The European Commission says that the Government may need more ''fiscal tightening'' this year, Bloomberg reports

''The growth outlook could continue to deteriorate significantly if the challenges in the peripheral euro area are not addressed and more of Ireland's main trading partners slide into a recession,'' the Commission said.

It made the comments in documents given to German politicians by the German Finance Ministry, as it backed the latest tranche of EU funds for Ireland.

In the report, the Commission urged the Government to reassess its deficit forecasts later this year and said the initial asset sales plan had not been sufficiently ambitious enough and had been revised.

It also noted that it is seeing some signs of upward wage pressure in Ireland and said that Irish banks' loans continue to deteriorate.

There was an outcry last November when details of the December Budget were supplied to German politicians before being announced here.

The Commission produced the report after its latest mission to Ireland.