'Optimistic' Government must make at least €2bn in Budget cuts, warns European Commission

The European Commission has warned the Government it must make MORE than €2bn in adjustments in the next Budget.

The warning is contained in a draft of the EC's Post Programme Surveillance report - which has been sent to the Department of Finance.

It says the coalition's economic forecasts have been overly optimistic - and there is "no room for manoeuvre" if Ireland's economy is to fully recover.

The EC has also sounded a warning to Ministers who have spoken about possible tax cuts - because they "create expectations" that can be "difficult to manage".

A spokesperson for the Finance Minister has said that no Budget decisions will be made until September - and Ireland is committed to meeting its targets.