The Whitehall official responsible for recommending whether Britain should join the euro has no recollection of saying it will be a political rather than economic decision, the Treasury said today.
Gus O'Donnell reportedly said it would be impossible to deliver a "clear and unambiguous" verdict on the five economic tests for British entry.
But his remarks were completely misrepresented and the economic case must be clear and unambiguous, a Treasury spokesman said.
Mr O'Donnell, the Treasury's head of macroeconomic policy and international finance, gave a private talk to economics undergraduates at the Department of Trade and Industry in November last year.
Challenged by one student on the nature of the assessment of whether the five tests have been met, Mr O'Donnell was reported as saying: "Economics can never be clear and unambiguous. Ultimately, it will be a political decision."
A Treasury spokesman said today: "Reports of Mr O'Donnell's remarks are a complete misrepresentation of what he actually said.
"Mr O'Donnell has no recollection of saying ultimately it will be a political decision.
"Any Government decision on the euro will be based on a thorough and rigorous assessment of the five economic tests. The economic case must be clear and unambiguous."
But Dominic Cummings, director of the eurosceptic Business for Sterling campaign, said of Mr O'Donnell's reported remarks: "This is the best indication yet that the Treasury realise just how flawed the euro is and will recommend a big 'No'."
Mr Cummings said Mr O'Donnell had also told the students that the euro had "failed" one of the Treasury's five tests.
He told BBC Radio 4's Today Programme: "He had an in–depth analysis of the institutions that run the eurozone and compared them extremely unfavourably with the Bank of England and the British Government.
"He was saying that that's going to be a very important aspect when they consider test two, the flexibility test, and he made it very clear to all the students that, in his view, test two had failed."Reuse content