8 August: no fines for Spain and Portugal and extension of excessive deficit deadline

August 8, 2016

Following up on its decision of 12 July under article 126(8) TFEU establishing that Spain and Portugal had violated the Stability and Growth Pact, the Council on 8 August has taken a decision imposing a fine on both countries which was however reduced to zero.

With regard to the imposition of a fine on Spain, the Council considered that "exceptional economic circumstances that would warrant a reduction of the amount of the fine do not exist." However, it also stated that "in view of Spain's reasoned request and having regard to the previous points, in particular the deep structural reforms undertaken by the Spanish government since 2012 and still in place, the challenging economic environment during the period covered by the June 2013 Council recommendation, the deficit-reducing commitments announced by the Spanish caretaker government in its reasoned request, along with the consolidation measures put in place following the Commission Recommendation of 9 March 2016 regarding measures to be taken by Spain in order to ensure a timely correction of its excessive deficit, a cancellation of the fine of 0,2 % of GDP is considered warranted."

The Council, in a separate decision under article 126(9) TFEU gave notice to Spain to take measure to reduce the excessive deficit, extending the deadline with two years to 2018, justifying this decision as followed:"Considering that no further structural measures should be requested in 2016, granting Spain one additional year for the correction of its excessive deficit, which is the rule under Regulation (EC) No 1467/97, would require an annual improvement of the structural balance in 2017 which would have a too negative impact on growth. Therefore, it seems adequate to extend the deadline for Spain to bring an end to its excessive deficit situation by two years."

With regard to the imposition of a fine on Portugal, the Council again considered that "exceptional economic circumstances that would warrant a reduction of the amount of the fine do not exist." But it also stated that "in view of Portugal's reasoned request of 18 July 2016 and having regard of (..) in particular the fiscal adjustment undergone during the economic adjustment programme which was accompanied by a comprehensive set of structural reforms; the commitments (i) to adopt, when necessary, fiscal measures to correct any potential budget execution deviations in 2016, (ii) to implement an additional structural adjustment of 0,25 % of GDP in 2017 compared with the adjustment of 0,35 % of GDP laid out in the April 2016 Stability Programme, and (iii) to implement structural reforms in key areas in view of existing challenges including measures to stabilise the banking system, the reasons put forward by Portugal are considered to warrant a cancellation of the fine of 0,2 % of GDP."

The Council, in a separate decision under article 126(9) TFEU gave notice to Portugal to take measures to reduce the excessive deficit, stating that Portugal shall put an end to the present excessive deficit situation by 2016.

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