The European Council overturned the fines for Spain and Portugal for infringement of excessive deficit rule and established a new “fiscal path” for each country, which will have to follow.
Such action follows from the preceding Council decision on the fact that Spain and Portugal have not taken effective measures to correct its excessive deficit and will now have to implement the recommendations made by the European Commission in their respective fields. In July, the Council confirmed that Spain and Portugal have not been able to reduce its deficit to below three percent of gross domestic product (GDP) for the time.
Once provided financial assistance amounting to 78 mrad euros (86.9 billion dollars) from the EU, the eurozone and the International Monetary Fund (IMF) in 2011, Portugal was not able until 2014 to bring its deficit in line with EU expectations. For this reason, in June 2013. The Council further extended to 2015 and set targets deficits of 5.5% of GDP in 2013, 4% in 2014 and 2.5% in 2015. Portugal was able to achieve a given economic restructuring program in June 2014, but in 2015 the general government deficit was 4.4% of the country.
The July decision of the Council launched in the framework of the sanctions of the excessive deficit procedure in the amount of up to 0.2% of GDP in each case. The Commission gave the countries 20 days to give the opposite answer. The Commission also recommended repealing fines for the two countries and adopt new ways of fiscal adjustment and called on Portugal finish its deficit in accordance with EU rules by 2016, and established deadline for Spain to do so no later than 2018.
These recommendations were adopted by the Council on 9 August. Council Tax Commissioner Pierre Moscovici welcomed the decision. He said: “Today’s decision reflects the judicious application of the Stability and Growth Giving more time in Spain and Portugal to bring its public deficit below three per cent, the European Union sets new reliable fiscal trajectory, which will help to strengthen both its economy and the euro zone as a whole.”
Pierre also added: “The Commission will assess the actions taken by Spain and Portugal over the coming months in the excessive deficit procedure (the Excessive Deficit Procedure) and analysis of the Project budget plans for 2017 (the Draft Budgetary Plans for 2017).”