UK to run biggest deficit in Europe

In its spring economic forecast the group predicted UK net borrowing would be 12 per cent of output in 2010 – a higher proportion than any other country in the 27-member block and above Greece's 9.3 per cent.

The Commission revised growth estimates for the UK upwards – although the 2011 figures still undershot Government expectations – while it boosted predictions for the euro area as a whole as officials sought to calm nerves over the Greek debt crisis.

It also cut predictions for UK borrowing, but it still saw the budget deficit in the next two years as higher than projected by the Treasury.

The report forecast net borrowing of 11.5 per cent in the financial year to March 2011 and 9.4 per cent in the following 12-month period, compared to forecasts of 11.1 per cent and 8.5 per cent respectively.

Restoring the UK's "greatly-weakened" public finances was a central task, the report said.

UK growth is predicted to be 1.2 per cent this year – in line with Government expectations – but the 2011 figure of 2.1 per cent is lower than official expectations of output expanding around 3.25 per cent.