THE EU Commission would want to see if there was a €3 billion adjustment in the Irish economy next year, Taoiseach Brian Cowen told the Dáil.

He said the Government hoped to reduce the deficit to 10.5 per cent or 10.75 per cent this year.

Mr Cowen said he fundamentally disagreed with the analysis that proposals for the better co-ordination of economic policies represented in some way a diminution of the State’s sovereignty.

“We live in an era of interdependence,” he added. “We have taken on obligations as well as rights in joining the single currency and great benefits have derived to the country from the establishment of the euro and our membership of it.”

The Taoiseach was replying to Sinn Féin’s Caoimhghín Ó Caoláin, who urged the Government to reconsider its support for the commission’s proposal that draft national budgets be submitted to Brussels for scrutiny and peer review by other member states. “Surely this is a further significant erosion of sovereignty in regard to budgetary and other fiscal matters and only further centralises the institutionalisation of what have heretofore been the independently assessed needs of each member state,” he added.

“As the Taoiseach knows very well, we warned against such developments in the course of the two debates on the Lisbon Treaty.”

Mr Cowen said that in a single currency area of 16 independent sovereign states, the need for the co-ordination of economic policy was fundamental.

He added that the unfortunate example of Iceland should remind Mr Ó Caoláin of the importance of avoiding isolation.

“If one was to take the deputy’s analysis, it is probably a greater guarantee of the loss of sovereignty than the retention of it,” he added.