Spain
and Portugal to get more time on deficits, again
The
Commission plans to delegate the sanctions decision to EU
governments.
By FLORIAN EDER
7/4/16, 10:24 PM CET Updated 7/5/16, 6:07 AM CET
Not for the first
time, and probably not for the last, the European Commission will
delay punishing EU member countries for breaching its budget deficit
rules.
The Commission is
expected to announce, possibly as early as Tuesday, that both
Portugal and Spain have failed to take “effective action” to
tackle their deficits — but it will shy away from sanctioning them
for now, according to four EU officials familiar with the plans.
This split decision
is an attempt by the Commission to balance demands that the rules be
respected with its wish to avoid the ire not just of Spain and
Portugal, but also their backers in the European Parliament. The
Commission is expected to hand the final decision over to the member
countries’ finance ministers.
It’s an approach
the commissioners hope will address the complaint heard in Brussels
that EU ministers “want the Commission to be tough while they
themselves tend to show mercy on their colleagues,” said one source
familiar with the thinking of Commission President Jean-Claude
Juncker.
Both countries have
clearly violated EU rules that set the maximum threshold for budget
deficits at 3 percent of economic output: Spain’s deficit hit 5.1
percent last year, and Portugal’s 4.4 percent.
However, the
pressure on Juncker to avoid strife was clearly voiced in a letter
from Gianni Pittella, chairman of the socialist bloc in the European
Parliament, urging clemency for Portugal’s leftist government,
while remaining conspicuously silent about Spain, whose acting prime
minister is the conservative Mariano Rajoy.
“Now is not the
time to activate sanctions against Portugal,” Pittella said
Saturday.
A “triangle” of
commissioners is in charge of overseeing member countries’
compliance with EU fiscal rules — Juncker, his deputy Valdis
Dombrovskis, and the Economy Commissioner Pierre Moscovici.
“They’re all on
the same page on this,” said one EU official said.
Credibility at stake
What the Commission
plans to do is akin to making an omelette without breaking any eggs.
In effect, it is proposing to split the legal procedure that could
eventually lead to tough financial sanctions against the two
countries into its component steps.
Fines can be as much
as 0.2 percent of a country’s GDP, which in Spain’s case could
total up to €2 billion. Other punitive measures may include the
freezing of EU payment commitments from structural funds from the
year after the verdict.
The Commission is
far from imposing such punishments on either country, according to
sources.
Instead,
commissioners will issue a statement establishing that both
governments failed to take effective action against excessive
deficits by an early July deadline — but without proposing
sanctions.
The college of
commissioners is set to discuss the issue at their meeting in
Strasbourg on Tuesday, but one EU official familiar with the agenda
planning said they probably won’t make a decision the very same
day.
Once commissioners
decide, the ball would then be in the court of the EU finance
ministers, who would have to decide whether or not Portugal and Spain
have taken effective action against their deficits, perhaps as early
as their next meeting on July 12.
If the ministers
back the Commission’s recommendation, Lisbon and Madrid would have
10 days to explain why they weren’t able or willing to reduce their
deficits before the next step in the process kicks in. That would
entail the Commission recommending paths for them to remedy their
deficits, as well as fines which would be subject to ministers’
approval.
Delayed decisions
have been the norm in dealings with Spain and Portugal. On May 18,
the Commission avoided proposing financial sanctions against them,
postponing a final decision to early July — after the Brexit
referendum on June 23 and the repeat general elections in Spain on
June 26.
As a result, it also
backed off from fining Portugal since sanctioning a small country
while sparing a bigger one would have sent a toxic message.
A month and half
later, the situation is largely unchanged: Spanish political parties
are again in talks to form a coalition government after an
inconclusive vote.
But some of the EU’s
budget hardliners have run out of patience.
“When the decision
took place last time, [the commissioners] said punitive action should
take place and they should be tough” an EU official told POLITICO.
“I heard at the time that, in the name of credibility, they would
have to be.”
Bjarke Smith-Meyer
and Fiona Maxwell contributed to this article.
Authors:
Florian Eder
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