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George Osbourne, Conservative shadow chancellor, said: "The decision by the European Commission to begin proceedings against the British government is a humiliation for a prime minister who used to boast about the comparison with other European countries.

He added: "First the Organisation for Economic Co-operation and Development and now the European Commission confirm our charge: that Labour failed to use the good years to prepare for the difficult times and as a result we enter an economic downturn with the worst budget deficit in the developed world.

"Gordon Brown’s reputation for economic incompetence is now international."