EU tough on deficit sinners Portugal and Spain

Sanctions against Spain are justified because the Rajoy government deliberately ignored the EU rules, El País concludes:

“From a political point of view the government deserves to be sanctioned. Its management of the fiscal adjustment programme has been a model of ineptitude because it indiscriminately hacked away at the main pillars of the welfare state (education, healthcare, social security) without achieving even a short-term deceleration in the growth of public debt. The government ignored its pledges to balance the budget while at the same time invoking them as the way to overcome the crisis whenever it deemed it convenient to do so for election reasons. … If Rajoy thought he could lower taxes and disregard the deficit rules and Brussels would let him get away with it just as the Spanish voters did, he was mistaken. And this profound error must be exposed.”

The German Finance Minister Wolfgang Schäuble commented on the decision to start sanctions proceedings saying the intention was not to punish Portugal and Spain "but to give the member states incentives to do what they must do in their own interests." The Jornal de Negócios responds caustically:

“The news is that the two countries aren't facing sanctions, but incentives. Confused? The German finance minister explains this as follows: Contrary to what the dictionary says, sanctions are not punishment. They are more like a 'stimulus' to ensure good future behaviour. A beacon that points us in the right direction. Schäuble's remark is typical of a certain patronising bossiness on the part of the EU. … The European integration process has been influenced for far too long by the belief that nations are unable to govern themselves. But even if you do believe this, saying it loudly and openly won't do anything to promote cohesion in the EU.”

The sanctions against Portugal and Spain highlight the unfairness of the EU, Wiener Zeitung laments:

“Spain and Portugal fall short of the deficit reduction targets and must reckon with punishment. This is likely to be more of a symbolic character but it's still punishment. Why these two countries are being penalised while others haven't is not quite clear. France, too, has an excess deficit but that is accepted. If Italy gets the green light for a government bailout for its banks it will hardly be able to meet the so-called Maastricht criteria which stipulate a deficit of no more than three percent. … So if the big member states get off scot-free this may reflect the true balance of power in Europe, but it is not a union. It would have been a nice gesture if the two countries of the Iberian Peninsula had also been given more time.”

The EU applies different criteria each time it considers the question of whether to impose sanctions on a country that has infringed the deficit rules, Handelsblatt agrees and calls for more sincerity from the Commission:

“All too often it is the member states themselves that prevent the implementation of the rules. This kind of rule-based system will never function 100 percent anyway. Politics is also always about the ability to bend the rules a little at the right moment. But it is hypocritical of the EU Commission to deny the de facto exceptions it makes for important and powerful member states - as it did in the deficit proceedings against France. … Perhaps the Commission should try the opposite strategy instead: whenever the Brussels officials are obliged to give in to the interests of a member state, they should admit this openly in future and point out: 'Those who don't like this law of the powerful must fight with us for more Europe.'”

EU policy not only ignores the reality of the situation, it is also fatal for the community, Le Quotidien writes in dismay:

“The sanctions can range from a fine (of up to 2 percent of GDP) to the suspension of European subsidies. [Portuguese Prime Minister] António Costa has warned of a rise in 'anti-European sentiment' if sanctions are imposed. Nevertheless the European Commission considers it its duty to hammer home the idea that the rules must be applied - even if they're counter-productive economically and dangerous politically in that they encourage the rise of extremist movements. But for the European executive presided over by Jean-Claude Juncker, everything is continuing as if Brexit had never existed. We're heading for the wall: time to put our foot to the floor.”

In the dispute over the deficit proceedings Spain has manoeuvred itself into a particularly difficult position, Público complains:

“The Minister for Economic Affairs Luis de Guindos will beg the EU commissioners to exempt us from the sanctions we face because of the budget deficit. … The uncomfortable sensation of being Europe's backend only intensifies in view of Guindos' words: 'Unless the economy grows and jobs are created there is no reserve fund big enough to guarantee the pensions.' He said this a few days ago after Rajoy had plundered the Social Security Reserve Fund for the umpteenth time. … Guindos has once again mounted the highest diving board and is getting ready to dive into an empty swimming pool.”

The Süddeutsche Zeitung considers it unlikely that Spain and Portugal will face deficit sanctions:

“This is simply because the political reality in the member states is less and less compatible with the limits set by the Stability and Growth Pact. After seven years of crisis a number of countries in Germany's proximity have accumulated mountains of debt, their companies have collapsed or gone abroad, and people are looking in vain for work. The debt regulations seem out of keeping with the times. Worse still is that the political basis of the parties that have carried these countries forward until now is being eroded. Spain had to hold fresh elections recently and in Portugal the government is facing a new credit programme. Impose sanctions in such a situation? Post from Brussels would likely make a fresh start in these two countries more difficult rather than facilitating it.”

The EU clearly has double standards when it comes to its deficit rules, Diário Económico complains:

“114 times! That's how often EU members have exceeded the Maastricht Treaty's three-percent deficit limit according to the Ifo Institute in Munich. And guess which country has violated this rule most frequently? Portugal? No. Greece? No. Spain? Nope. Ireland? No. 'Oui', it's France! Eleven times! … But Germany has also broken this 'golden rule': not once, not twice or three times, but five times! … Okay, but of course the Germans and the French were penalised when they didn't meet their deficit limits, right? No, not once! And in 2004 when both country exceeded the three-percent deficit limit the rule was simply suspended. Imagine that! And for two whole years! Why does this rule exist at all? Clearly, simply so it can be broken!”

The new socialist government is mainly to blame for the European Commission's plans to impose sanctions on Portugal now of all times, writes the liberal business daily Jornal de Negócios:

“The Commission wants to punish Portugal. … This raises the following questions: Has Portugal ever been punished before for violating the deficit rules? No! Not even when it was in gross violation of those rules. Why not? Because the sanctions aren't imposed automatically. The decision to impose them depends on the government in question's degree of commitment: on its implementation of measures to meet the deficit reduction target. What is annoying Brussels now is that the excuses that have been used in the past to explain these deviations no longer apply. And that is clearly a result of the financial policy of the current government.”

It is not clear yet whether and how sanctions will be imposed on Spain and Portugal, Público stresses:

“There is no consensus on the application of sanctions. … The EU commissioners, EU finance ministers and political leaders are split into the orthodox, who stress that sanctions are inevitable, led by [German Finance Minister] Wolfgang Schäuble, [the president of the Euro Group] Jeroen Dijsselbloem and [EU Commissioner for the Euro] Valdis Dombrovskis, and those who advocate a more flexible approach to EU budget rules in order to avoid such sanctions, including Jean-Claude Juncker, Martin Schulz, Matteo Renzi and Manuel Valls. Therefore we should all understand that the Commission's decision on potential sanction against these two countries must be a compromise that reflects these different sensibilities”