The European Commission is likely to repeat its warning that Ireland's economy is in danger of overheating when it publishes its Broad Economic Policy Guidelines for 2001 this week.

The Government argued that falling inflation and a slowdown in the world economy would offset the inflationary effect of last December's Budget. But the Commission does not believe these events have made a significant difference to Ireland's economic situation and this year's guidelines are expected to be similar to last year's.

EU finance ministers approved an unprecedented reprimand for Ireland earlier this year after the Government ignored a call in last year's guidelines to use the budget to dampen inflation.

Euro-zone governments are committed to respecting the guidelines, which must be approved by all finance ministers and heads of government.

If this week's guidelines repeat last year's call to use budgetary policy to reduce inflationary pressures, the Minister for Finance, Mr McCreevy, will risk a second conflict with Brussels if he attempts to introduce another give-away Budget later this year.

Mr McCreevy declined to speak to reporters before he left an EU finance ministers' meeting in Malmo on Saturday. He has never accepted the Commission's analysis of the Irish economy. But with a referendum on the Nice Treaty looming, the Government will wish to avoid a public clash with Brussels.

The Commission's view could be echoed next week when the Central Bank publishes its annual report on the economy. The Bank's Governor, Mr Maurice O' Connell, acknowledged that much had happened in the Irish economy over the past 12 months but he indicated that inflation remained a risk.

"Inflation is coming down but not as fast as the Central Bank would wish," he said.