A EUROPEAN Commission review of the Government’s budgetary performance will this autumn examine whether the conditions exist for an extension of the timetable to stabilise the public finances by 2013.

The routine review, which will take into account the fact that tax revenues were 4 per cent below target in the first three quarters of the year, will be carried out under excessive deficit procedures set out in the EU’s Stability and Growth Pact. The pact is the responsibility of economic and monetary affairs commissioner Joaquin Almunia.

The result of the review will be presented to EU governments at a European Council summit in December.

It is understood the commissioner will assess whether the recovery plan is progressing in line with the targets set out in the commission’s agreement with the Government which calls for €4 billion in spending “adjustments” in 2010 and 2011, and further cuts of €3.5 billion in 2012 and €3 billion in 2013.

While it is open to Mr Almunia to examine the case for an extension to the 2013 deadline if he finds that targets are not being met, it is believed that both the Government and the commission are reluctant to go down that road. as the Government is still in the first year of a five-year programme.

The commission recently predicted that Government debt could be among the highest in the EU by 2020. In a draft paper the EU executive prepared for informal meetings here of EU finance ministers and central bank chiefs, the commission found that the deficit would reach 200 per cent of gross domestic product (GDP) by 2020 unless policy measures were introduced to cut spending or raise taxes. Such a deficit would be eight times higher than the figure recorded in 2007.

Any extension of the 2013 deadline, however, would provide some additional headroom for Minister for Finance Brian Lenihan as he prepares his most difficult budget yet. However, the Minister has already dismissed as “not feasible” a suggestion by trade union leader David Begg that the Government should extend the recovery plan for several more years to minimise the impact of cuts on workers.

Pointing out that Ireland was already the beneficiary of the longest recovery period allowed by the commission, he said the most “crucial” risk to taxpayers was the rise in the interest bill on the national debt.

Amid vociferous opposition from public sector unions to pay or service cuts, any move to relax the fiscal strictures on the Government would also weaken the Minister’s hand in budget negotiation.

Government borrowing is at €25 billion this year, and a further €20 billion may be required next year. With that in mind, there is a sense in Government circles that the current timetable makes sense given risks flowing from any failure to confront the disarray in the public finances.

While it is also open to Mr Almunia to sanction the Government if he rules it is not fulfilling the commitments made, that is considered very unlikely given the extent of the corrective measures already taken by the Government.