Daily Management Review

EU set aside sanctions against Spain and Portugal


05/18/2016


Spain and Portugal have received a reprieve from Brussels, despite the violation of EU fiscal rules. The European Commission has postponed a decision on the introduction of the first in the history fines for Eurozone countries that violated the limit of the budget deficit.



European Commission President Jean-Claude Juncker called for the decision to be taken after the parliamentary elections in Spain, scheduled for June 26. Both countries also have an additional year to bring their budget into line with EU rules.

Earlier, it was reported that the European Commission will hold a meeting to discuss measures against the Government of Spain, which is headed by Prime Minister Mariano Rajoy. Spanish authorities have violated the country's budget deficit limit for the fourth consecutive year.

European Commission is demonstrating flexibility in the excessive deficit, allowed by Madrid and Lisbon, at least within a certain timeline. This feature bears a risk of accusations that the organization puts politics above strict compliance with EU rules, writes the Financial Times.

As stated by the European Commissioner for Economic and Financial Affairs Pierre Moscovici, "now is not the right moment in economic and political terms" to decide on the introduction of measures in relation to Spain and Portugal for the admitted problems with the budget. "However, we will have to return to this issue at the beginning of July," - Moscovici said.

The Commission also made recommendations on economic policy for the European Union in 2016. The recommendations have legal force and are based on the right of Brussels to impose sanctions against Eurozone countries that got outside the specified limits.

Portugal came into view of the European Commission for the fact that the country cannot control the budget deficit. Last year it was 4.4%, which is 1.7 pp above the target.

Spain's deficit of the state budget amounted to 5.1% in 2015, while the European authorities demanded its decline to 4.2%. Probably, this year Spain will also not be able to reach the goal. The budget deficit target in 2016 - less than 3%.

Revised recommendations for the establishment of control over the budget deficit are expected to give Portugal and Spain a year to take action, rather than two years as they have requested. 

source: reuters.com






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