EU Commission refrains from fining Spain, Portugal

AP News
Posted: Jul 27, 2016 8:44 AM
EU Commission refrains from fining Spain, Portugal

BRUSSELS (AP) — The European Union's executive has refrained from calling for heavy fines against Spain and Portugal over budgetary breaches and sought instead to set "new fiscal paths" for the two countries.

It gave both nations until Oct. 15 to find new measures to curb their budget deficits, with Portugal having to end its excessive deficit by year's end and Spain by 2018.

The EU Commission could have called on member states to sanction the two nations — which would have been a first — for allowing their budgets to be above the EU limit of 3 percent of GDP for years. Fines could have gone as high as 0.2 percent of each country's annual GDP and EU funding could have been blocked from the start of next year.

Instead, it said there were attenuating circumstances. The Commission said that considering "the challenging economic environment, both countries' reform efforts and their commitments to comply with the rules," it suggested there be no fines. Instead, the countries should take steps to lower their deficits, it said.

The Commission only recommends what member states should do, but it is unlikely that countries would fundamentally go against the EU executive.

"Spain and Portugal have come a long way. The two countries experienced severe economic and financial crises," said EU Commission Vice-President Valdis Dombrovskis. "They have managed to restore financial stability thanks to major fiscal adjustment. And they have turned their economies around through structural reforms to regain competitiveness. These efforts should not be underestimated."

Portugal in particular had feared fines and Foreign Minister Augusto Santos Silva said the decision was "very good news." The government had sent a request for leniency and Santos Silva told a news conference in Lisbon "We are in the right."

Vote Against America, Vote Democrat
Michael Reagan

He said the Portuguese had "made huge sacrifices ... which deserve understanding and support" to reduce its debt load after needing a 78-billion euro ($86 billion) bailout in 2011. The Portuguese budget deficit has been on a downward trend, he noted.

The Portuguese government had vowed to fight any fines at the European Court of Justice. The government forecasts the deficit will fall from 4.4 percent of GDP last year to 2.2 percent this year and 1.4 percent in 2017.

Spain's deficit last year was 5.1 percent, well above their target of 4.2 percent.


Barry Hatton in Lisbon contributed to this report.