Spain and Portugal at risk of EU sanctions over national budgets

Both countries’ deficits have repeatedly exceeded the bloc’s limit of 3 percent of GDP.

The European Commission is mulling possible fines for Spain and Portugal for failing to meet EU national budgetary targets.

One source from within the room in Tuesday’s college of commissioners’ meeting in Strasbourg confirmed to POLITICO on Wednesday that there was a debate but said no decisions were taken.

There was, however, “a majority that agreed that both countries are candidates for stepping up the procedures,” the source said, adding that “it’s clear that Spain and Portugal are in trouble” for exceeding the EU’s budget deficit limit of 3 percent of GDP.

“For too long, the Commission has refrained from sanctioning [countries], although the Stability and Growth Pact has clearly been violated,” said MEP Markus Ferber of the European People’s Party. “That has harmed the pact’s credibility. Now, the Commission has to withstand all lobbying attempts by Madrid and Lisbon and make full use of its toolbox.”

Reuters and Euractiv also reported on the possibility of sanctions against the two countries. But it’s not certain if the Commission will ultimately take such action.

Last year, for example, France looked likely to be penalized for missing the deficit target but was given more time to meet the EU budgetary requirement.

EU member countries can be fined up to 0.2 percent of GDP. In 2011, the EU decided to crack down on delinquent countries by making sanctions decisions less politically driven. And after dealing with an overdrawn crisis over Greece, the Commission is much more attuned to the integrity of the oversight regimen that it manages.

The Commission, however, retains political discretion on this matter. And the fact that Spain and Portugal are among the most pro-EU countries will likely work in their favor at a time when the bloc must contend with much more urgent issues such as Brexit and the migrant crisis.

Still, the Commission may find it hard to overlook the fact that the two countries missed the target by a long way. Spain’s deficit last year was 5.1 percent of GDP instead of the 4.2 percent the EU finance ministers had required. Portugal also missed the EU target last year with a deficit of 4.4 percent.

On May 18, the Commission is expected to present analysis on every EU country’s budgetary situation, which will be the basis for a decision on possible sanctions.

Both Spain and Portugal had been arguing over the past months for the Commission to grant extra time to comply with the budgetary rules.

Spain, for instance, will hold another election on June 26 after no party succeeded in forming a government following the previous national election in December.

Matthew Karnitschnig contributed to this report.

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