The European Parliament gave some leeway to Spain and Portugal on Thursday (6 October) before an expected suspension of EU funds takes place, as MEPs decided to continue their assessment by calling their finance ministers.
The Conference of Presidents, the European Parliament’s top political body, concluded that more information is needed before making a proposal to the European Commission on the suspension of the funds.
The Parliament requested entering into a structural dialogue with the executive after the Iberian economies breached the EU’s fiscal rules.
The leaders of the political groups decided, without debate, to ask the European Commission for further clarification of which programmes will be affected when a decision is finally made.
The legislature will also invite the finance ministers of Spain and Portugal to appear before a joint session of the Economic Affairs and Regional Development committees. MEPs will ask them about the national budgetary situation and what measures they plan on implementing to meet the new deficit targets set by the EU.
Sources explained that, ideally, both ministers would speak the same day, although the details of their appearances have yet to be finalized.
A European Parliament official explained that those who supported Commission Vice-President Jyrki Katainen’s hawkish view to immediately freeze the funds had “lost the battle”.
A broad majority of MEPs spoke out against freezing the funds during an exchange with Katainen, and Commissioner for Regional Policy Corina Crețu.
Spain and Portugal were found guilty of breaching the Stability and Growth Pact last July. Although the European Commission did not fine them, freezing structural funds was a “legal obligation”, Katainen told MEPs on 3 October.
The Commissioners insisted that EU money would not be affected if Madrid and Lisbon implement tax hikes and budget cuts, to meet the agreed deficit targets.
The extra time gained is badly needed in both countries. While Spain’s political parties are still struggling to form a new government, Portugal is reluctant to adopt further measures after it revised downwards its growth forecast for 2016.
A European Parliament official told EURACTIV that, right now, “the most important thing” is to control the timing to ensure that Spain and Portugal escape from the sanction procedure without any scratch.
Depending on the answers offered by the Commission, the Conference of Presidents left the door open to requesting a new hearing with the Commissioners.
According to executive’s internal documents, the decision on the freezing of EU funds could come by the middle of November. The Council would then adopt it, unless there is a majority against it.
In regards to the final amount of the suspension, Crețu explained that the Commission will “significantly” reduce the figure given the high level of unemployment in both countries.
In 2013, Spain received three extra years to cut its deficit below the mandatory 3% of GDP of the pact.
Despite the fact that this was the third time Madrid had been granted leeway since 2009, the deficit reached 5.1% of GDP in 2015, higher than previously announced.
The European Commission's latest forecast predicts that the Spanish deficit will be 3.9% of GDP this year and 3.1% in 2017.
In April, the executive and the ECB concluded that the needed progress on fiscal consolidation in Spain "has come to a halt, with part of the structural adjustment implemented in earlier years being reversed".
Following the elections on 4 October, a three-party coalition led by the Socialist Party came to power in Portugal. The new government failed to submit its draft budget for 2016 by 15 October, as the EU’s fiscal rules said, and sent the draft proposal only on 22 January 2016.
After assessing the first draft, the Commission concluded that the budget was “in clear breach of the Stability and Growth Pact”, and requested more measures.
Portugal has been in the corrective arm of the Stability and Growth Pact since December 2009 and was asked to bring the deficit to below 3% of GDP by 2015. For 2016, the Council recommended that Portugal should make a structural effort of 0.6% of GDP.
- 15 October: deadline for member states to submit their draft budgets for 2017.
- Mid-November: Commission expected to come up with an assessment of the draft budgets and the decision on the suspension of EU funds.
- 8 December: Spain and Portugal's deadline to submit the fiscal adjustments requested by the Council.