The Minister for Finance, Mr McCreevy, has warned that the downturn in Europe's biggest economies could damage Ireland's growth prospects. And he suggested that the recent appreciation in the value of the euro against the dollar could create problems for Irish companies.

Mr McCreevy was speaking in Brussels after EU finance ministers gave France an official warning over its budget deficit and told Germany to bring its public spending under control. Growth is sluggish in Germany, France and Italy, which together account for 70 per cent of the euro-zone economy.

"A downturn anywhere in the world economy is not good for us. This is particularly true if it is affecting our big export markets," he said.

Mr McCreevy declined to comment directly on the euro's exchange rate against the dollar but he recalled that, when others complained in the past about the currency's weakness, he had warned that a strong euro could be more problematic. "It did give us a competitive advantage in recent years," he said.

The Minister suggested that the euro's strength, despite Europe's economic difficulties, highlighted the hazards of trying to predict market movements.

Commenting on the prospect of war against Iraq, Mr McCreevy said that a prolonged war would cause great damage to the world economy. But he expressed confidence that armed conflict could be avoided.

Mr McCreevy welcomed an agreement by EU finance ministers last night on taxing income from cross-border savings, saying it would help all member-states to boost revenues and stem tax evasion.

The deal emerged after Austria, Luxembourg and Belgium agreed to impose a withholding tax after 2010.