Government rejects EU calls for more fiscal cuts

The Conservatives, whose lead in the polls has slipped in recent weeks, seized on the EU report. They have promised to take quicker action on tackling the deficit than either the Labour government or the Liberal Democrat party and have warned that Britain's triple-A credit rating was under threat because of government profligacy.

"What has to be done now is to get this debt rapidly under control and get the bulk of the structural deficit, get rid of it during the next parliament and I also think one needs to start now," said Conservative business spokesman Ken Clarke.

Some analysts have warmed to the Conservatives' approach but others have criticised the party for talking tough but not producing the evidence to back it up.

"The real lack of detail is on the part of the government because they have refused to publish a spending review," the Conservative source said. "They don't want to own up to the scale of the problem they have created."

Byrne said spending cuts as envisaged by the EU would be a disaster for public services.

"You would have to take 20 billion pounds of public spending out by 2014-15, that's about half the education budget. We think that halving the deficit over four years is the right approach," he said.

"We think that is not reckless. It's not painless either."

(Additional reporting by Michael Holden and Kylie MacLellan; Editing by Stephen Nisbet)