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the finance ministers of the European Union (EU) found, Tuesday, July 12, that Spain and Portugal n ‘ have not fulfilled their commitments under the stability and growth Pact. The European Commission had already made this statement Thursday, July 7, recalling that in 2015, Madrid recorded a deficit of 5.1% of gross domestic product (GDP), well above the 4.2% expected by Brussels. Lisbon and posted 4.4% deficit instead of 2.7% forecast
The lighting. The European Commission said Spain and Portugal budget deficit excessive
This finding of the ‘Ecofin’ opens up a sanctions procedure in sensitive political contexts for the two countries targeted. Spain still has no stable government after the parliamentary elections on 26 June. The Prime Minister, Mariano Rajoy, whose party (Conservative) won, is still unable to form a coalition. In Portugal, a leftist coalition installed since early 2016 refused to “pay” for the recapitalization of one large bank, Banif Financial Group S.A. (Banif), explaining a large part of the deficit. A decision by the previous government.
“We do not speak of sanctions”
The subject is delicate and several leaders, including French Finance Minister Michel fir, European Commissioner for economic, Pierre Moscovici, or the president of the Eurogroup, Jeroen Dijsselbloem, took care to repeat, since 11 July: “Today we do not talk of sanctions “, probably to defuse the emotional charge associated with this procedure. In fact, this is the first time since the stability and growth pact was revised, after the financial crisis, as countries are in this politically uncomfortable situation.
It is more difficult to justify that Spain and Portugal have suffered from the crisis, they have experienced harsh austerity years and the unemployment rate in Spain was still 19.8% of the labor force in May ( latest Eurostat data available). From the observation of Ministers, the Commission has twenty days to write a “recommendation” of sanctions, ranging from 0% to 0.2% of GDP of the countries concerned.
the penalties must be validated by the ministers. If they want to oppose the recommendations of the Commission, they must bring it to a reversed qualified majority.
Meanwhile, Madrid and Lisbon have ten days after the conclusion of the budgetary slippage to justify the and expect leniency from Brussels.
“It is unjustified and against-productive to apply any sanctions in Portugal” , reacted on Tuesday the Portuguese Prime Minister, António Costa . “This whole process is a contradiction” , said the head of the socialist government, ensuring that Portugal would bring this year’s public deficit below 3% of GDP “without resorting to a plan B or exceptional measures “ of fiscal consolidation.
Meanwhile, the Spanish Minister of the economy, Luis de Guindos, announced that Madrid would propose ” a measure on corporate tax (…) a powerful measure “, which will bring € 6 billion, in 2017 to reduce its deficit below 3% GDP and avoid a penalty.
No way to punish too
last week already, Mr. Moscovici confirmed that “sanctions equal to zero [were] nt a possibility “. “We must take into account the efforts made by both countries, also stated Valdis Dombrovskis, Vice-President of the Commission. They will have the opportunity to respond to demand a reduction or even a zero setting fines. “
The finance ministers appear on the same line: no question of not respecting the rules of the pact. But no question of punishing too. The conservative central bankers – the German Wolfgang Schäuble in mind – tend to excuse the Spanish Government. The Social Democrats line up behind Lisbon. “Portugal does not deserve it applies an excessive discipline,” said Mr Sapin.
Evidence that is little controversy over the likely low level of sanctions: the ministers should approve by written procedure, without debate, in the heart of summer
Read also:. deficits: towards EU symbolic sanctions for Spain and Portugal
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