Britain and Ireland have both rejected calls from the EU to tone down their tax and spending plans.

The unprecedented criticism was levelled at the UK for breaking the so-called "stability pact" by not balancing its budget.

Ireland was reprimanded with the first-ever formal censure for violating the broad economic guidelines with an "inflationary" spending policy.

The censure came as European finance ministers met on Monday to examine Britain's state of preparedness for the single currency.

Gordon Brown was said to be furious at being lectured about domestic economic policy with officials suggesting the spat raised serious questions about the way the European commission arrives at such rulings.

Brown said: "I made it clear that we will continue with plans for higher public spending."

The commission, which carries out a yearly "audit" of all EU governments spending plans, says Britain would break the rules on borrowing if, as is predicted by the chancellor, the government runs a one per budget deficit in 2004.

Britain is also at odds with the EU over whether it needs to join the exchange rate mechanism. The European commission says that the UK would need to have been a member of the ERM for two years before it could be admitted to the eurozone.