European Union Economic and Monetary Affairs Commissioner Mr Pedro Solbes has said the decision by euro zone finance ministers to effectively freeze budget rules underpinning the euro has no legal basis.
He said the EU's Stability and Growth Pact was not suspended despite this morning's decision, which effectively suspends disciplinary action against Germany and France.
The Stability and Growth Pact pact, which aims to prevent euro zone states from running budget deficits of more than 3 per cent of their gross domestic product, was agreed before the euro was launched in 1999 and is designed to limit government borrowing and protect the common currency's credibility.
Mr Solbes said ministers were entering uncharted territory that would make it harder to enforce the rules drawn up before monetary union to underpin the euro.
"The Commission deeply regrets that these proposals are not following the spirit and the rules of the (EU) treaty and the Stability and Growth Pact," Mr Solbes said, publicly contradicting comments made by Italian Finance Minister Mr Giulio Tremonti who had earlier said the deal reached was in line with the spirit and letter of EU budget rules.
The EU executive, responsible for enforcing the pact, declined to spell out its next move but dropped hints that it may mount a legal challenge.
"The Commission, while continuing to apply the treaty, will reserve the right to examine the implication of these conclusions, if they are finally accepted, and decide on possible subsequent actions," Mr Solbes added.
Swedish Deputy Finance Minister Gunnar Lund said the pact on budget discipline was "seriously amputated in all likelihood, but I don't think it is dead".
Mr Lund admitted opponents of the compromise did not have enough votes to block it. But he said flouting the rules would make it harder to convince public opinion in countries such as his, which voted against joining the euro in a September referendum, to back the single currency.