EU deficit fine would be counterproductive: Portugal

Portuguese Prime Minister Antonio Costa on Tuesday said it would be “unjustified and counterproductive” to punish his country for overstepping the eurozone’s deficit limits.

“This entire process is a contradiction,” Costa told reporters, saying that Portugal this year would bring its deficit to under three percent of GDP, thus meeting EU rules, “without having to turn to plan B or exceptional measures” to cut spending.

Eurozone finance ministers agreed to officially begin a sanctions procedure against Spain and Portugal, a procedure that could entail fines of up to 0.2 percent of gross domestic product (GDP).

For Portugal, that could mean up to roughly 360 million euros, based on 2015 GDP figures published by the EU statistics agency.

“The European economy and the eurozone will derive no benefit from applying sanctions, of any kind, on Portugal and Spain,” said Costa.

He said the European Commission, the International Monetary Fund (IMF) and German’s “highly respected” finance minister, Wolfgang Schaeuble, had repeatedly praised Portugal for its efforts to rein in its deficit.

“To propose now that Portugal should be punished because its previous government didn’t take the rights steps would diminish Mr. Schaeuble’s credibility and would not strengthen the public’s trust in the running of the eurozone,” Costa said.

Bailed out Portugal, long considered a star reformer, sharply cut its budget deficit from close to 10 percent of GDP in 2010 to 4.4 percent last year, but that still overshoots targets and the bloc’s limit.