On 7 July, the European Commission took the next step towards fining Spain and Portugal for failing to bring their budget deficits in line with EU rules. In May, the EC found that both countries failed to comply with their recommendations. The EC had stated back then that it would come back to the issue in July. This was supposed to give some time for both governments to show willingness to act. Last week, though, the EC found that that was not the case. Both countries failed to reach their budget deficit levels and did not take sufficient action to do it, either. Portugal was supposed to have a deficit of 2.5% of GDP in 2015, while it had 4.4%. Spain was supposed to have 4.2% and had 5.1%. Both countries came a long way since the crisis, their deficit levels in 2010 were 11%. Now, the EC proposes a Council decision establishing that rules were breached. The decision is expected this week at an ECOFIN Council meeting. After that, the EC will be forced to propose a fine, which can be up to 0.2% of GDP, which can be several billion euros, and suspension of disbursements from structural funds. The EC proposal will be approved by the Council if a qualified majority is not against it - which is highly unlikely. The issue is sensitive, because in the past, the EC and the Council failed to enforce the rules properly in the cases of Germany and most notably France. Moreover, Portugal has an anti-austerity leftist government, so the decision can be seen as political, and Spain has had no proper government for months, since two indecisive elections failed to provide a stable government.

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