BRUSSELS—The European Commission has put off a contentious decision on imposing financial sanctions on Spain and Portugal for failing to bring their budget deficits within European Union rules, saying it would revisit the issue in July, after Spain had held a general election.

The commission, the EU’s executive arm, said Wednesday the two Iberian countries should take more measures to reduce their budget deficits in 2016 and 2017, and gave them an extra year to get their deficits within 3% of gross domestic product, the bloc’s...