Spain and Portugal off the hook as EU defers penalties

THE European Commission has deferred disciplinary proceedings against Spain and Portugal over their failure to meet deficit targets until after the Spanish General Election on June 26, it was announced on Wednesday, May 18.

Spain is required to take measures worth more than €8 billion in order to reduce its debt below the 3 per cent of GDP target before 2017, despite Mariano Rajoy vowing to reduce taxes if he is re-elected as Spanish Prime Minister less than 24 hours earlier, on Tuesday May 17.

EU Economic Commissioner, Pierre Moscovici, said that the commission do not consider this an opportune moment economically or politically to follow through with the threat of sanctions, the first time that such embargoes would have been applied, with the Spanish election among the factors mentioned.

“We are proposing new deadlines for both countries to correct their excessive deficits,” he said. “We propose that each country receives one extra year, and one extra year only. The new deadline for Portugal will be 2016, and for Spain 2017.”

This is the fourth time that Spain’s deadline has been extended, although the country may still be in line for a fine in early July should the Commission consider it prudent, with the postponement representing one last political favour for Rajoy before the upcoming elections.

Spain ended 2015 with a fiscal shortfall equivalent to 5.1 per cent of GDP, failing to comply with EU targets for the umpteenth time since the recession began.