Spain
and Portugal could face EU sanctions over national budgets
European
Commission may sanction countries for failing to meet EU budget
rules.
By ZOYA SHEFTALOVICH
5/18/16, 8:35 AM CET Updated 5/18/16, 8:37 AM CET
The European
Commission will decide Wednesday whether to issue fines to Spain and
Portugal for exceeding the EU’s budget deficit limit of 3 percent
of GDP.
The college of
commissioners may impose fines, which can be set at a maximum of 0.2
percent of GDP, delay its decision, or give the countries more time
to meet targets.
At last week’s
college meeting, a majority of commissioners “agreed that both
countries are candidates for stepping up the procedures,” a source
in the room told POLITICO.
The EU has never
used its power to sanction countries for breaching deficit rules
since the creation of the eurozone, but Spain and Portugal have
repeatedly failed to follow rules.
Spain in particular
has a tough case to answer, with a headline deficit of 5.1 percent of
GDP in 2015. While the country had managed to cut the deficit from
5.9 percent in 2014, it was still above its forecast and exceeded the
4.2 percent target set by the EU. In addition, during the country’s
election campaign, several parties advocated doing less to try to
reach EU targets.
Spain’s caretaker
Prime Minister Mariano Rajoy may have made things worse Tuesday,
telling the Financial Times in an interview he would cut taxes if
elected next month.
Kristalina
Georgieva, European commissioner for budget and human resources,
reminds the European Parliament to be mindful of the targets.
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“If tax revenues
continue to rise, as they are doing now, we can plan another tax
cut,” Rajoy said. “We lowered the deficit by 4.3 percentage
points in four years, even though we spent two years in
recession … No one can say Spain is not willing to comply with
the rules of the game and do things well.”
António Costa, the
new Portuguese prime minister, argued last week his country shouldn’t
be sanctioned. He said the EU had praised the previous government for
austerity, and the new government could not be blamed for any fiscal
gap its predecessor failed to fill.
The college of
commissioners will also consider fining Italy, but the country is
likely to be spared because it has taken steps to improve its budget
deficit. The Commission is ready to grant Italy an “unprecedented
amount of flexibility,” according to a letter sent by
Vice-President Valdis Dombrovskis and Commissioner Pierre Moscovici
to Italy’s Finance Minister Pier Carlo Padoan on Monday.
“It is our
intention in principle … to recommend to the college to grant the
full 0.5 percent available under the structural reform clause, 0.25
percent under the investment clause, 0.04 percent for the increase in
costs this year related to migrant inflows and 0.06 percent for
exceptional costs directly related to the security situation,”
Moscovici and Dombrovskis wrote, adding: “This amounts to 0.85
percent of GDP.” In exchange, they asked for “a clear and
credible commitment” that Italy will respect the rules in 2017.
The Commission has
previously considered issuing fines to countries that fail to meet EU
targets, but has pulled back. Last year, France looked likely to be
penalized for missing the deficit target but was given more time to
meet the EU budgetary requirement.
Authors:
Zoya Sheftalovich
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