By Manuela Saragosa
BBC Europe business reporter in Brussels
Greece has received a formal warning from the European Commission for publishing false data about its public finances.
The Greek finance minister has promised to tackle the issue
The Commission found that Greece had hugely underreported its budget deficit between 1997 and 1999.
Greece had admitted that it would not have qualified to join the euro in 2001 if the true state of its budget deficit had been known at the time.
Greece could face legal proceedings if it does not change its procedures.
The warning follows an investigation into Greece's public finances by Eurostat, the Commission's statistical agency.
The body found that Greece's deficit in 1997 was actually 6.6% of its GDP, not 4% as was reported at the time.
Eurostat has also revised upwards Greece's deficit figures for 1998 and 1999.
In both years, Greece's deficit was above the 3% cap which the EU imposes on states wanting to join the euro.
The Commission said it wanted Greece to take steps to ensure its data can be trusted in future, producing accurate figures about how much the government is spending.
Putting house in order
"The purpose of the infringement procedure is to ensure that Greece puts its house in order," said Commission spokeswoman Amelia Torres.
"Greece would not have joined the euro with the figures that we now have," she added.
The Commission will send the Greek Government a letter of formal notice on Wednesday.
Greece will have two months to reply.
But if the Commission is not happy with its answer the matter could end up in court.
The Greek government said it had made progress in improving the country's accounting processes since it took office in March.
It confirmed it would take further action to ensure Greece was not referred to the European Court of Justice.
"The Greek government will persist in the policy of transparency and credibility of fiscal data with a view to complete the effort that began after the (March) elections," said finance minister Yiorgos Alogoskoufis.
"Today's government reestablishes the country's credibility," he added.
Eurostat was also criticised for failing to raise the alarm about the quality of Greece's budget data.
So far, no-one has been officially blamed for what amounts to the EU's most serious statistical embarrassment since the launch of the single currency.
The Commission said the agency had shown a "lack of awareness to bring the problem to the right public level instead of having a closed discussion between statisticians".
Greece may still face separate disciplinary action from the Commission for breaching EU limits on its deficit this year.
That could lead to fines over and above any measures taken to ensure its statistics are accurate in future.