EU waives fines against Spain and Portugal

Two countries run high deficits and would have had fines of up to 0.2% against them

The European Commission yesterday backed away from slapping fines on Spain and Portugal for running high deficits, in what would have been a landmark move by the EU to impose tough budget rules.

Under bloc regulations, the EU executive could have imposed fines of up to 0.2 per cent of national gross domestic product (GDP) against Madrid and Lisbon — but instead showed clemency amid growing anti-Brussels sentiment highlighted by Britain’s Brexit vote. “Sanctions, even symbolic ones, would not have been understood by the public,” the EU’s economic affairs commissioner, Pierre Moscovici, said at a news briefing.

“It is not the best approach at a time when doubts are widespread in Europe,” he added. The EU has to date not dared to use its full powers against Eurozone overspending for fear of triggering a populist backlash and given the opposition of chronic overspenders such as France and Italy.

Triggering the sanctions process has been the long desire of Germany, which was instrumental in giving Brussels the new powers to enforce strict budget discipline.

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 per cent of annual economic output in 2010 to 4.4 per cent last year, but that still overshoots the EU’s 3.0 per cent target.

EU’s economic affairs commissioner