EU will fine not Spain and Portugal for violating deficit

                      

The European Commission decided on Wednesday not fining Spain and Portugal for failure to comply with deficit targets.

Sanctions could set a precedent in a continent still destabilized by Brexit.

"The board [of 28 European Commissioners] today decided to cancel the fines against the two countries," said European Commission vice president in charge of the euro, Valdis Dombrovskis, at a news conference in Brussels.

The recommendation from the Commission, presented on Wednesday, must be ratified by the ministers of the euro zone.

"Sanctions, including symbolic, would not allow correct the past and would not have been understood by the people," said the European Commissioner for Economic Affairs, Pierre Moscovici.

He also said that the fines are not the best method at a time when Europe has doubts about his future after the yes to Brexit the British.

In theory the fines could reach a maximum of 0.2% of Gross Domestic Product (GDP) of the countries concerned. The recommendation presented Wednesday by the Commission will now have to be approved by the ministers of the euro zone.

In 2015, the Spanish deficit reached 5.1% of GDP, more than the maximum of 3% set by the so-called stability pact and that the target of 4.2% set later by the Commission.

Portugal, in turn, had a deficit of 4.4% of GDP last year, when the target was 3%.

The European executive gave Spain an additional two years, until 2018, for the country to demote its deficit to below 3% On 18 May, the deadline was by 2017 to meet the target block.

For this country, which can not form the government since the general elections of 26 June, the European Commission recommends the following budget trajectory: a deficit of 4.6% of GDP in 2016, 3.1% in 2017 and 2.2 % in 2018.

The Commission demanded that Portugal reached this goal since 2016 with a deficit of 2.5% of GDP for this year.

Spain and Portugal "gone through tough economic and financial crises. They were able to restore financial stability thanks to significant budgetary adjustments. The two countries have undergone structural reforms to improve competitiveness. These efforts can not be underestimated," said Dombrovskis.

"Indeed, these efforts are beginning to bear fruit. In both countries growth returned and were created thousands of new jobs," he added.

In addition to the fines, the Commission has an obligation to propose the total or partial suspension of financing with the Structural Funds, which can reach 0.5% of GDP and 50% of funding promises for 2017 in both countries.

The Commission expects to begin a "structured dialogue" with the European Parliament on this issue, which affects 12 funds in Portugal and about sixty in Spain.