THE Irish economy needs more investment in jobs and fewer cuts, according to one of the EU's leading officials.
The comments show renewed concern at the top of the European Commission about the effects of austerity as Europe's recession deepens, and echo President Michael D Higgins' criticism of austerity earlier in the week.
Commission vice-president Antonio Tajani said: "It is important to reduce the public debt in our countries with sacrifices and spending cuts.
"Ireland is working a lot on this, but I think it is a mistake to focus only on austerity. It is impossible to beat the crisis only with cuts."
Echoing commission president Jose Manuel Barroso, who last week said austerity had "reached its limits", Italian Mr Tajani said Europe was shifting to focus on growth.
"After the 'fiscal compact' we should have a 'growth compact'," he said. "It is possible to work to reduce public debt while boosting jobs. This is not purely an 'austerity versus growth' argument. The two can work together. It is about finding a balance."
Earlier this week, Finance Minister Michael Noonan admitted the economy would grow this year at a fractionally slower pace than expected at the Budget because of a slowdown in exports and the economic crisis in the eurozone. The commission warned in a separate report on Europe's economies yesterday that the liquidation of the former Anglo Irish Bank and the rejection of Croke Park II are risks to keeping finances on track this year.
Brussels also thinks the Government is increasing the size of the bank bailout by accepting shares from AIB instead of cash, due as interest on bailout loans.
That missed money may count towards the deficit, the commission said, but its spring forecast also said the economy's performance so far this year was broadly in line with plans.
Unemployment is likely to be lower than forecast, but this is because of stronger than expected emigration.
"While unemployment fell to 14pc in February, the trend continues to be driven more by a shrinking labour force than by major employment creation," the commission said.
The picture is bleaker in Europe, with predictions that there will be no growth this year in the EU, while the eurozone will shrink by 0.4pc.
Mr Tajani said that while cutting spending had to be done, there was now more room for European institutions to stimulate the economy.
In Dublin for a conference on promoting small businesses, he added that Europe had focused too much on finance and services and now needed to promote industry more.