The European Commission has sought yet more information from the Government about the terms of An Post's contract to deliver social welfare payments.
Worth about €45 million this year to the loss-making postal company, the contract was awarded in 1999 without being put to public tender.
Though renewed on an ad-hoc basis only, following a complaint to the European Union by the US group Transaction National Services, the contract is crucial to An Post.
The company's full-year losses in 2002 are believed to have been in line with a €37 million deficit forecast last February.
While the contract was cleared by the Attorney General, Transaction National Services complained that the contract should have been put to tender.
After an investigation, the European Commission issued proceedings against the Government last summer.
While the Government stood behind the award, the Commission's Internal Market Directorate General said yesterday that it was unhappy with its defence.
It issued a reasoned opinion on December 19th, giving the Government two months to respond to the proceedings.
With some informed observers predicting months ago that the matter was likely to go the European Court of Justice in Luxembourg, the Government is expected to write again to the Commission before the February 19th deadline.
Informed individuals believe the latest response will state that there was no obligation to tender because the contract was for a social service, as distinct from a financial one.
Given An Post's poor financial position, the Government would not be willing to put the contract to tender. It expected to make a robust defence of the process.
Recognising An Post's difficult position, the Government agreed in principle late last year to increase by about 10 per cent the fee the Department of Social and Family Affairs pays for the service, bringing the fee to about €45 million from just over €40 million.
Loss of the contract would be a severe setback to An Post. But even if the Government was compelled to put the contract to tender - by the Commission or by the European Court of Justice - it is believed likely that An Post would secure it.
The European Commission has argued that the contract should have been put to tender to enable other organisations outside the Republic to express an interest under European Treaty rules on non-discrimination on grounds of nationality and the free movement of goods and services.
However, the European Commission has stated that it believed there was no requirement to advertise the contract under the Directive on the Procurement of Services number 9250-EEC, which is the standard obliging the Republic to put major contracts out to tender.
