The chancellor has warned that the pace of EU market liberalisation is too slow.

In a speech on Monday, Gordon Brown struck a cautious note - although his aides insist he is not preparing the ground for a negative assessment on the UK's euro convergence.

Brown is said to believe that the EU is well off target to achieve its aim of becoming one of the world's most dynamic economies by 2010.

"In a world where business must respond quickly and people must adapt to change, Europe has too often been unwilling to go beyond old assumptions that the labour, capital and product market flexibility necessary for productivity is the enemy of social justice," Brown said.

"In a single currency area, where the old flexibilities to adjust exchange rates and interest rates are no longer available at a national level, labour, product and capital market flexibility are even more essential."

Liberal Democrat Treasury spokesman Matthew Taylor said that Brown was seeking to blame the EU for his own failures of economic policy.

"By turning his fire on the EU at this time Gordon Brown is trying to shift the blame for Britain's imbalanced economy and limping manufacturing sector," he said.

"What British business really needs is a bonfire of the chancellor's own regulations and red tape. It is the Chancellor who has increased tax complication in the UK by a third since taking office."

The speech came at a crucial time in the debate on British membership of the single currency.

The government's euro-enthusiasts say the chancellor is growing increasingly hostile to British membership.

Peter Mandelson, one of Brown's key opponents, last week urged the prime minister to go for a snap referendum following a successful war against Saddam Hussein.

Warning Blair that it was time to "come off the fence" Mandelson called for an early referendum.

The chancellor is set to announce the results of his five tests by early June.