Penalties due: Eurozone mulls fines for Spain, Portugal deficits

EC declared the two countries in violation of budget rules

BRUSSELS: Eurozone finance ministers will on Monday wrangle over whether to inflict penalties on Spain and Portugal for running up excessive deficits against EU rules for years.

A decision by the 19 ministers of the single currency to punish the two countries would be an unprecedented step and would put attention on overspending France, which is on course to break the rules next year.

French Finance Minister Michel Sapin - whose country was coincidentally beaten by Portugal on Sunday in the Euro 2016 football tournament - said on Monday Portugal does not deserve punishment on its budget and argued for a light touch.

“Portugal has made enormous efforts in the past years. It does not deserve excessive discipline,” said Sapin in Paris ahead of the talks.

France’s plea for leniency came after Germany recently warned Portugal against making “a serious mistake” of flouting the rules.

Those remarks by German Finance Minister Wolfgang Schaeuble angered Portugal, which summoned Germany’s ambassador to Lisbon in protest.

The European Commission, the EU’s executive arm, last week officially declared Spain and Portugal in violation of budget rules despite fears that austerity orthodoxy by Brussels will further stoke anti-EU populism in the wake of Brexit vote.

But many EU powers, led by Germany, have long hoped for the commission to crack down on public overspending, even amid the fallout of the British vote to quit the bloc and a poor economy.

The often-broken rules call for budget deficits not to exceed 3% of gross domestic product. An endorsement by the ministers would give the commission 20 days to prepare penalties, but Spain and Portugal could make an official request for zero sanctions within 10 days that would include a firm commitment to fix their budget.

Spain on Friday defended its economic policies despite the embarrassing sanctions procedure and said it remained confident that it would avoid a fine.

Published in The Express Tribune, July 12^th, 2016.

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