Lisbon set to win deficit target extension International lenders are this week set to give Portugal a second extra year to meet fiscal targets agreed as part of a €78bn bailout in what government critics see as an admission that tough austerity policies are failing. The decision will fuel debate over the extent to which austerity measures are smothering the potential for growth in struggling eurozone economies. In Strasbourg on Wednesday, José Manuel Barroso confirmed that the European Commission, of which he is president, would propose giving Lisbon "another year" to meet its budget deficit goals. Pedro Passos Coelho, the prime minister, has suggested Lisbon will be given until 2015 to bring its budget deficit below 3 per cent of national output, two years later than originally envisaged in the adjustment programme Portugal signed in May 2011. Mr Barroso said the government had been making "remarkable efforts" to comply with the programme, but had missed deficit targets largely because a deeper-than-expected downturn in Europe had hit exports. Portugal had initially agreed to meet the 3 per cent deficit limit this year, but the "troika" of lenders - the commission, the International Monetary Fund and the European Central Bank - agreed in September to relax the deadline to 2014. Greece and Spain have also been granted extensions for complying with eurozone fiscal targets and France has requested one. But Portugal would the first country to be given a second extra year. Portuguese business leaders, trade unions and opposition parties have all been pushing for more time to cut the deficit as a means of easing austerity and freeing the government to invest in schemes to lift economic growth and create jobs. But employers and unions say a second extra year to meet budget deficit goals is still too little. One more year will not be enough. Reducing the deficit in that period is impossible," said António Saraiva, head of the Confederation of Portuguese Industry. Two more years, at a minimum, would be ideal. "Another year will not solve the problem," said Arménio Carlos, head of the communist-leaning CGTP-Intersindical, the biggest trade union confederation. "[Only] another year is ridiculous," said João Vieira Lopes, head of an organisation representing shopkeepers and restaurants. António José Seguro, leader of the centre-left Socialists, the main opposition party, said Portugal was being given more time "not because the government has done well but because it has failed." There was now a national census in favour of relaxing fiscal targets, he said. Accusing the government of having "a passion for austerity," he said: "Impoverishing a country doesn't resolve anything, it only creates additional problems." Vítor Gaspar, finance minister, has said the economy will contract by 2 per cent this year - twice as much as the government initially forecast - while unemployment is expected to reach a record 17.3 per cent by mid-2013, the country's third consecutive year of recession. The new extension to the deficit deadline is expected to be officially announced this week after the troika conclude their latest round of talks on Portugal's progress with its three-year adjustment programme. Participants have described the talks as the toughest and longest to date. Detailed plans for making additional permanent public spending cuts totalling €4bn over the next two to three years are believed to be the main sticking point.