Sanction procedure on Spain and Portugal within days

Commissioner Moscovici stressed that the Commission acts within the Stability and Growth Pact, but defended an "intelligent" use of the fiscal rules. [EUROPEAN COMMISSION]

The European Commission has postponed again triggering unprecedented sanction procedures against Spain and Portugal for breaching the EU’s fiscal rules, but will formally adopt the decision by 8 July, EU sources told today (July 5)

The College of commissioners today discussed the budgetary situation of the two Iberian economies.

According to EU officials, it was an “unemotional” exchange of views on how Madrid and Lisbon failed to meet their targets to cut the deficit below the 3% of GDP threshold included in the Stability and Growth Pact.

Spain and Portugal braced for EU deficit verdict on 12 July

The Slovak presidency of the EU expects the European Commission to recommend sanctions against Spain and Portugal for breaching EU budget deficit rules this week, in time for a decision at the upcoming Ecofin meeting of finance ministers on 12 July.

But the College has dragged its feet on formally adopting a negative verdict on the efforts made by both countries to bring their budgets in line with the EU fiscal rules.

During an orientation debate in early May, commissioners already “broadly” agreed on the lack of effective action taken by both countries to meet their deficit targets.

Commission to recommend sanctions against Spain and Portugal

EXCLUSIVE / The European Commission will launch a sanctions procedure against Spain and Portugal or the first time, as the college concluded on Tuesday (10 May) that the two countries have not made “sufficient effort” to cut their deficits, has learned.

Following the discussion today, officials explained that the executive will prepare the recommendation which will trigger the sanction procedure by the end of the second week of July (8 July).

This would be the first time that the EU sanctions a member state for breaching its spending rules.

One of the most likely options was an adoption by written procedure on Thursday (7 July). In that case, there would be enough time to conclude the preparatory work required for the EU Finance Ministers’ meeting on 12 July, as the Ecofin Council must endorse the executive’s sanction recommendation.

“We will adopt the necessary decision very soon”, commissioner for Economic Affairs, Pierre Moscovici, told reporters after the College meeting on Tuesday (5 July).

“We will communicate all the details of the decision at that stage, when the decision is taken, not before”, he said just before leaving the room without taking any questions.

But the French Commissioner did take the opportunity to defend how the Commission is applying the Stability and Growth Pact, amid the criticism coming from some capitals.

“We have acted, we are acting and we will act within the rules of the pact”, he said while he added that it the Commission’s job to ensure the “credibility” of the rules.

But he warned that the fiscal rules “are intelligent” and are applied “intelligently”.

The flexible application of the fiscal rules of Jean-Claude Juncker’s Commission has been criticised by Germany and the Netherlands.

Dijsselbloem berates Juncker for failing to apply EU pacts

Eurogroup President Jeroen Dijsselbloem has criticised European Commission President Jean-Claude Juncker for saying that the European Commission has given France leeway on fiscal rules “because it is France”.

The executive’s use of the pact has been also questioned by the Council’s legal service.

The College decided to postpone the opinion on Spain and Portugal’s deficits in mid-May when the negative recommendation was expected as part of the EU’s economic governance cycle (the European Semester).

The postponement raised eyebrows among the governments backing a strict application of the rules and Council’s lawyers.

This time around, the Commission had a “rules-based discussion” on Tuesday, officials told this website. Even more, commissioners kept the Stability and Growth Pact on the table during the college meeting.

Once the Ecofin Council endorses the Commission’s recommendation, the college will have to propose the Finance ministers within 20 days how to punish Spain and Portugal.

The fine could amount to 0.2% of GDP (more than € 2billion in the case of Spain) and the freeze of part of the EU funds.

  • 12 July: Ecofin Council

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