8% in 2009 and 7.2% in 2010.
