The European Commission and the ECB have completed their latest post-programme surveillance mission to Ireland this week - and have criticised Fianna Fáil's bill to give the Central Bank the power to cap mortgage interest charges.

In a statement tonight, the Commission and ECB said "The opposition Bill enabling the Central Bank of Ireland (CBI) to cap interest rates on variable rate mortgages, if enacted, could interfere with the smooth transmission of monetary policy.

“By impinging on the generation of sustainable profits by banks, it could also have implications for banking supervision and financial stability.

“Moreover, a decision to direct lenders as to the interest rate they can charge could lead to a decrease in competition and have a deterrent effect on potential new entrants to the market, thereby inhibiting credit extension at sustainable market rates," said the statement.

The mission, which took place over four days this week, is a twice yearly evaluation of progress in the management of the economy after the Troika bailout programme. 

The missions will continue until at least 75% of the Troika loans are repaid (almost all of the IMF loans have already been repaid).

While it concluded the Irish economy is growing at a robust rate, the mission team warned that future streams of corporation tax are vulnerable to Brexit.

Like the Fiscal Advisory Council, the mission team recommend the Government does not use extra corporation tax revenues to reverse current spending commitments, but use it instead to reduce Government debt levels.

The statement said: "Ireland's fiscal adjustment has been remarkable but slowed in 2016.

"While broadly compliant, the Draft Budgetary Plan implies a risk of some deviation from the required adjustment towards the medium-term objective in both 2016 and 2017.

"The Government used a large part of the over-performing, but partly volatile, tax proceeds to fund additional current spending in 2016. While the corporation tax increase is recognised as a level shift, this is not fully in line with the June 2016 EU Council recommendations, which encourage Ireland to use windfall gains to accelerate deficit and debt reduction.

“Looking forward, a continued decline in the still high level of public debt remains sensitive to fluctuations in economic growth and is dependent on the size of fiscal adjustment. In this context the Government announcement of a debt-to-GDP target of 45% of GDP by the mid to late 2020s is to be welcomed. In this context, compliance with the EU fiscal framework provided under the Stability and Growth Pact remains of the essence," added the statement.

It is critical of the October Budget, saying it does not broaden the tax base, and could leave little money for needed infrastructure investment: "The 2017 Budget aims to exhaust the available fiscal space and little has been done to broaden the tax base in this Budget, leaving the public finances vulnerable to shocks.

"Further current spending increases and tax cuts could narrow the scope for public investment in infrastructure, making it difficult to address bottlenecks and boost the long-term productive capacity of the economy."

It said that despite significant progress in recent years, there is ample scope for further vigilance for the banking sector.

"Despite the recent pickup in new lending volumes, both households and firms continue to repay more than they borrow, resulting in a still largely credit-less economic recovery. Market uncertainty persists, including in relation to the longer-term impact of the UK 'leave' vote on the banks, especially those with significant UK exposures."

It said developments in real estate markets need to be closely monitored. While there is "little evidence of house price overvaluation so far, recent price and rent increases have drawn attention to persistent housing supply bottlenecks". 

It noted the changes made to the Central Bank's macro-prudential framework, otherwise known as the mortgage lending rules. 

While they have been "refined" it said the important features have been retained, especially the loan to income rules. 

It said the framework should be maintained to prevent the potential re-emergence of a vicious circle between house prices and bank lending.