- Title: EU defers action on Spain, Portugal deficits
- Date: 18th May 2016
- Summary: BRUSSELS, BELGIUM (FILE) (REUTERS) EXTERIOR OF EU COMMISSION BUILDING
- Embargoed: 2nd June 2016 14:21
- Keywords: EU Moscovici Dombrovskis Spain Italy Portugal deficit reforms
- Location: BRUSSELS, BELGIUM
- City: BRUSSELS, BELGIUM
- Country: Belgium
- Topics: European Union,Government/Politics
- Reuters ID: LVA0014IC57BB
- Aspect Ratio: 16:9
- Story Text: The European Commission decided on Wednesday (May 18) to defer any disciplinary action against Spain and Portugal over their excessive budget deficits until after a Spanish general election on June 26, handing caretaker Prime Minister Mariano Rajoy a political favour.
The EU executive had been due to recommend whether to fine Madrid and Lisbon for their repeated breaches of the European Union's deficit limit of 3 percent of gross domestic product, the first time such a sanction would have been applied, even though it was likely to be purely symbolic.
Instead, the Commission told Spain and Portugal to take further action to reduce their deficits this year and next, and said it would review both countries' position in early July.
EU Economics Commissioner Pierre Moscovici told a news conference that the Commission did not consider this was the right moment economically or politically to take a further step, citing the Spanish election among the factors.
"We are therefore today proposing new deadlines for both countries to correct their excessive deficits while delivering a structural effort that is demanding, but that we believe realistic. We propose that each country receive one extra year and one extra year only, which means that efforts must be led in a strong way and at a strong pace, so that the new deadline for Portugal will be 2016 and for Spain, 2017," Moscovici said.
Rajoy vowed to cut taxes further if he is re-elected in an interview with the Financial Times published on Wednesday, raising the prospect of further clashes with Brussels over Madrid's chronic fiscal shortfall.
Commission Vice-President Valdis Dombrovskis said in response that it was up to Spain to take its own tax decisions, as long as it respected the fiscal targets set by the EU, which require Madrid to reduce its deficit by an additional 0.25 percent of GDP this year and 0.5 percent next year.
"As long as Spain sticks with those fiscal targets, it's for Spain to take its own fiscal and tax policy decisions," Dombrovskis said.
The debate is typical of tensions between the Brussels authorities responsible for maintaining budget discipline and coordination that is supposed to underpin the common euro currency and national governments facing electoral pressures.
The Commission also said that Italy, Belgium and Finland were complying with the EU's budget rules on government debt levels, but that it would review its assessment of Italy in November, singling Rome out for closer vigilance.
"It goes without saying, we will carefully review the Italian budget plan that we will receive in October. At this time and at this stage, we will conduct a new analysis based on Article 126(3) (of the Lisbon Treaty) of conformity of this country with debt rules. Therefore we will be vigilant. We maintain it through this deadline clause this Autumn, even if I positively acknowledge the letter we received from (Italian Economy Minister) Pier Carlo Padoan, following observations that we made to him together," Moscovici told reporters.
Italy said on Tuesday it had been granted the maximum flexibility by the Commission under the EU budget rules, allowing it to discount the equivalent of 0.85 percent of GDP for spending on refugees, labour market reforms and investment.
France, the second biggest economy in the euro zone, has failed to meet the EU's deficit target and was last year given until next year to get its budget in order. - Copyright Holder: FILE REUTERS (CAN SELL)
- Copyright Notice: (c) Copyright Thomson Reuters 2016. Open For Restrictions - http://about.reuters.com/fulllegal.asp
- Usage Terms/Restrictions: None