EU refrains from immediate fine against Spain over budget

AP News
Posted: May 18, 2016 8:20 AM

BRUSSELS (AP) — The European Union refrained Wednesday from imposing immediate fines on Spain and others despite their failure to meet budget targets, opting instead to give them additional leeway to get back on track.

The EU's executive had been expected to impose sanctions on Spain for not meeting EU-prescribed limits for a fourth year running. Action against Portugal had also been expected.

Instead, the European Commission said it "will come back to the situation" in July.

The EU wants countries to keep their budget deficits below 3 percent of their annual GDP and has sets targets for those not meeting the limit on how to get there. One of the reasons behind Europe's sprawling debt crisis of the past few years is that the limits were often ignored.

Though countries can be fined up to 0.2 percent of their GDP if they fail to implement measures to meet the limits, no country has yet been fined.

"This is not the right moment, economically or politically, to take that step," said EU Financial Affairs Commissioner Pierre Moscovici.

The decision to postpone judgment could be convenient for Spain's caretaker prime minister, Mariano Rajoy, ahead of June 26's general election. Even after skirting deficit limits for years, Rajoy has said he still plans to implement tax cuts, raising the specter of more clashes with the EU on deficit reduction.

Deferring any sanctions is set to fuel accusations that the EU Commission has no teeth when it comes to enforcing strict economic rules.

Moscovici insisted though, that despite the delay, the Commission was "resolved to have rules respected."

Justifying the postponement until July, he noted that Portugal and Spain are "two countries that have got through tough crises — unemployment rates are very high still."

Both, he added, have "made significant efforts to reform."

The Commission also gave Italy some leeway after encouraging economic statistics and commitments from Prime Minister Matteo Renzi to bring the budget back in line. It said it will have a new report on Italy by November.

Overall, the average deficit in the eurozone is to fall to 1.9 percent of GDP, down from 6.1 percent in 2010 during the height of the economic crisis.