The European Commission is set to extend the deadline for Ireland to reduce its Government borrowing level until 2014.

The Commission is likely to give the Government an extra year because it has taken action to address the deficit, but has still seen a worsening of the public finances due to rising unemployment and falling tax revenues.

The move has been welcomed by the Congress of Trade Unions, which wants the economic adjustment spread over a longer period.

Back in March the Commission said five governments - including Ireland - were in an excessive deficit situation - borrowing more than 3% of GDP to fund their annual budget. Ireland was borrowing over 12% of GDP.

EU finance minsters agreed to a Commission proposal that Ireland be given until 2013 to get back to the borrowing limit of 3%.

Now the Commission is set to extend that period by a year, as rising unemployment and falling tax revenue has seen the Governments finances worsen, despite the April Budget.

While Ireland, France Spain and the UK have taken action to reduce their deficits since March, and will get an extension, Greece has not taken action and may face sanctions as soon as tomorrow.

ICTU economist Paul Sweeny said the Commission decision is a tacit recognition that Congress was right to call for an extended period of economic adjustment - until 2017 - and he said it was an admission that Government policy of deep cuts was simply making things worse.

However, the Department of Finance insists the extension will make no difference to plans for a €4bn cut in Government spending in the December Budget.