Meant to be broken

20 May 2016 By Neil Unmack, Fiona Maharg-Bravo Follow @unmack1

Spain, Portugal and Italy are getting free passes to break Europe’s fiscal rules. Political calculations explain why, but even if penalties were enforced they’d be self-defeating. Instead of punishing sinners, the single currency needs simpler rules that reward those who comply.

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The European Commission on May 18 put off any disciplinary action against Spain and Portugal for breaking EU fiscal rules until early July, after the Spanish general election on June 26. They both will get an extra year to bring their deficits back into line with EU rules. The new deadline for Portugal will be 2016, and for Spain 2017.

Spain missed its 2015 deficit target of 4.2 per cent of GDP to reach 5.1 per cent. It plans to achieve a deficit target of 3.6 percent in 2016, while the EU predicts it will be 3.9 percent.

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