Jack Straw has had his demand for Zimbabwe to be suspended from the Commonwealth rejected by a ministerial action group.

The group rejected his call and instead opted to monitor the country's elections as a last chance for president Mugabe's regime.

Following the meeting the ministers set out "concrete benchmarks" of how the elections need to be carried out. If the observers deem the vote to have been flawed then the option of suspension will be brought forward.

"The issue here was what could the Commonwealth do at this time," said the committee following Wednesday's meeting.

Straw expressed his disappointment over the fact that despite the country's deteriorating human rights situation the committee had decided to allow Zimbabwe to stay in the Commonwealth.

The Conservatives said the decision sent the wrong signals to Mugabe.

Shadow foreign secretary Michael Ancram said: "I am very disappointed that Commonwealth ministers have taken this view as I believe it sends out the wrong message to Mr Mugabe."

"I regret that this decision has been reached so late in the day and that the government dithered and did not take our advice."

The foreign secretary argued that the situation in the country, under the direction of president Mugabe, has become so unacceptable that the country should no longer remain a member of the Commonwealth.

"The tragedy unfolding in Zimbabwe is driven by one man's ruthless campaign to hang on to power whatever the cost to others in the process. He's destroying his country's economy, damaging the rest of southern Africa and making wretched the lives of people," Straw said earlier this week.

He made his recommendation at a meeting of the Commonwealth Ministerial Action Group on the Harare Declaration in London. The group made its recommendation on the issue ahead of the heads of Commonwealth governments which takes place in Australia in March.

The group comprises ministers from Australia, Bangladesh, Barbados, Botswana, Canada, Malaysia, Nigeria and the United Kingdom.

The eight were called on to monitor serious or persistent violations of democracy, human rights, fundamental freedoms, the rule of law and the independence of the judiciary as laid out in the Harare Commonwealth Declaration.

In the latest move Zimbabwe has ruled it will allow observers to monitor the country's elections, except those from Britain. The latest edict follows a ban on foreign media from the country and the announcement by the Zimbabwe army that it backed a Mugabe victory.

EU foreign ministers have given president Mugabe one week to allow independent observers into the country for the March elections, or sanctions will be imposed.