Hahn said: "This will always be implemented proportionately, especially in countries where certain regions have a great deal of independence and autonomy through their constitution".
"It's not necessarily the case that all programmes will fully come under the penalties or sanctions," he added.
The comments were made at the opening session of the EU's 'Open Days' in the European Parliament. Hahn was grilled by numerous regional representatives who questioned whether regional and local authorities should be held responsible for the alleged misbehaviour of national governments.
Liverpool City Councillor Flo Clucas said: "If we want to have macroeconomic conditionality and we're not involving regions in the design of programmes as we should … then that I think will create problems."
"With this [proposal] unfortunately I think what we're seeing is the stick and not the carrot," she added.
A 'sword of Damocles'
Hahn faced criticism from numerous other regional and local officials for his broader sanctions proposal.
Michel Delebarre, mayor of Dunkirk, went so far as to say that the Commission was "placing a sort of sword of Damocles over the regions by threatening to suspend structural funds for local authorities of member states not respecting the Stability Pact."
Danuta Hübner, a Polish European People's Party MEP and chair of the European Parliament's Committee on Regional Development which will have to approve the proposal, said: "I have always been against this approach and I continue to be."
The controversy goes to the heart of whether Brussels can assert more influence over member states' budgetary policies.
Hahn defended his proposal saying that in the context of the sovereign debt crisis "at European level there has been a call on the Commission to take action, and react, and if necessary introduce penalties and sanctions because we have been told that we are 'all bark and no bite'."
Hahn stated this was part of the Commission's efforts to increase its control over excessive deficits in all EU countries, including non-euro members.
"The basic idea was to have an opportunity … so that we would have something similar to what we have in the eurozone which would apply to all states," he said.