The European Commission's annual country report on Ireland warns that the Government's capital spending programme is inadequate for the country's needs.
The Commission has said that over the next three years in particular, capital spending will be underfunded because the Government has chosen to prioritise tax cuts and current spending increases over investment.
This report is critical of the Government for prioritising tax cuts over investment spending, particularly in education, public transport, energy and water infrastructure.
It says seven years of sharply reduced spending has taken a toll on the quality and adequacy of infrastructure.
The report also says the new capital programme for the next government term will, even at its maximum point, leave spending one third lower than what it calls the already depressed EU average.
This, it warns, could negatively affect the country's growth prospects and the delivery of key public services.
It says a key weakness for the country is public transport in the car-dependent Dublin region.
The city is now ranked the ninth most congested of 200 cities worldwide at peak times - worse than Los Angeles, Beijing and Rio de Janeiro.
In addition, the Commissions's report said Ireland does not have "a comprehensive centralised register of state-owned assets, even though such a register is an important element for nationwide infrastructure development planning".
It highlighted problems in the setting-up of Irish Water as one of the negative effects of a lack of register of assets.
It says Ireland is a high spender on healthcare, with only Denmark spending more as a share of GDP, but health outcomes are only in the middle third.
The report is also critical of inadequate financial controls in health spending, and the long and continuing delay in implementing a single accounting system for the health service, which it does not foresee before the end of the decade.
It also criticises the country's continuing high pharmaceutical costs.
