European Commission economy chief Pierre Moscovici on Wednesday indicated he wants to see eurozone deficit miscreants Spain and Portugal escape sanctions. The EU on Tuesday threatened both countries with swingeing fines for failing to fix years of high deficits, although Brussels has previously avoided wielding its disciplinary powers for budgetary overshooting.
"I hope we shall be capable of going towards zero sanctions once Spain and Portugal give us good guarantees" that they are trying to bring spending into line, Moscovici told Europe 1 radio. The European Commission, the EU's executive arm, has 20 days to decide on sanctions after eurozone finance ministers found Lisbon and Madrid had not taken "effective action" to bring down their deficits.
Both countries, who now must lobby the EU to plead their case, could face fines of up to 0.2 percent of GDP - nearly 2.2 billion euros ($2.4 billion) in Spain's case and 360 million euros for Portugal based on 2015 data under an "excessive deficit procedure." Both countries have been battling to rein in spending, having been hit hard by the eurozone debt crisis.
The Iberian neighbours have been in the EU's deficit bad books since 2009 owing to recurrent fiscal holes, even though bailed-out Portugal sharply cut its budget deficit from close to 10 percent of GDP in 2010 to 4.4 percent last year. Spain, while avoiding a eurozone bailout, endured six years of recession and last year reported a deficit of 5.1 percent of gross domestic product (GDP) - way off the target of 4.2 percent set for it by the commission and the normal 3.0-percent limit. Moscovici voiced sympathy for both on an issue also sensitive for France, widely expected to miss a promise to bring its own deficit back under the 3.0 percent limit next year.
"I have never been a supporter of austerity. I do not believe the rules were drawn up to punish. I do not think sanctions are the right response," he explained. Moscovici said he believed the rules were rather "a process to encourage deficit cutting" rather than a "punitive process." On Tuesday, French Finance Minister Michel Sapin said "the rules are the rules," albeit ones which should be applied "intelligently" on a case-by-case basis.
But Germany is leading more hawkish members of the bloc in forcing the pace on paring down deficits and ramping up pressure on overspenders.
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