The European Commission will make a final decision next Tuesday (5 July) on whether to launch sanction procedures against Spain and Portugal for breaching EU fiscal rules, officials told euractiv.com.
Britain’s shock decision to leave the EU in a referendum last week has not altered the Commission’s plans to sanction both countries, EU officials said.
The numbers simply don’t add up for Spain and Portugal, the officials commented.
The executive prepared a negative verdict on the Spanish and Portuguese budgets and was ready to recommend sanctions on 18 May, the sources added.
According to the Juncker Commission, Madrid and Lisbon did not take “effective action” to cut their deficit below 3% of GDP on time.
If the Council backed this assessment, both countries will be imposed fines of up to 0.2% of their GDP and see part of their EU funding blocked. The Council of the European Union is the institution representing the 28 EU member states.
Spain and Portugal narrowly avoided sanctions in May this year when the Commission decided at the last minute to postpone its decision. The executive did not want to trigger sanctions for the first time, only weeks before the Spanish general elections and the UK referendum on EU membership.
“We have concluded that this is not the right moment economically or politically to take this step,” European Economic Affairs Commissioner Pierre Moscovici told reporters at the time.
Moscovici insisted that the postponement did not imply that the Commission would neglect its obligations in regards to the Stability and Growth Pact, the EU’s fiscal rules.
As part of its decision, the executive also decided to grant both countries one extra year to balance their public accounts, raising eyebrows among some EU member states who questioned the procedural step used by the College of Commissioners to give more leeway to Madrid and Lisbon.
The Council’s legal service said the European Commission could not alter the time frame to meet fiscal targets by setting new dates for the country-specific recommendations package, a procedure mainly for structural reforms.
Despite the negative assessment on Spain and Portugal, the executive’s ultimate decision regarding sanctions is hard to predict.
Commission indecisiveness could be fuelled by the current political and economic context, which is highly volatile after Britain’s decision to leave the EU last week.
“You never know with this Commission,” an official commented speaking on condition of anonymity.
Meanwhile, Prime Minister Mariano Rajoy, underlined the efforts made by his government to cut the Spanish budget deficit from 9 to 5% of GDP between 2011-2015.
“I hope things will be done in a reasonable way,” Rajoy told reporters after an EU summit this week where leaders discussed Europe’s future direction after the Brexit vote.
Italian Prime Minister Matteo Renzi also opposed sanctioning the two economies given the tense political and economic situation.
“It’s absurd not to use common sense,” Renzi said after the European summit, held in Brussels on 28-29 June.
According to El País daily, a majority of EU leaders are against sanctioning both countries.
However, German Finance Minister Wolfgang Schäuble and Eurogroup President Jeroen Dijsselbloem, underlined the importance of a strict application of EU fiscal rules in order to ensure their credibility.
EU finance ministers will have the final word on the Commission’s recommendation when they discuss the executive’s proposal on 12 July. If they back the negative opinion, the executive would have 20 days to decide on the size of the fine, which could potentially amount to more than €2 billion for Spain (0.2% of GDP).
However, EU sources did not expect that the executive would impose the maximum fine and will instead opt for a symbolic amount.