The business and employers organisation, IBEC, has warned that the Government must watch public spending very carefully in the run up to EMU and that it was "sailing very close to the wind".

In its newsletter published today, it says there could never have been a problem-free transition to EMU. "This present period as we approach EMU was bound to be volatile," it says.

IBEC says the Government could make a positive contribution to the health of the economy "in these difficult times by being especially diligent in the management of our finances."

IBEC said there is a strong case for active and ongoing review of spending commitments. "New policy commitments should not add to the difficulties being faced by business.