Europe joins IMF in warning over the scale of Budget 2016
Both the European Commission and the International Monetary Fund have warned that the Government should do more in Budget 2016 to narrow the deficit.
Following its latest post-programme surveillance mission, both organisations said the recovery in Ireland continues to strengthen.
The European Commission noted Ireland was the fastest-growing EU country last year, and that growth is expected to remain buoyant this year and next.
The Commission said it would fully assess the updated forecasts presented with the Spring Statement earlier this week, and said it would give its verdict towards the end of the month.
But it warned more should be done to narrow the deficit down further.
"In light of the very strong economic recovery, a more ambitious budgetary target for 2016 would accelerate the reduction of the high government debt-to-GDP ratio and help protect against future shocks," the Commission said in the report.
Meanwhile the IMF said Ireland's "economic rebound is in full swing".
It was slightly more positive, saying the Spring Statement "steers fiscal policy in broadly the right direction."
The Washington-based fund said the Government should be targeting a budget deficit of 1.5pc of the value of the economy next year, fractionally more ambitious than the current 1.7pc in part because of high public debt.
"Nonetheless, it appears most likely that revenue could exceed the prudent official projections; such over performance must be saved to ensure an adequate pace of adjustment," the IMF said.
In its report, the European Commission also chose to highlight the housing sector and the high cost of pharmaceuticals.
"Despite the authorities' policies to address housing supply constraints, there is a demand overhang, most notably in Dublin," it noted.
"Further efforts are needed to reduce public expenditure on pharmaceuticals and to improve cost effectiveness in the delivery of healthcare especially for hospitals. The authorities are now confident that the enactment of the legal services regulation bill is near. This would be an important first step towards the reduction of legal services costs."
The news came the day after the former President at the European Central Bank gave a defiant performance to members of the Banking Inquiry on Thursday.
Departing Central Bank Governor Patrick Honohan defended Jean-Claude Trichet's appearance, saying he has "always been a friend of Ireland."
"He has been a bit demonised. That doesn't mean that I agree at every step with all of the things he said. But he did so in the best interests of Ireland and the best interests of Europe. And when he says that, he is completely sincere. He was never in a position of saying, I don't care about this country or that country."
Prof Honohan said Mr Trichet's appearance was "a great day for Irish democracy and for Irish engagement with relevant public officials."