The European Commission launched formal disciplinary procedures on Thursday against Spain and Portugal for their excessive deficits in 2014 and 2015.
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“I am convinced this sanction will not happen, because Spain is the fastest-growing economy in the eurozone and it has passed more reforms than anybody else”. Spain’s Acting Economy Minister Luis de Guindos has been adamant that sanctions would be unreasonable as the government is working to fix its economy after the financial crisis, an argument countered by proponents of austerity.
Other countries, including France and Italy, have also in the past been warned about missing deficit and debt targets but have never been sanctioned. So the two countries may have to do with less funding just as they are trying to make ends meet.
Finance ministers may waive the fines at a July 12 meeting if they determine the deficits were due to “exceptional economic circumstances”.
After the Council’s decision, the Commission will have to propose sanctions “within 20 days”, the European Union executive said in a document.
That means sanctions could be set as soon as July 27.
“We are open for dialogue”.
Many EU powers led by Germany have long hoped for the commission to finally crack down on public over spenders, but with populist fires burning after the Brexit vote, ministers meeting in Brussels on Tuesday could decide to delay their immediate endorsement.
“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.
Portugal missed the deadline to correct its deficit in 2015 and the commission disputed whether its budget for this year was in line with its budgetary obligations.
“I have gone on the record to say that the last thing we need now is for the Commission to talk about sanctions for countries which may have deviated by 0.2 percent from a path of deficit reduction”, Gurria, who heads the OECD which advises developed nations on policy, told a conference in Lisbon.
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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 previous year, but that still overshoots targets and the bloc’s limit.
