Europe Minister David Lidington has told MPs the UK is "ready to act" if the government feels that EU institutions are going beyond their powers in implementing new rules on budgetary supervision.
He gave evidence to the European Scrutiny Committee on 22 February 2012, as part of an inquiry into the eurozone crisis.
Mr Lidington was questioned by MPs on the decision of the UK government not to sign up to a so-called "fiscal compact" that has been agreed by 25 of the 27 EU governments.
The compact is designed to ensure that governments do not build up excessive public deficits.
The fact that it is not a formal treaty means that there is uncertainty as to whether the usual rules on what the various EU institutions may or may not do apply.
Conservative MP Jacob Rees-Mogg accused the government of being happy for an "illegal" treaty to be drawn up, a claim denied by Mr Lidington.
The veto was invoked by David Cameron at an EU summit in December, convened to come up with ways to end the debt crisis that has struck a number of eurozone countries including Greece, Ireland, Italy, Portugal and Spain.
All these countries have been either faced with bailouts or austerity measures.
The session comes on the same week that the Greek government secured a second bailout after passing a package of austerity measures.
At least three eurozone countries - Belgium, Greece and Portugal - are officially in recession, with other countries including those with a traditionally strong economy such as Germany and the Netherlands facing a slowdown in growth.