There has been continued speculation about Eurofighters

Responding to a report in The Guardian that the armed forces were facing a financial crisis, the MoD said it was considering "adjustments".

There has been speculation an order for Eurofighters could be reduced and numbers of battle tanks affected.

But the MoD said it was impossible to say which, if any, specific projects would be affected.

And it insisted all government departments had to tackle "fluctuating financial positions".

The Guardian speculated there would be widespread cuts and said the MoD had considered, but decided not to go ahead with, a recruitment freeze.

The situation for the armed forces is complicated by a new accounting system which takes into account the MoD's massive range of assets, as well as its spending needs, when calculating its budget.

'Fluctuating finances'

An MoD spokesman said: "As the defence secretary said in the House of Commons on 16 October, all departments have to deal with fluctuating financial positions and live within their budgets. The Ministry of Defence is no exception.

"This year there has been the added complication of managing the impact of operating full Resource Accounting and Budgeting (RAB) for the first time, including issues such as how quickly we might use resources released by reducing our asset base to fund other priorities.

"With its huge (�86bn) asset base, the MoD is inevitably one of the departments most affected by the implementation of RAB. Work continues to identify what adjustments are required."

There has been speculation cuts could lead to a third of an order of 232 Eurofighters being scrapped, or affect equipment such as battle tanks.

But the MoD did deny that the cost of the war in Iraq would have any bearing on its main budget.