EU finance ministers yesterday gave a cautious welcome to a report warning that the old age pension system would become unaffordable within a generation unless it was thoroughly overhauled. The ministers discussed the report, which was prepared by an advisory committee of finance ministry and central bank economists, during their monthly meeting in Brussels.

But they stopped short of backing the report's most controversial proposal, to increase the statutory age of retirement.

The Minister for Finance, Mr McCreevy, said that, although Ireland did not share the problems of an ageing workforce faced by other EU member-states, the State would not remain unaffected indefinitely.

"We are in the strongest position within the EU visa-vis the age of the population. But in time we are going to come towards the European average," he said.

He claimed that, by putting aside 1 per cent of GNP and ploughing much of the profits from telecoms privatisation into the pension fund, the Government had taken appropriately prudent action. But he acknowledged that these measures would only go part of the way towards avoiding a demographic timebomb.

The finance ministers expressed support for the European Central Bank's recent interventions in the foreign exchange markets but gave no hint of plans for a further co-ordinated intervention.

"Experience has shown the ECB can intervene on its own . . ," said Mr Laurent Fabius, the French finance minister.

The ministers also warned countries looking to join the EU they would not be able to adopt the euro immediately after accession. The report made clear countries will have to meet the convergence criteria of the Maastricht treaty for joining the single currency.