The European Commission will propose to the EU finance ministers meeting next week that Greece be given notice that it has to reduce its excessive deficit by the end of 2006 at the latest, said commission spokeswoman Francoise Le Bail on Wednesday.
If the proposal is accepted at the 17 February meeting, it would mean Athens must act to bring its annual deficit under 3% of Gross Domestic Product (GDP) by the end of next year or face fines.
Under the proposal, Greek authorities get an additional year to act "to create the conditions for a balanced and lasting correction of the Greek deficit".
The commission estimates that the Greek deficit could be as high as 3.6% of GDP next year, higher than the Greek government's estimates, Le Bail said.
The EU Commission took on
France and Germany over gaps
Greece is expected to submit by 21 March how it expects to meet the new conditions.
In 2003, the commission took on France and Germany for running excessive budget gaps.
However, the two countries resisted, rallying a majority of EU nations around a declaration saying Paris and Berlin would get their deficits under 3% of GDP by 2005.
Although it successfully challenged that in the EU High Court, the European Commission then abandoned legal steps against France and Germany.
Last year, the European Commission put Greece's budget deficit at 5.5% of GDP after learning Athens had provided flawed statistics about its economic performance in the years leading up to the introduction of the euro in 2002.