Thursday 27 October 2016

EU states back deficit sanction procedure for Spain, Portugal

Published 12/07/2016 | 13:27


European Union finance ministers endorsed on Tuesday a deficit sanction procedure for Spain and Portugal, paving the way for the EU executive to propose possible fines in the next 20 days.

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The European Commission said last week that Madrid and Lisbon had not done enough to correct their excessive budget deficits last year and in 2014, beginning a formal procedure that may lead to sanctions, so far never applied.

In a regular meeting in Brussels, EU finance ministers backed the Commission's assessment, in a widely anticipated decision.

Fines up to 0.2pc of GDP may be imposed if the excessive deficits aren't reduced, although sanctions so far have never been applied.

The Council of EU finance ministers will decide on the Commission's recommendation at their regular meeting on July 12, a spokeswoman for the EU's Slovak presidency told Reuters.

Ministers could reject the Commission's assessment only with a qualified majority of its members, making it very unlikely that the Council may oppose the Commission's recommendation.

After the Council's decision, the Commission will have to propose sanctions "within 20 days", the EU executive said in a document.

Spain and Portugal may therefore be fined by July 27, the last meeting of the European Commission before the summer break, an EU official told Reuters.

The two countries have been under EU's excessive deficit procedure since 2009 because of surging fiscal gaps following the 2007-08 global financial crisis. In line with the procedure, the Commission set annual targets to gradually reduce their fiscal gaps.

But in 2014 and 2015, Spain and Portugal missed the agreed objectives, maintaining deficits well above the 3pc limit.

Last year, Spain had a 5.1pc deficit, higher than the required 4.2pc. Portugal was required to cut its deficit to 2.5pc of GDP in 2015, but instead had a 4.4pc deficit. (Reuters)


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