Not Even A Symbolic Fine for Spanish Deficit

moscoviciPierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs.

The EU Comission has decided not to fine Spain and Portugal for its deviation in the public deficit in 2015. Both countries, which have been traditional fiscal sinners since the crisis began, did not take effective actions last year to reduce their deficit targets as agreed with Brussels. Although symbolic, Brussels could have imposed fines of up to 0.2 percent of GDP on Madrid and Lisbon, around 2.1 billion euros in the case of Spain.

Despite the fact that the decision could be interpreted as a show of sympathy towards Spain’s still recovering economy, it underlies growing fears of anti-Brussels sentiment after the UK’s Brexit vote.

“Sanctions, even symbolic ones, would not have been understood by the public,” Economic Affairs Commissioner Pierre Moscovici admitted on Wednesday.

The EC’s decision not to fine Spain and Portugal could diminish the credibility of budgetary common rules, given that they were already badly affected when the Commission did not fine France last year for its repeated abuse of the Pact.

Instead of fines, Brussels still could suspend the payment of EU structural funds to both countries next year. The money can be unfrozen quickly once, for example, the two countries adopt 2017 budgets which show they intend to meet their commitments under EU rules.

Spain’s caretaker Prime Minister Rajoy tweeted after the EC decision: “Satisfied with the decision of the European Commission. Fiscal consolidation, growth and employment are priorities for Spain.”

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.