The public finances of the UK, Spain and 10 other European Union countries are at long-term high risk, because of projected increases in welfare expenditure and the impact of the world financial crisis, according to a report by the European Commission.

The 175-page study, published this week, placed only five of the EU’s 27 countries in the low-risk category – Bulgaria, Denmark, Estonia, Finland and Sweden. Ten countries, including France, Germany, Italy and Poland, were identified as medium-risk.