The European Commission yesterday recommended that Portugal be given three years - an unprecedented length of time for a euro-zone member state - to reduce its budget deficit to below the European Union limit.

Suggesting that Lisbon should be told to get back into line by the end of 2008, the executive body said faster cuts would harm economic growth in the poorest country in Western Europe.

Portugal's budget deficit is expected to balloon to 6.2 percent of GDP this year - the widest gap in the 25-nation bloc - from 2.9 per cent in 2004 and more than twice the EU maximum of 3 percent of gross domestic product.

"The Commission recommends that this budgetary situation be corrected by the end of 2008 at the latest and through structural measures," it said in a statement.

The recommendation was made under the Stability and Growth Pact, which allows the EU to police budget deficits to underpin the euro currency, and which was reformed in March.

EU finance ministers are expected to endorse the decision in September, said Amelia Torres, the commission's monetary affairs spokeswoman.

Portugal welcomed the Commission's decision.

"It is the first time that the European Commission allows three years (to bring down a deficit).

This is proof of confidence in our economic stability programme," prime minister Jose Socrates said.

The pact, which in its orginal form envisaged only one year to reduce an excessive shortfall, now gives EU budget sinners more time to put their public finances in order when they face slow growth or special circumstances.

"Bringing public finances back on a sound footing is an urgent necessity for the Portuguese authorities," said EU economic and monetary affairs commissioner Joaquin Almunia.