E.U. Commissioner

Tough Talk on Budget Offenders

Valdis Dombrovskis, vice president of the European Commission, poses for a photograph ahead of a Bloomberg Television interview outside the Brussels Economic Forum in Brussels, Belgium, on Thursday, June 9, 2016. European Central Bank President Mario Draghi said fiscal policy should not work against monetary policy by curbing aggregate demand, and should be seen as a microeconomic tool to enhance growth. Photographer: Jasper Juinen/Bloomberg
E.U. Commission vice-president Valdis Dombrovskis warns "budget offenders" Portugal and Spain might lose E.U. structural funds if they fail to correct their excessive deficits.
  • Why it matters

    Why it matters

    If European Union members keep violating budget rules, running deficits and increasing debt, financial markets could lose trust in their ability to repay loans.

  • Facts

    Facts

    • Valdis Dombrovskis is the current European Commissioner for the euro, financial stability and social dialogue as well as a Vice-President of the European Commission, serving since November 2014.
    • On August 8, the E.U. agreed not to impose fines on Portugal and Spain for their failure to correct their excessive deficits, demanding instead that they bring back their deficits below 3 percent of their GDP by 2016 and 2018 respectively.
    • Six years into its bailout regime, Greece is still way behind on meeting the key conditions stipulated by its creditors and risks a halt to further payments from the current €86 billion package.
  • Audio

    Audio

  • Pdf

In an interview with business weekly WirtschaftsWoche, a sister publication of Handelsblatt, E.U. Commissioner Valdi Dombrovskis talked about southern Europe’s economic and budget challenges.

Mr. Dombrovskis, this summer the European Commission waived fines over excessive deficit. Does the E.U. Stability Pact still have any credibility?

It’s true we canceled the fines against Spain and Portugal. But it shouldn’t be forgotten that there are two types of sanctions. One is penalty payments; the other is the suspension of E.U. structural funds. And the final word hasn’t been spoken concerning the latter. The discussions between the European Commission and the European Parliament are still in progress.

Do you seriously believe these funds can be cut?

It is true there is no precedent for penalty payments. But we have already suspended structural funds once, specifically in 2012 for Hungary. Back then the Hungarian government promptly corrected its budget and made the necessary adjustments – whereupon we released the structural funds. So this instrument does work.

The Commission has been notoriously indulgent with large members in the past. France has to cut its deficit to below three percent in 2017. Is that realistic with a presidential election coming at the end of April?

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