Mr Stevenson said there was a funding gap in the Waverley plan

He said the burden would now fall on Scottish Borders and Midlothian councils to fill the funding gap.

However, Lib Dem MSP Jeremy Purvis argued that financial responsibility for the project lay with the executive.

Scottish Borders Council leader David Parker said the authority had given as much funding to the scheme as it could.

The SNP executive has been carrying out a financial review of all major transport projects.

Mr Stevenson said the sums on the Waverley line did not add up.

What the government has done is reaffirm a financial commitment that was given by the previous government and we have set out what needs to be done to ensure the railway can take its course John Swinney Finance secretary

"We have now learned that the funding package proposed by the Waverley Railway Partnership will not be sufficient to deliver and that that opening in December 2011 is not achievable," he said.

"We expect Scottish Borders and Midlothian councils to work hard with developers to close the funding gap."

The statement angered Mr Purvis, who said that since the project had transferred to Transport Scotland the funding responsibility lay with the executive.

"It is the clear responsibility of the minister and there is no way that Borderers should be asked to pick up the tab for what is an SNP Government mess," he said.

"We don't know the scale of the gap, how it happened or when it happened.

"Confusion reigns at the heart of the government and that is not good for the Borders."

Cost estimates

However, Finance Secretary John Swinney said that Transport Scotland had not yet completed its takeover of responsibility.

He said: "Before you become the authorised undertaker you have to do the due diligence process.

"In that process it is becoming clear that the original cost estimates were overly ambitious - that is a product of the way in which the project has come forward and been managed by the previous administration.

Scottish ministers will have to make that decision - are they going to commit to the scheme and fund it or are they not? David Parker SBC leader

"What the government has done is reaffirm a financial commitment that was given by the previous government and we have set out what needs to be done to ensure the railway can take its course."

SBC leader David Parker insisted that if the executive did not foot the bill then the project could collapse.

"Scottish ministers will have to make that decision - are they going to commit to the scheme and fund it or are they not?" he said.

"The councils have gone as far as they can go.

"It is now up to the minister to put the additional money that is required into this scheme."

'Political football'

Tory MSP Derek Brownlee said the situation confirmed what he had feared about the project from the outset.

Mr Brownlee said: "I always thought in relation to the Borders railway - notwithstanding the support it had cross-party - that I would believe it when I saw it.