"Both the public debate between central bankers and politicians over the reform of the Stability and Growth Pact and the unveiling of the true extent of Greece's fiscal deficits serve to underscore that Euroland's fiscal framework is in serious disarray".

Some central Banks, notably Germany's Bundesbank, rushed to criticise the Commission's proposal to reform the Stability Pact when they were unveiled. The European Central Bank (ECB) has also stressed that the Treaty should remain untouched but that the implementation of the rules could be improved.

And last week saw revelations that the state of Greece's budget deficit was far worse than previously thought - described by Morgan Stanley as "a Greek tragedy".

The note concludes, "All of this again highlights the fact that there is no credible fiscal policy framework in place to prevent countries from running excessive deficits in EMU [Economic and Monetary Union]".

The author of the note, European equity analyst Joachim Fels writes, "I stick to my view that the old Pact is dead and buried, and a credible new one is simply not in sight".

The warning comes as the EU's economics and monetary affairs Commissioner, Joaquin Almunia, prepares to flesh out his ideas to reform the Pact.

Mr Almunia will give a speech entitled, "How to strengthen economic governance" at a workshop in Brussels called "EMU after five years".

The Commission proposed in September to allow more time for countries whose deficits break the three percent ceiling of gross domestic product to whip the debt back into shape.

Brussels also suggested taking more into account the individual economic situation of the country concerned.