‘Spain & Portugal seen as unruly children that get pushed around by EU’
Eurozone finance ministers are planning to hit Spain and Portugal with sanctions for not doing enough to correct their huge budget deficits.
The deficits in both countries have been above the EU's limit of three percent of gross domestic product.
Sanctions for that could be a fine of 0.2 percent of GDP which is about €2 billion for Spain and almost €400 million for Portugal.
RT: This would be the first time any EU country has been penalized for handling its GDP deficit. Why are eurozone leaders deciding to punish them now?
Felix Moreno de la Cova: It has been nine years since the onset of the financial crisis of 2008. And for not one year of those nine has the Spanish government - two different governments - been able to meet European targets for deficit reduction. Not once. And I think the damage from that to our bond markets and to our credibility is much harsher than any damage that could come from a tiny symbolic sanction.
RT: Will sanctions really help? Isn’t it kicking these countries when they're already down?
FMC: I don’t think they have the guts in Europe right now or the focus to impose anything more than symbolic sanctions. But nine years have passed; Spanish debt to GDP has gone from 35 percent to over 100 percent. We are not in the same situation. We are in an emergency situation and people are acting - especially in government - as if this is normal, as if they can go on not meeting the commitments and not keeping their promises forever. And obviously that is not going to happen.
RT: Sanctions for that could be a fine of 0.2 percent of GDP which is about €2 billion for Spain and almost €400 million for Portugal. Isn’t it going to hurt both countries?
FMC: They’ll impose something, but just bear in mind for a second that Spain has deficits of almost €50,000 million a year. So, €2 billion is a drop in the bucket compared to what the debt of the government is already racking up. So, it is more the symbolic slap on the wrist and the effect on credibility than the actual money amount. Of course, this is not going to be very good for the image of the EU in Spain if it is seen as if our European overloads are punishing us. But our own government is punishing us much more by the debt that is lying on our backs.
RT: Do you expect similar action against other countries that don't meet the EU's deficit limit of three percent of GDP?
FMC: No, of course, not. We’ve seen exceptions made for France and Germany every time they’ve had problems with a deficit, and it is only the smaller countries with less weight in the EU, who make less of a contribution, who are seen as the unruly children that need to be pushed around and taken care of.
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