20th May 2016

EC does not fine Spain and Portugal for fiscal deficits, for now

Last week at the College meeting, the Commissioners discussed and adopted decisions with regard to the fiscal discipline in the EU. Although overall the situation gets better (the number of countries in the "excessive deficit procedure" will be 6, down from 24 in 2011), some countries still do not comply with the agreed rules. The main culprits are Spain and Portugal, both having failed to meet their fiscal target for last year. According to the SGP rules (toughened after the debt crisis), the EC should recommend fines of up to 0.2% of GDP. However, both Spain and Portugal are in difficult economic situations, mainly with regard to unemployment. Even more importantly, there are political considerations. Portugal has a new leftist anti-austerity government and Spain awaits repeated elections in June. The Commission has thus adopted a wait-and-see approach. For now, it proposed that the Council recommends stronger fiscal action in both countries, but the situation will be re-evaluated in July. The non-decision was criticized by experts and fiscal hawks – the whole point of tougher rules is that fiscal discipline is enforced, through fines if necessary. However, the EC first chose not to fine France and now Spain and Portugal, even though the breaches are blatant. The whole enforcing arm of the SGP is thus being degraded, again.

For more, click here, here and here.

Members of the American Chamber of Commerce in the Czech Republic