Business World

Saturday 24 February 2018

Spain and Portugal face fines for missed budget targets

A pedestrian walks past the European Commission headquarters building in Brussels
A pedestrian walks past the European Commission headquarters building in Brussels

Francesco Guarascio

The European Commission has began formal disciplinary procedures against Spain and Portugal for breaches of new budget rules introduced after the financial crisis.

The Commission opened proceedings yesterday over excessive deficits in 2014 and 2015. Under toughened-up powers fines could be levied as soon as the end of the months on the two countries.

Both had deficits greater than the European Union's limit of 3pc of gross domestic product in the past two years and failed to correct the deficits quickly enough, the Commission said.

The two countries now risk fines and the suspension of EU funds if they cannot show the rules were breached because of "exceptional economic circumstances".

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)

Irish Independent

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