Spain's Economy Minister Luis De Guindos says he expects his nation to get its deficit below 3 percent by next year. The European Union on Tuesday backed sanctions on Spain and Portugal for breaking European rules on budget deficit targets. FIle photo by Kevin Dietsch/UPI | License Photo
BRUSSELS, July 12 (UPI) -- European Union finance ministers supported sanctioning Spain and Portugal for breaking targeted budget deficits Tuesday.
The EU's economic and financial affairs council decided Spain and Portugal should be sanctioned for breaking rules that countries' budget deficits must remain within 3 percent of gross domestic product.
"The Council found that Portugal and Spain had not taken effective action in response to its recommendations on measures to correct their excessive deficits" the European Council said in a statement on its website on Tuesday. The Council's decisions will trigger sanctions under the excessive deficit procedure."
According to the EU, Portugal and Spain have 10 days to appeal the decision. And the commission has 20 days to recommend fines that could amount to 0.2 percent of GDP.
But top EU officials have indicated the sanctions are likely to be symbolically set at zero, according to the Wall Street Journal.
"This Commission wants to respect the rules," Pierre Moscovici, European commissioner for economic affairs, told CNBC on Tuesday. "This Commission wants to be credible and stability is our road map ... We don't want to penalize economies in recovery and we know that Portugal and Spain suffered from a severe crisis and the priority for them is to reduce unemployment. So dialogue is a good quality," he said.
"I am sure that we will have a smart, intelligent result at the end," Peter Kažimír, Slovakia's finance minister and the president of the European Council wrote on the Council's website.
Luis De Guindos, Spain's acting economy minister, told CNBC he believes Spain could get its deficit below 3 percent by 2017.
"With respect to the situation for Spain it would be something of a paradox to impose a financial penalty to the best-performing European economy, which is Spain. And I think this consideration is shared by many people, not only at the Eurogroup but also at the Ecofin," he told CNBC.
Spain has proposed to raise an extra $6.64 billion next year with changes to corporate tax payments.
Portugal's Finance Minister Mario Centeno told CNBC on Monday that sanctions would be inappropriate.
"We will do our job, which is precisely to argue in favor of no sanctions for Portugal — at least a very low level of sanctions. The point here is we do have our incentives right and we are very much committed to our fiscal consolidation," Centano said.
Portugal sharply reduced its budget deficit from around 10 percent of GDP in 2010 to 4.4 percent last year, but it still was more than the bloc's limit.
The Commission warned Spain and Portugal in 2013 to better deal with their budget deficits. Last week, the Commission said Portugal had not corrected its "excessive" deficit by its 2015 deadline and that Spain is unlikely to correct its deficit by this year's deadline.