Brussels, 27/07/2016 (Agence Europe) - A somewhat surprising announcement. Although the European Commission and the member states seemed to be moving towards “symbolic” sanctions against Spain and Portugal for failing to reabsorb their excessive budgetary deficits, the college of commissioners made a recommendation, on Wednesday 27 July, in favour of simply cancelling these sanctions.
The Commission had three options, explained the Commissioner for Economic and Financial Affairs, Pierre Moscovici: - imposing a maximum fine of 0.2% of GDP (or €2 billion for Spain and nearly €200 million for Portugal); - reducing the fine on the basis of an assessment of the efforts made by the two member states under the excessive deficit procedure and their reasoned requests sent in earlier this month; - cancelling the fines. As things stand, the third option is the one that has been chosen.
This position seems to mark a turning point in the reading of the European budgetary rules in favour of a more flexible approach, which is incidentally contained in the recommendations made to the two countries. Portugal, amongst other things, must put an end to its excessive deficit situation by the end of the year, in line with the recommendations submitted in May. The surprise is contained in the decision made on the Spanish case, for which the Commission has recommended coming out of the excessive deficit situation by the end of 2018, when a one-year grace period had been suggested (EUROPE 11553).
“There were legal grounds for sanctions, but we made the decision that was politically and economically wiser”, Commissioner Moscovici commented, going on to point out that the Stability Pact is an “effective” instrument, not a “stupid” one. He stressed that the deficits of the member states had fallen from an average of 6% at the start of the decade to an average of 2% at the moment without any need for sanctions.
Moscovici and his colleague with responsibility for the Euro, Valdis Dombrovskis, justify the Commission's decision by the socio-economic situation in the Iberian peninsular - still caught in the turbulence of the economic crisis - as well as the efforts made by the two member states in recent years, but referred also to the “doubts” of the citizens regarding the European project, in reference to the recent results of the British referendum (EUROPE 11580). In the more specific case of Spain, Commissioner Moscovici also stressed the political situation of the country, which is struggling to achieve a clear parliamentary majority.
Even so, the decision to cancel the fines was by no means a unanimous one within the College. Six Commissioners, including Dombrovskis and Jyrki Katainen, were in favour of sanctions, even though they would have been token in nature, in the opposite corner to the more flexible line favoured by Moscovici and the President of the Commission, Jean-Claude Juncker, according to one source. Juncker is reported to have made the extremely rare decision to suspend the meeting of the college to hold a trilateral meeting with Dombrovskis and Moscovici, at the end of which the latter's position prevailed.
Under the regulation on the effective implementation of budgetary supervision (Regulation 1173/2011, article 6), the 'Economic and Financial Affairs' Council (ECOFIN) has ten days to reject the recommendation or modify it by “inverse qualified majority”. It has been suggested that the recommendation is not particularly to the liking of the member states of the north and east, particularly the Baltic states. The Slovakian Presidency, in the person of its finance minister, Peter Kazimir, has furthermore spoken in favour of equal treatment of the member states in the application of the Stability Pact (EUROPE 11594).
Readers may recall that these recommendations follow the decision of the ECOFIN Council of 12 July by virtue of the Treaty on the Functioning of the European article (article 126). The Commission then had 20 days to make its recommendations (EUROPE 11598).
ESI funds. There is another plank of the sanctions that has yet to be determined: the structural and investment funds. The European Parliament called for structured dialogue with the European Commission, which is due to begin in September of this year (EUROPE 11600, 11598) under the principle of conditionality laid down in article 23 of the regulation on common provisions (Regulation 1303/2013). “In view of today's adoption, however, it is highly likely that the sanctions on the cohesion funds will also be abandoned”, a source close to the dossier told us. (Original version in French by Pascal Hansens)