• EU commission chief said deficit-penalty decision should wait
  • Spain’s acting prime minister from Juncker’s political family

European Commission President Jean-Claude Juncker persuaded his fellow commissioners to hold off sanctioning Spain for missing its budget targets, handing a boost to Acting Prime Minister Mariano Rajoy as he makes economic competence the centerpiece of his campaign for re-election.

Juncker, who comes from the same center-right political family as Rajoy, convinced the 28-strong commission to postpone the decision on Wednesday against the wishes of several of his colleagues, according to two people familiar with the matter. While the group ultimately fell into line behind their president, the officials responsible for budget policy, Economic Affairs Commissioner Pierre Moscovici and Vice President Valdis Dombrovskis, argued Spain hasn’t done enough to escape punitive action, the people said.

Moscovici told reporters afterward it was “not the right moment economically or politically” to punish Spain, which is gearing up for its second election in six months on June 26. The commission said it will revisit the question of sanctions in early July. European Commission spokeswoman Annika Breidthardt declined to comment, saying the weekly meetings of commissioners are confidential.

Rajoy has missed his EU-agreed deficit target in each of the four years he’s been in power and the commission’s own economic staff had recommended sanctions. Yet Juncker pulled rank to head off calls to discipline Spain, the people said, allowing Rajoy to face his political rivals without the embarrassment of an EU fine hanging over him. This week the Spanish leader pledged further tax cuts if he can put together a new government after the election.

Potential Fine

“I am convinced there won’t be a fine,” Acting Economy Minister Luis de Guindos told reporters in Barcelona after the commission’s announcement.

When Spain entered the EU’s Excessive Deficit Procedure in 2009 it was given until the end of 2012 to bring its shortfall below the 3 percent limit. Despite giving extensions on that time frame in December 2009, then 2012 and 2013, the commission is still waiting for Spain to meet its commitment. On Wednesday, it gave Rajoy an additional year.

Countries that take insufficient action to control their deficits face sanctions that include a fine of as much as 0.2 percent of gross domestic product, the withholding of EU funds and the imposition of troika-style inspectors to scrutinize national officials.

While there was no legal reason why the commission had to make a decision this week, the decision was slated for Wednesday to coincide with the publication of economic reports of all 28 EU nations.

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