Monday

19th Nov 2018

EU faces dilemma on Portuguese and Spanish deficits

  • Madrid: In May, Spain was given one more year to reduce its deficit, but it is still waiting for a government (Photo: cuellar)

The European Commission will give its verdict on Spain and Portugal's efforts to reduce their deficits on Tuesday (5 July).

Amid post-Brexit debates on EU powers over member states, it is expected to spare both countries even if it says they have not done enough.

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  • Lisbon: symbolic fine of €0? (Photo: Raphael Chekroun)

An EU source on Sunday told the Reuters press agency that Spain and Portugal would get a three-week delay to take "effective action" to reduce their deficit.

Other sources had earlier told the Wall Street Journal that the college of commissioners would open a procedure against the two countries but that it would propose to impose a symbolic fine of zero euro.

In May, both countries were given one more year to reduce their deficits to below 3 percent and until July to announce measures. That equated to a deadline of the end of 2017 for Spain and the end of 2016 for Portugal.

In 2015, the Spanish deficit was 5.1 percent of GDP while Portugal's was 4.4 percent.

Likewise, Portugal last year posted a fiscal gap of 4.4 percent of GDP, despite having previously agreed to bring it below 3 percent.

The main reason for that decision was the Spanish general election on 26 June. A new three-week delay would likely be explained by the fact that no government has been formed yet.

The question whether to impose sanctions on Spain and Portugal is divisive among officials in the EU.


On Sunday, the German commissioner, Guenther Oettinger, said that the EU "must decide sanctions on Spain and Portugal" and that any other decision could "not be explained to people".

In recent days, German finance minister Wolfgang Schaeuble and Bundesbank president Jens Weidmann also said that the British vote to leave the EU should not be used to ease the EU's fiscal rules.

'Common sense'

Speaking to journalists in Bratislava on Thursday, Slovak finance minister Petr Kazimir said that the EU "cannot have double standards - that would be shooting ourselves in the foot”.

He also said that the EU needed to distinguish "recklessness" from situations where countries need some time to improve the situation, however.

After Slovakia took over the six-month EU presidency on Friday, Kazimir is to chair the meetings of finance ministers that would have to approve the commission's proposal on Spain and Portugal.

Italian prime minister Matteo Renzi last week said he opposed sanctions and that it would be "absurd not to use common sense".

According to Spanish media, most EU leaders at a summit last week said there should be no sanctions in order not to destabilise Spain and Portugal after Brexit.

Brexit nerves help traditional Spanish parties

Center-right PP of prime minister Rajoy and center-left PSOE came out first in Sunday's general election but failed to win majority. Anti-austerity Podemos lost 1 million votes.

Analysis

How Portugal's leftist 'contraption' works

After six months in power, the improvised left-wing coalition between socialists, leftists and communists has managed to rule and even thrived, to many Portuguese's surprise.

EU delays decision on Spain and Portugal debt

The college of commissioners had a "first discussion" on whether to start a deficit procedure against Madrid and Lisbon. It said it will take a decision "very soon".

EU 'finance ministry' pardons Italy and Spain

Italy, Portugal, and Spain are unlikely to face sanctions for breaking EU budget rules, the European Commission has said, in what it described as a “political” decision by a kind of “common finance ministry”.

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