Commission split on credibility of rules as Spain and Portugal get ‘pardon’

By Jorge Valero |

A strong group of commissioners was in favour on Wednesday (27 July) of imposing at least a symbolic fine on Spain and Portugal for breaching the Stability and Growth Pact, but Jean-Claude Juncker opted for a zero penalty – supported by German Finance Minister Wolfgang Schauble.

The college meeting saw commissioners discuss for the first time in EU history whether to fine member states for breaching the fiscal rules.

But the debate was not about Spain and Portugal’s “lack of effective action” to meet their deficit targets, but rather the credibility of the EU’s economic and fiscal rules. The outcome did not leave everyone happy, various sources told

Key economic commissioners, like the Vice-President for the euro, Valdis Dombrovskis, and Vice-President for Jobs, Growth and Investment, Jyrki Katainen, backed a symbolic fine.

In their view, this was a balanced approach to show the Commission enforces the existing legislation without causing too much pain to citizens. Despite the Stability and Growth Pact allowing for a penalty of up to 0.2% of GDP, Dombrovskis limited the amount to between 0.01%-0.04% of GDP, while Katainen suggested a fine of 0.01% of GDP. For Spain, this would have represented €100 million instead of more than €2.1 billion.

But other members, including the Commissioner for Economic Affairs, Pierre Moscovici, highlighted various political and economic arguments to oppose any fine at all, including the efforts made by Spain and Portugal in the past, new commitments made by the Iberian economies, and the turbulent political situation agitated by the Brexit, the growing of populist parties in Europe, and terrorism.

For Spanish and Portuguese citizens, “it would be hard to understand” a fine, given the consequences of the crisis and the “hardship” some segments still face, Moscovici told reporters on Wednesday.

Pope would want zero fine

Although most commissioners spoke, not all of them clearly expressed their position. In light of this, President Jean-Claude Juncker had “a lot room for manouevre”, a senior EU official commented.

Juncker warned of the political consequences of the fines when the sanction procedure was initially discussed in May. This time around, his position was also clear.

“We must not be more Catholic than the Pope, but please make public that the Pope would want zero sanctions”, the President told his commissioners.

Finally, the Commission decided to recommend that EU Finance Ministers cancel the fine against Spain and Portugal.

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