1st LD Writethru: EU gov'ts agree not to fine Spain, Portugal over breaches of deficit rule

The European Union (EU) governments have finalized a decision not to fine Spain and Portugal over their breaches of the bloc's budgetary rules, The EU Council announced on Tuesday.

The EU Council, consisting of the EU national ministers, reached the agreement Monday, it said in a statement, urging Madrid and Lisbon to adopt further measures to meet the deficit goals by new deadlines.

The approval came two weeks after the European Commission, the bloc's executive body, make such proposals, and could be viewed as a relief for Spain and Portugal on fines, which in theory could up to 0.2 percent of their gross domestic product (GDP).

The two countries, however, still wait for another potential sanction on structural funds, which the Commission put on hold until "a structured dialogue" with the European Parliament due in September after the summer break.

The Council confirmed that Spain and Portugal were obligated to present detailed reports by mid October on how to cut deficits below 3 percent of GDP, the EU's reference value for government deficits, by scheduled times.

Spain, a country still in search for a coalition government, was granted two more years to accomplish the budgetary mission by 2018, while Portugal gained extra one year, having to cut the deficit by this year.

Last year, Portugal's deficit gap turned out to be 4.4 percent and Spain's was 5.1 percent.

The Commission last month announced that both Spain and Portugal failed to adopt "effective measures" to tackle excessive deficits and hence faced with sanctions, but it suggested on July 27 to waive fines on the two following requests from both governments.

Plans to address overspending were outlined in their requests as Madrid considered measures amounting to 0.5 percent of GDP in next two years while Lisbon proposed suspension of public spending, the Commission earlier said.

It as well hinted that the suspension of structural funds would only begin in 2017 if entering into force, could be lifted if Spain and Portugal remained on track with the new fiscal adjustment path set by the bloc.

Under the new path, Portugal was projected to reduce its general government deficit to 2.5 percent of GDP in 2016, with necessary austerity measures to be implemented. Spain was urged to cut deficit to 4.6 percent this year, 3.1 percent in 2017 and 2.2 percent of GDP in 2018.

The Commission as well voiced optimism on Spain, saying Madrid may even achieve its deficit goal in 2017 if its future government would adopt further "effective measures." Endit