Photographer: Oli Scarff/Getty Images

EU May State Spain, Portugal Sanctions Over Budgets Thursday

  • Both countries said to face EU action due to public spending
  • Decision was postponed in mid-May as Spain faced elections

Spain and Portugal are facing the prospect of sanctions by the European Commission after repeatedly failing to rein in public spending.

European Union officials have concluded that neither government took effective action to adhere to EU budget-deficit rules, according to one person familiar with the discussions. An announcement may be made on Thursday, the person said.

Pierre Moscovici
Pierre Moscovici
Photographer: Jasper Juinen/Bloomberg

The commission, the EU’s executive arm, will adopt the “necessary” measures very soon, EU Economic Affairs Commissioner Pierre Moscovici told reporters in Strasbourg Tuesday. “These rules are intelligent and demand to be applied in an intelligent way,’’ he said.

Market News International, which reported the commission action earlier, said that Moscovici and EU Commission Vice President Valdis Dombrovskis would announce the decision on Thursday and recommend that sanctions be applied.

“It’s a difficult decision for the Commission,” said Vincenzo Scarpetta, a
policy analyst at the Open Europe research group in London. “It’s got to strike a balance between ensuring rules are seen as credible and enforced without
creating political turbulence and hurting growth. Not fining Spain would not go
down well in countries like Germany, but usually politics end up trumping
rules.”

‘Total Opposition’

“The government’s position is of total opposition to sanctions,” Finance Minister Mario Centeno told a parliamentary commission in Lisbon on Wednesday. The ministry earlier reiterated that it remains committed to its targets.

A spokeswoman for the Spanish Economy Ministry in Madrid declined to comment, while a spokeswoman for the Commission referred to Moscovici’s earlier statement.

After missing last year’s deficit-reduction goal by almost one percentage point, officials in Madrid secured an extra year from the commission to bring down the deficit below 3 percent. Acting Economy Minister Luis De Guindos said in May that the deficit should come in at 3.6 percent of output before falling to 2.9 percent next year.

Asked about a potential sanction, De Guindos said then that while the commission has the “legal right” to fine the nation under EU budget rules, he was convinced that officials in Brussels wouldn’t go ahead with sanctions and Spain would ultimately avoid a fine.

The commission had been due to announce a decision in mid-May, but postponed its announcement. Moscovici told reporters at the time that it was “not the right moment economically or politically” to punish Spain, which was about to hold its second election in six months.

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