Alistair Darling was given six months by his fellow European Union finance ministers yesterday to bring Britain's budget deficit below the 3 per cent of gross domestic product required by the single currency rule book.

In an embarrassing move for the Government, the ministers formally opened an excessive deficit procedure against Britain, insisting that the overshoot had to be brought below the 3 per cent ceiling “as soon as possible and by financial year 2009-10 at the latest”.

They added that once the deficit had been brought within acceptable limits, certain medium-term objectives should be followed, including prudent debt ratios that took account of the economic and budgetary impact of ageing populations, and sufficient room for budgetary manoeuvre to meet public investment needs.

To meet that longer target, Britain's partners established “the deadline of January 8, 2009, for the United Kingdom to take effective action”.

The Government said last night that the ministers had not taken account of the UK's low debt, the economic cycle or the important role of investment in public services and infrastructure.

Three years ago, almost a dozen EU countries faced similar instructions to put their budgetary house in order. Now, only Britain and Hungary continue to come in for criticism.

Since Britain is not in the eurozone, there is no prospect of the country facing the ultimate penalty of financial sanctions if it fails to meet the deadline, but yesterday's decision is an unwelcome rap over the knuckles for a Government that has prided itself on its stewardship of the economy.

According to the latest British forecasts, the general deficit will reach 3.2 per cent this year but will fall to 2.8 per cent in 2009-2010.

Europe disputes that, estimating that the £2.7 billion cost to the Treasury from the changes in income tax bands could push the deficit up to 3.5 per cent this year.

In contrast with the treatment of Britain, the finance ministers said that Slovakia had met all the conditions to exchange its currency for the euro.

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