EU offers reprieve to Spain, Portugal on deficits

The EU warned Spain and Portugal on Wednesday to quickly meet the EU’s rules on public deficits but delayed any decision to slap fines against the countries until July.

The unexpected reprieve from the EU for Spain delays a potential embarrassing decision against Madrid until after elections on June 26.

Inflicting penalities against an EU member state for public overspending would have been an unprecedented step by the European Commission, the bloc’s executive arm.

“We have concluded that this is not the right moment economically or politically to take this step,” European Economic Affairs Commissioner Pierre Moscovici told a news briefing in Brussels.

For the eighth consecutive year, austerity-weary Spain has overshot its fiscal targets, making it one of the worst performers in the eurozone.

Spain’s acting Prime Minister Mariano Rajoy said on Wednesday he was eyeing more tax cuts if re-elected, in defiance of the EU rules on running up public deficits.

Spain’s deficit came in at 5 percent of gross domestic product last year, far higher than the 4.2 percent initially promised to Brussels and vastly above the 3 percent limit set by EU rules.

Madrid has also raised its public deficit target this year from 2.8 percent of GDP to 3.6 percent, which means Spain will once again overshoot the limit set by Brussels.

Spain is gearing up for another election on June 26 — the second in just six months after bickering parties failed to reach an agreement on a coalition government following inconclusive polls in December.

Bailed-out Portugal, meanwhile, will see its public debt hit 130 percent of GDP, over double the EU limit of 60 percent.

In Lisbon, a left-wing government came to power last year on a pledge to reverse unpopular austerity measures, in defiance of the EU.