The German Finance Minister, Wolfgang Schäuble, does not agree with the postponement of penalties for Portugal and Spain for running their economies with excessive deficits.
For Herr Schäuble, the fact that the governments in Lisbon and Madrid have been given a bit more time to balance their books does not really give rise to a warm feeling of confidence within Europe.
The German hard-liner says that Brussels should have taken a firmer decision as rules are rules.
The European Commission has postponed to the beginning of July any decision on sanctions due to Portugal and Spain’s excessive deficits in 2015. The European Commissioner for Economic Affairs, Pierre Moscovici, said that Brussels has decided to give Portugal just one more year to bring its deficit below 3.0% of GDP.
Schäuble is the second heavy-weight to stand up against Portugal in the last 24 hours. On Tuesday, the president of the Eurogroup, Jeroen Dijsselbloem said the application of penalties to Portugal is a "serious possibility given the current situation of the country."
"Sanctions are absolutely a possibility, they are in our rules and regulations and when we look at the current situation in Portugal and Spain there are serious reasons for considering their application," said Dijsselbloem.
The Dutch Finance Minister took a more moderate approach arguing that the António Costa Socialist administration should not face sanctions so as to ensure "that the budget remains within the limits."
Portugal’s Prime Minister, António Costa, already has said he is calm and that he will hit his targets, warns against complacency and says that any budget involved a degree of concern but this concern “is no reason for unrest.”
Mário Centeno, Portugal’s Minister of Finance, said that the government "knows exactly what to do."
Brussels continues to talk of Portugal and Spain in the same breath, a habit that has led António Costa to stress that the Portuguese deficit is well below the Spanish one.
"If you look at the deficit that Portugal recorded last year and the one that Spain had in 2015, then it will be found that Portugal is ahead of Spain. Especially if you discount the extraordinary measures such as the Banif rescue and the unachieved revenue predictions from the previous executive - Portugal had a deficit of 3.2%, which is well below the Spanish one."
The rating agency Moody’s said today that Portugal’s deficit will be 3% of GDP this year. This value is higher than the 2.2% Government target and the 2.3% required by the European Commission.
Nevertheless, Moody's does not see much risk of any significant deviations in the budget, taking into account the "intense scrutiny" of Brussels and the 'Plan B' that Brussels still insists on for Portuguese fiscal emergencies.
The rating agency is still concerned that the Portuguese economy is growing at a rate below that of the European average.
Comments
Given all these grand titles - How could the reckless lenders have factored in the feeble mindedness of the reckless borrowers? Or was the hopelessly endemic corruption in Portugal to blame and if so - when will we see in Portugal a root and branch digging into who got what? And where off-shore it is now?
Nationalising failed Portuguese banks is only done to safeguard then destroy the links to this missing money. Which, unless Portugal can piggyback on any debt reduction given to Greece - must be paid for by the Portuguese people. Not the grand oligarchs that caused the problems!
It therefore is painful to point out the obvious. That Portugal - having progressed not one iota as a 'European partner state' furiously increasingly its borrowing at absurdly low 'German subsidised' rates. Rather than facing government debt valuations more relevant to Portugal's real situation as a long tern 'failed EU state'.
The European Union was never intended for such idiocy.