More Pain, But No Gain in Store.
No matter how fast Spain’s economy grows, its government cannot seem to get a grip on its spending habits. This year is going to be the eighth consecutive year that Spain has overshot its fiscal target. Originally, the Spanish government was supposed to get its deficit back below the EU’s sacred limit of 3% of GDP by 2013, from a staggering 11% in 2011. When it became clear during the darkest days of the crisis that it would be impossible, the deadline was extended by a year. A year later, Madrid had made so little progress that it got a further two-year extension, to 2016.
Now, things are so serious that the EU is threatening to sanction Spain, as well as Portugal, up to 0.2% of GDP for failing to bring their deficit under the targets set by the Commission. It will be the first time that the EU has adopted such punitive measures, but for the biggest repeat offender of excess deficits, France, there is no punishment. Quelle surprise!
Spain, by contrast, could end up facing a fine of as much as €2 billion. All will depend on how much and how convincingly the Spanish government commits to reduce its deficit next year. Naturally, the fine will not be paid by the politicians who failed to play by the rules agreed upon in Brussels; it will be paid by the citizenry who are already suffering the consequences of the recession that helped cause the deficits…
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