The Commission has today come back to the fiscal situations in Spain and Portugal, as we announced we would do in our Communication of the 18th of May.
Spain and Portugal have come a long way. The two countries experienced severe economic and financial crises. They have managed to restore financial stability thanks to major fiscal adjustment. And they have turned their economies around through structural reforms to regain competitiveness. These efforts should not be underestimated.
And indeed, they are already paying off. Both countries are back to economic growth and thousands of new jobs are being created.
With GDP growth at 3.2% in 2015 and a growth forecast of 2.6% in 2016, Spain is actually amongst the fastest growing European economies. As a result, we see unemployment rates clearly going down.
The same is true for Portugal, where labour market performance, for instance, remained strong in 2015. And the country is expected to bring unemployment down – from the peak of 16.4% in 2013 – to 11.7% in 2016.
However, lately Spain and Portugal have veered off track in the correction of their excessive deficits and have not met their budgetary targets.
The Commission concluded that Portugal did not correct its excessive deficit by the deadline of 2015 and that Spain is off-track to correct it by the 2016 deadline. For various reasons, the windfalls from higher growth and lower interest rates were insufficiently used to reduce deficits and debt.
Reducing these high deficit and debt levels is a precondition for sustainable economic recovery and growth for both countries.
Therefore, we have adopted recommendations for Council decisions under Article 126(8) of the Treaty concerning the absence of effective action by Spain and Portugal.
This is a necessary legal step to give both countries new deadlines for the correction of their excessive deficits, with updated fiscal adjustment paths to be specified.
The Stability and Growth Pact is there to provide the incentives for sound fiscal policies, for the good of each country individually, and of the euro area and the EU as a whole. The Commission is the guardian of the Treaty and we have well-specified duties in economic surveillance. Of course, at the end of the day, it is the Council that decides on the basis of a proposal from the Commission.
The Stability and Growth Pact is there to be applied with common sense. Above all, the Commission wants to work closely with the two Member States concerned on a way forward.
Our common goal is to ensure that Member States put their finances back on a sustainable track.
I now pass floor to Pierre who will explain today's decisions in detail.