The European Commission decided to begin formal disciplinary procedures against Spain and Portugal on Thursday for their excessive deficits in 2014 and 2015, which may lead to fines for the two countries before the end of July. Both countries argued sanctions should not be imposed for various reasons.
The European Union’s current mandatory limit on deficits is maximum 3% of gross domestic product which Spain and Portugal failed to comply with.
The two countries now risk fines and the suspension of EU funds if they cannot show the rules were breached because of "exceptional economic circumstances". Fines up to 0.2% of GDP may be imposed if the excessive deficits are not reduced, although sanctions so far have never been applied.
Portugal’s left government argued it is unfair to start this procedure since it has already been on track of correcting the country’s deficit for 2016. Spain suffered a prolonged period without on a political deadlock which could repeat itself after the last general election on June 26.
In the aftermath of the UK referendum to leave the European Union, there have been voices against the sanctions. However, Germany and other member states insist on the rigid application of rules.