BRUSSELS, Jan 27 (Reuters) - The European Commision asked Portugal on Wednesday to explain why it was failing to cut its budget deficit as promised, a move that could lead to a rejection of Lisbon’s draft budget unless the Commission’s concerns are addressed.

EU countries are obliged by EU law to keep their budget shortfall below 3 percent of gross domestic product. If the deficit is bigger, EU finance ministers set deficit reduction targets and deadlines for the country under what is called an excessive deficit procedure.

“The draft budgetary plan reflects that the excessive deficit has not been corrected by the 2015 deadline, which would lead the Commission to recommend steps under the excessive deficit procedure (EDP) once the validated EDP data are available,” the Commission said in a letter to the Portuguese finance minister.

Following an inconclusive parliamentary election last October, Portugal’s left managed to oust the austerity-minded centre-right government and formed a Socialist administration at the end of November pledging a greater focus on boosting growth.

On January 22 the new government sent a draft 2016 budget to the Commission for checks on whether it meets EU requirements.

The draft shows that the headline budget deficit in 2015 was 4.2 percent of GDP, well above the EU ceiling of 3 percent, even though Lisbon was supposed to cut it below 3 percent last year.

The deficit is only to fall to 2.7 percent in 2016, according to the 2016 draft.

It also envisages a cut in the structural deficit - which excludes the effects of the business cycle and one-off items - from 1.3 percent of GDP to 1.1 percent in 2016.

However in mid-2015, European Union finance ministers had asked Portugal to cut that deficit by 0.6 percent of GDP in 2016.

Under powers granted to the EU executive arm in 2013 during the sovereign debt crisis, the Commission has the power to reject a draft budget if it breaks EU laws and to request a revised spending plan that does comply.

“Before proceeding in this direction ... we are writing to consult you on the reasons why Portugal plans a change in the structural balance in 2016 which is well below the adjustment recommended by the Council in July,” the Commission letter said.

The Commission has sent similar letters three times since it gained the new powers. Italy and France were asked to explain the budget drafts in September 2014 and Austria in May 2014.

As a result, all three governments announced additional measures to keep their drafts roughly in line with requirements of EU budget rules and avoid being asked for a new draft plan.

The Commission gave Lisbon until Friday, Jan. 29, to explain the numbers in the 2016 draft.

If the answers are not satisfactory, the Commission could ask Portugal for a revised draft by Feb. 5. (Reporting by Jan Strupczewski; Editing by Gareth Jones)