EU finance ministers meet tomorrow to decide whether to issue warnings to Germany and Portugal over the size of their budget deficits. Both states will use the meeting of euro-zone ministers today to continue their lobbying against the proposal from Commissioner Mr Pedro Solbes, which has already been backed by the Commission.

At the end of last week, Britain's Chancellor of the Exchequer Mr Gordon Brown came out in support of Germany, making it less likely that the unprecedented warning will be issued. The ECB has indicated that a compromise is likely to be found - a relief to Germany which would be loathe to become the first to be censured for breaches of the Stability and Growth Pact which it was instrumental in attaching to the Economic and Monetary Union process.

However, the danger is that the EU is seeing as failing to act against member-states for political rather than economic reasons and Europe analysts fear this may damage the credibility of the euro.