The European Commission, which is part of the Troika, has said Ireland is growing strongly but it has issued warnings about Irish banks and the need to cut legal costs.

It has also called for the Government to use strong economic conditions to accelerate the reduction of the national debt.

It has issued its report at the end of a Troika mission to Dublin this week.

It says Irish banks still have the highest level of bad loans in the eurozone, despite a significant improvement over the past two years.

Almost one fifth of loans are non-performing and this "still weighs on the ability of banks to support economic growth with new credit at more favourable interest rates".

The Commission has said it is undertaking a full assessment of the Budget for 2016 and will issue its opinion "shortly".

However, it says the targets for reducing the debt and deficit reduction would have been significantly lower had the strong growth been used to reduce borrowings and the deficit.

It said spending in the Budget was mainly targeted at "higher public wages and social benefits".

It has also said that "adequate funding" of water infrastructure needs to be ensured.

The Commission had repeated its call for a credit register, which would show banks how much potential customers had already borrowed.

It added that following "renewed delays" it was "critical" the legal services regulation bill would be introduced to cut high legal costs.