The European Commission backed away on Wednesday from fining Spain and Portugal for running higher budget deficits in 2015 than agreed. The imposition of fines for the first time would have been a landmark move by the European Commission to make member countries adhere to budget regulations.
 
Both countries have argued that imposing fines to them at this point would have been unfair and irrational. Portugal has already implemented measures to tackle its higher than agreed deficit and Spain is still trapped in a political deadlock after a second general election in a row after which political parties are unable to form a government.
 
Brussels could have imposed fines of up to 0.2 percent of national gross domestic product against Madrid and Lisbon, but instead showed clemency amid growing anti-Brussels sentiment highlighted by the UK's Brexit vote.
 
“Sanctions, even symbolic ones, would not have been understood by the public” Economic Affairs Commissioner Pierre Moscovici, said at a news briefing. “It's not the best approach at a time when doubts are widespread in Europe” he added.
 
However, Mr. Moscovici warned that instead of fines the European Commission could still suspend EU structural funds to the two countries next year, if remedies to plug the budget holes were not provided in the near future.
 
Both Spain and Portugal had been under the EU's excessive deficit procedure since 2009 because of recurrent fiscal holes.
 
Bailed-out Portugal sharply cut its budget deficit from little under 10 percent of GDP in 2010 to 4.4 percent last year, but that still overshot the EU's 3-percent ceiling with regard to fresh borrowing.
 
Spain experienced six years of recession and reported a deficit of 5.5 percent in 2015, way off the 4.2-percent target set by the Commission.