By Patrick Bartlett BBC European business correspondent

The European Commission is expected to confirm on Wednesday that Germany has become only the second country to breach financial rules governing the euro.

Germany's struggling economy pushed its budget deficit last year well above the limit allowed for euro members.

Schroeder's policies are unpopular

The public dressing-down from Brussels comes at a critical time for the German Government, which is threatened with an all-out strike over pay by three million government workers.

The European Commission formally is expected to recommend that Berlin be set a tough deadline to introduce measures to cut its deficit.

Portugal is the only other eurozone country to have faced such disciplinary action.

For Germany, the process is the more humiliating because it was the principal architect of the rules designed to prevent the euro being undermined by spendthrift governments.

Recession fears

To rectify the situation, Chancellor Gerhard Schroeder has been forced to pursue a deeply unpopular austerity package of tax rises and spending cuts.

Against that background, public sector workers demanding a 3% pay rise have been given short shrift.

Employers and trade union representatives are to make a last-ditch effort on Wednesday to avert a nationwide strike. But the outlook is not promising.

If the strike by nurses, firefighters, bus drivers and others goes ahead, it will be the first in Germany for more than 10 years.

Economists fear it could plunge the country back into recession.