IN a press conference on Wednesday November 16, representatives from the European Commission announced that Spain and Portugal will not be sanctioned, nor will they have EU funds suspended, following highly-publicised budgetary transgressions. The Commission has also argued in favour of a more relaxed fiscal stance across the continent.
The European Commission has the authority to fine eurozone member countries that exceed annual deficit limits of above 3 per cent of their GDP, particularly if the countries have made no effort to correct the issue.
Both Spain and Portugal were found to have breached said fiscal regulations last year. However, Commission Vice President Valdis Dombrovskis indicated that it would not be necessary to impose fines upon the two nations, as both of them have taken action to correct the imbalances.
At the same time, the Commission has put forth a proposal to relax fiscal policy next year in an effort to give the eurozone economy a much-needed shot in the arm. Specifically, the Commission has argued in favour of a continent-wide fiscal expansion of up to 0.5 per cent of GDP in 2017.
Spain is expected to receive more than 5 billion in EU funds between 2014 and 2020, whereas approximately 3.5 billion will be set aside for Portugal. Had the two Iberian nations been fined or had EU funds withheld, it could have been potentially disastrous given that both countries already have massive amounts of debt.