A Cabinet minister is playing down fears that Irish Water could fail a vital European Union test.

A draft report from the European Commission says the new regime of water charges means the borrowing by Irish Water could be included in the national debt.

If that is the case, the government may be forced into an embarrassing mini-budget later in the year.

Officials have warned of "uncertainty" surrounding the prospect of the utility passing the crucial market corporation test - which will determine whether the company can be kept off the government books.

The Irish Independent reports the document is critical of the revised water package by the coalition, which is capped at €160 for all households.

The EC report is concerned that a lower than expected revenue collection from the charge has "diminished" the prospect of Irish Water being self-funded.

But Jobs Minister Richard Bruton says he is confident that Irish Water will still pass the test.