In a report to be fully published tomorrow, the EC urges the UK to cut its deficit faster.
The report says: “The fiscal strategy in the convergence programme is not sufficiently ambitious and needs to be significantly reinforced.
“A credible timeframe for restoring public finances to a sustainable position requires additional fiscal tightening measures beyond those currently planned.”
The report suggests the size of the Government’s stake in UK banks adds to concerns about whether borrowing can be scaled back.
The report was commissioned by the EC due to the UK breaching EU stability rules.
The Government currently plans to half the budget deficit in four years and warns that faster cuts could make the economic recovery falter.
The issue is a key dividing line between Labour and the Conservatives in the run-up to the general election with the Tories calls for faster cuts.
Liberal Democrat Shadow Chancellor Vince Cable says: “The Government’s position on the size of the structural deficit and the speed at which it must be cut is the minimum. We must not cut Government spending too soon and risk plunging a fragile recovery back into recession.
“Cuts without economic growth will not deal with the deficit. To be credible all parties must not only show when they will tackle the deficit, but also what they will cut.”