EU gives Portugal 'only' one more year to control deficit

BY TPN/ LUSA,

The European Commission on Wednesday decided to maintain Portugal under excessive deficit procedures for euro-zone member states whose budget deficit is more than 3% of gross domestic product, and recommended that the government move to make lasting reduction in the deficit by 2017.

The European Union executive promised to review the country's situation once more in early July.

In a statement on its specific recommendations by member state, the commission recommended that Portugal press ahead with a "lasting correction to the excessive deficit in 2016 and 2017, taking the structural measures necessary and using all gains for the reduction of the deficit and debt."

Nevertheless, as foreseen under excessive deficit rules, the commission is to review Portugal's situation again in "early July", meaning that the decision on whether to recommend that Portugal be fined will only be taken at that time.Any decision to apply a fine would have to be taken by economic and finance ministers of all EU member states on the basis of a commission recommendation.

The European commission for economic affairs, Pierre Moscovici, said at a news conference that the body had decided to propose that Portugal be given “one more year, and only one more year” to bring its deficit below 3% of GDP.The country was supposed to have met the 3% target last year, but its deficit was actually 4.4% of GDP, largely as a result of the cost of resolving Banif, a troubled bank.

Recent media reports had indicated that there was a majority on the commission for recommending that Portugal and Spain be fined for violating euro-zone rules on deficit and making "insufficient efforts" to improve the situation.

In its statement on Wednesday the commission stresses that Portugal is "experiencing excessive imbalances" and so that it should "implement its reforming agendas in rigorous fashion and in a timely fashion".

The commission recommended that six countries in all remain in excessive deficit procedures - the others being Spain, Croatia, France, Greece and the UK." It recommended that Cyprus, Ireland and Estonia be removed from the procedures.