THE EUROPEAN Commission will confirm this morning that it will give the Government a one-year extension to its 2013 target to restore stability to the public finances, a move that will push out the deadline until 2014.

Although economic and monetary affairs commissioner Joaquín Almunia will cite deteriorating economic conditions as the reason for the move, he is very unlikely to permit any deviation from the Government’s budget target to cut expenditure by a total of €4 billion next year.

The commissioner’s report on Ireland will be issued alongside reports assessing efforts by France, Spain, Britain and Greece to bring their budget deficits back within the 3 per cent of gross domestic product limit set out in the EU Stability and Growth Pact.

Mr Almunia told reporters in Brussels it was clear that the Greek government was not taking effective action to curtail its deficit, adding that the other countries would be given a one-year extension if they were judged to be taking effective action.

Mr Almunia’s finding in respect of Minister for Finance Brian Lenihan is already known to be positive.

“Fiscal strategies should be differentiated according to the different positions of the member states,” Mr Almunia said after a meeting of finance ministers in Brussels. The wider EU group of finance ministers agreed yesterday to follow a agreement by the 16-member euro group to make preparations to start curtailing their budget deficits by 2011.

However, they said it was too early to consider setting deadlines for ending extraordinary measures to support banks throughout the 27-member bloc.

“It’s premature now to start to talk about ending these guarantee schemes, capital injection schemes and bad asset schemes,” said Swedish finance minister Anders Borg, whose government holds the EU’s rotating six-month presidency.

“It is necessary that we start to discuss the principles, the sequencings and the co-ordination that is necessary to withdraw the support system in an orderly way.”

Although EU governments and the European Commission want to send a signal to financial markets that the crisis is being overcome, they said that economic stimulus remains necessary to protect the nascent recovery of the European economy.

“While it’s very important that economic policies stay expansionary, it’s also very important that we start to communicate and design the exit strategy,” Mr Borg said.

“Public finances in Europe will deteriorate rapidly if we have an unchanged policy and if we don’t have eventually a strong fiscal restructuring.”