The European Commission has issued a firm warning to the Irish Government in its latest assessment of the Irish economy.

While it praises the country's recovery, it is critical of the budgetary targets outlined in the Government's highly publicised Spring Economic Statement.

After years of austerity, the EU argues that Ireland should use extra revenue generated by the recovery to reduce its debt, rather than increasing spending or cutting taxes.

The report reads: "Budget 2015 complies with the Stability and Growth Pact, but the 2015 and 2016 deficit targets could have been more ambitious given strong economic growth, and expenditure ceilings still need to be strengthened."

It argues that it is necessary to pay back debt "to ensure that debt levels are sustainable and do not weigh on the growth prospects."

The EU also advises that Ireland should consider broadening its tax base to "support the adjustment process."

With Irish parties already gearing up for the next General Election, Budget 2016 is set to be a difficult balancing act for the coalition parties, as they try to convince voters that they are benefiting from Ireland's growth, without compromising the recovery through irresponsible spending or tax cuts.

There has been no comment from Brussels on Ireland's decision to open public service pay talks, but The Irish Times reports that the issue of competitiveness is set to be raised by European Economic Commissioner, Pierre Moscovici when he visits Dublin on May 25th.

The Commission's report also raises specific concerns about health spending in Ireland, noting that it is unusually high, and that "in spite of higher public expenditure on health, population health status indicators such as life expectancy and infant mortality are by and large no better than in the rest of the EU."