French Finance Minister Michel Sapin said Monday that Portugal does not deserve European Union penalties for government budgetary overruns.
“Portugal has made enormous efforts in the past years. It does not deserve excessive discipline,” said Sapin in Paris, speaking on his way to a meeting of European finance ministers.
The ministers are meeting in Brussels and are mulling possible sanctions against Spain and Portugal for running up excessive deficits — but Sapin insisted formal action was unwarranted.
“Certainly the (European) Commission is within its rights and perhaps even its duty when it points out that Portugal has not respected its commitments” to stay within EU deficit guidelines, Sapin said.
But he noted that Lisbon had been battling “extremely violent” economic headwinds in recent years marked by austerity and added Portugal’s deficit problem stemmed in part from a state bailout of Banif bank last December.
The commission last Thursday officially declared Spain and Portugal in violation of EU public spending rules, the first step towards what would be unprecedented penalties against members of the bloc.
The commission, the EU’s executive arm, set the countdown to possible sanctions despite fears that austerity orthodoxy by Brussels will further stoke anti-EU populism in the wake of the Brexit vote and a weak economic recovery.
Many EU powers, led by Germany, have long hoped for the commission to crack down on public overspenders, even amid the fallout of the British vote to quit the bloc.
The commission could impose fines of up to 0.2 percent of gross domestic product on eurozone countries that repeatedly ignore the rules — but has to date fought shy of doing so.
Portuguese Prime Minister Antonio Costa warned last week that Brussels would only embolden euroscepticism if Brussels applies sanctions.
Spain and Portugal have been under the EU’s excessive deficit procedure since 2009 because of recurrent fiscal holes following the global financial crisis.
Spain last year reported a deficit of 5.1 percent of gross domestic product (GDP), way off the target of 4.2 percent set by the commission and the normal 3.0 percent limit.
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.