“By giving more time to Spain and Portugal to bring their public deficits below 3%, the Council sets new credible fiscal trajectories, which will contribute to strengthening both their economies and the euro area”.
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European Union member states let Spain and Portugal off the hook on Tuesday, deciding against fines for their repeated breach of budget deficit rules meant to bolster growth and the public finances.
Both countries have now been set new deadlines. Again it said the country’s efforts had fallen far short, and highlighted a relaxation of fiscal policy in 2015 as having a particular impact on the country’s fiscal outcome that year, with the deficit at 5.1% of GDP compared to a target of 4.2%. “Effective action by Spain and Portugal will be a necessary condition to lift the suspension of commitments under the European Structural and Investment Funds”, said EU Commissioner Valdis Dombrovskis.
Portugal expects its deficit will fall from 4.4 % of GDP last year to 2.2 % this year.
“On 8 August 2016, the Council agreed not to impose fines on Portugal and Spain for their failure to take effective action to correct their excessive deficits”.
The EU only enforced the fine, which could have risen to 0.2 per cent of each countries’ GDP, on July 12. Portugal has been given a one year extension.
As the Commission recommended, the Council calls on Portugal to put an end to its excessive deficit by 2016, and that Spain does so by 2018 at the latest.
But citing “exceptional circumstances”, the EU Council has given each country more time to conform to the rules and bring their deficits down. “I trust that Spain and Portugal will respond accordingly to the decisions”.
For this year, the Council said Madrid must find savings equivalent to 0.5 percent of GDP to bring the deficit down to 4.6 percent, and then 3.1 percent in 2017 and 2.2. percent in 2018. This will require Portugal to make an adjustment equal to 0.25% of GDP.
Spain’s deficit is now forecast to stand at 3.3% for 2017 and 2.7% in 2018, and the council said its targets will require Spain to make changes equal to 0.5% of GDP in both.
Under the EU’s stability and growth pact, members of the Eurozone are forbidden from running budget deficits in excess of three per cent of GDP.
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Spain and Portugal will not be fined for breaking the EU’s budget rules, it was confirmed today.
