The European Commission has decided to start legal action against Greece after it emerged that it had been sending incorrect economic data to Brussels since 1997.

This under-reporting of its budget deficit by billions of euro meant that Greece joined the euro in 2001 although it was technically not entitled to join.

A Commission spokeswoman said the legal action was "to ensure that Greece puts its house in order".

"It is quite obvious that there are systemic problems in the Greek statistical departments," said the spokeswoman.

The Commission's infringement procedure was sparked by an investigation by the EU's statistical agency, Eurostat, which found that Athens had given faulty figures for the years just before it joined the euro.

Eurostat revised Greece's budget deficit up to 4.3 and 3.4 per cent of GDP in 1998 and 1999 respectively, from 2.5 and 1.8 per cent. Under the euro rules, all member states have to maintain a budget deficit of 3 per cent or less of gross domestic product.

"Greece would not have joined the euro with the figures that we now have," the Commission spokeswoman said.

The Commission now wants Greece to take steps to make sure its data can be trusted in the future. Athens' "misreporting" of the figures has also prompted the Commission to investigate how it gathers its statistics.

Currently the system relies on good faith - Eurostat has no power to check the source of information in an individual member-state.

The proposals, which would have to be agreed by member-states, are to call for a greater supervisory role for Eurostat and for national statistical agencies to have greater independence from government.

Athens, which has two months to reply to Wednesday's decision, has laid the blame for the figures squarely at the door of the previous Socialist government in power until March this year.