In a regular meeting in Brussels, EU finance ministers backed the Commission’s assessment, in a widely anticipated decision.
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The decision, taken in Brussels on Tuesday, triggers a period of 10 days during which the governments in Madrid and Lisbon can try to make a case for leniency from the European Commission.
“Certainly there will be a possibility within this procedure for the countries to put forward motivated requests to reduce potential sanctions or probably even bring them down to zero”, said Valdis Dombrovskis, the European Union commissioner responsible for the euro.
Valdis Dombrovskis, the European Commissioner for the Euro, said Tuesday that it’s possible the fines could be scrapped.
Portuguese Prime Minister Antonio Costa said any fine would be “unjustified and counterproductive” and slammed the whole process as “a contradiction”. Only members of the 19-country eurozone can be fined, however, but that covers both Portugal and Spain. If the council decides that they should be fined, the Commission has 20 days to come back with some kind of sanction – it could also recommend that no fine is due.
On Monday, German finance minister Wolfgang Schaeuble repeated that “all agree that the rules must be applied”.
But in 2014 and 2015, Spain and Portugal missed the agreed objectives, maintaining deficits well above the 3pc limit.
The ministers took the unprecedented step despite fears that too much austerity by Brussels will further stoke anti-EU populism after the Brexit vote.
French Finance Minister Michel Sapin told reporters that Portugal “doest not deserve excessive discipline”, praising the efforts Lisbon had made in recent years.
“It’s a possibility to have zero sanctions”, Dijsselbloem indicated, echoing the commission’s position last Thursday’s.
“This is all about the political stigma, a symbolic gesture that won’t have any immediate or objective impact on Spain or Portugal”, he added.
The decision “will trigger sanctions under the excessive deficit procedure”.
Spain and Portugal have been under the EU’s excessive deficit procedure since 2009 because of recurrent fiscal holes following the global financial crisis.
Bailed-out Portugal, long considered a star reformer, sharply cut its budget deficit from close to 10 per cent of GDP in 2010 to 4.4 per cent past year, but that still overshoots targets and the bloc’s 3.0 per cent limit. At the same time – six years after Greece received its first of its three bailouts – they know that the credibility of Europe’s efforts to manage the economy is still in question and appearing lax could send out the wrong message.
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In 2015 it reported a deficit of 5.1 per cent of gross domestic product (GDP), still way off the target of 4.2 per cent set by the commission and official limit.
