Com­mis­sion to slap Spain and Por­tu­gal with fines

Financial Mirror (Cyprus) - - FRONT PAGE -

The EU threat­ened Spain and Por­tu­gal on Tues­day with huge fines for fail­ing to fix years of high deficits, the first time Brus­sels has wielded its dis­ci­plinary pow­ers over mem­ber states’ bud­gets.

Madrid and Lis­bon said the ac­cu­sa­tions were un­fair but vowed to do what­ever was nec­es­sary to win le­niency from penal­ties that could be up to 0.2% of their eco­nomic out­put, ac­cord­ing to EurAc­tiv.com.

Eu­ro­zone fi­nance min­is­ters “found that Por­tu­gal and Spain had not taken ef­fec­tive ac­tion in re­sponse to its rec­om­men­da­tions on mea­sures to cor­rect their ex­ces­sive deficits”, a state­ment said.

The de­ci­sion “will trig­ger sanc­tions un­der the ex­ces­sive deficit pro­ce­dure”, it added. Spain and Por­tu­gal have ten days to lobby the EU to im­pose no penalty and both coun­tries said they in­tended to do so.

“It would be a huge para­dox if the Euro­pean econ­omy … which is grow­ing the most and creat­ing the most jobs … were to be fined,” said Spain’s act­ing Econ­omy Min­is­ter Luis de Guin­dos.

Por­tuguese Prime Min­is­ter An­to­nio Costa said any fine would be “un­jus­ti­fied and coun­ter­pro­duc­tive” and slammed the whole process as “a con­tra­dic­tion”. The EC will con­sider their ar­gu­ments and must de­cide on sanc­tions within 20 days.

Ex­pec­ta­tions are high that the coun­tries will in fact get away with­out a fine, but they will likely see EU aid sus­pended un­til fresh re­forms are de­liv­ered.

Ger­many’s Fi­nance Min­is­ter Wolf­gang Schauble urged the Com­mis­sion to “pro­pose the com­plete or par­tial sus­pen­sion of struc­tural aid for pro­jects in 2017” in the two coun­tries.

Un­der EU rules, the com­mis­sion could also im­pose fines of up to 0.2% of GDP – but to date it has not dared to use its full power against eu­ro­zone over­spend­ing. Spain faces a fine of up to EUR 2.2 bil­lion, while Por­tu­gal is on the hook for EUR 360 mil­lion, based on GDP data for 2015. The min­is­ters launched the process de­spite fears that too much aus­ter­ity by Brus­sels will fur­ther fuel anti-EU pop­ulism af­ter the Brexit vote.

Trig­ger­ing the sanc­tions process

has been the long de­sire of Ger­many, which was in­stru­men­tal in giv­ing Brus­sels the new pow­ers to crack­down on over­spenders in the eu­ro­zone. But the is­sue is es­pe­cially sen­si­tive for France, which is widely ex­pected to miss its prom­ise to bring its deficit back un­der un­der the 3.0% next year.

Hit hard by the eu­ro­zone debt cri­sis, Spain and Por­tu­gal have been un­der the EU’s ex­ces­sive deficit pro­ce­dure since 2009 be­cause of re­cur­rent fis­cal holes.

Bailed-out Por­tu­gal, long con­sid­ered a star re­former, sharply cut its bud­get deficit from close to 10% of GDP in 2010 to 4.4% last year, but that still over­shoots tar­gets. Spain, while avoid­ing a eu­ro­zone bailout, suf­fered through six years of re­ces­sion. In

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