Communication: Assessment of action taken by Portugal and Spain in response to the Council Decisions of 8 August 2016 giving notice to take measures for the deficit reduction judged necessary in order to remedy the situation of excessive deficit

On 8 August 2016, the Council adopted decisions under Article 126(9) of the Treaty on the Functioning of the European Union (TFEU), giving notice to Portugal and Spain to take measures for the deficit reduction judged necessary in order to remedy the situation of excessive deficit.

Portugal was given notice to put an end to the excessive deficit situation by 2016 by reducing the general government deficit to 2.5% of GDP this year. Such a target excluded the impact of the direct effect of potential bank support. Based on the Commission 2016 spring forecast, which underpinned the Council decision, this was considered consistent with an unchanged structural balance with respect to 2015.

The Council also decided that Portugal should use all windfall gains to accelerate the deficit and debt reduction. Moreover, Portugal was required to adopt and fully implement consolidation measures for the amount of 0.25% of GDP in 2016 in addition to the savings included in the Commission 2016 spring forecast. This notably implied fully implementing the consolidation measures incorporated in the 2016 Budget, including the additional expenditure control in the procurement of goods and services highlighted in the Stability Programme, and complementing those savings with further measures of a structural nature to achieve the required fiscal effort.

Finally, in order to ensure a durable improvement of public finances, the Council requested Portugal to strictly implement the Budget Framework Law and the Commitment Control Law and further improve revenue collection and expenditure control. Portugal was requested to present a clear schedule and implement steps to fully clear arrears and improve efficiency in the health care system, to reduce the reliance of the pension system on budget transfers, and to ensure fiscal savings in the restructuring of State-owned enterprises (SOEs).

Spain was given notice to put an end to the excessive deficit situation by 2018 by reducing the general government deficit to 4.6% of GDP in 2016, to 3.1% of GDP in 2017 and 2.2% of GDP in 2018. Based on the updated Commission 2016 spring forecast underpinning the Council decision, this was considered consistent with a deterioration of the structural balance by 0.4% of GDP in 2016 and improvements by 0.5% of GDP in both 2017 and 2018. The Council also decided that Spain should use all windfall gains to accelerate the deficit and debt reduction, and should adopt and fully implement consolidation measures for the amount of 0.5% of GDP in both 2017 and 2018 in addition to the savings included in the updated Commission 2016 spring forecast.

Finally, the Council required Spain to adopt measures to strengthen its fiscal framework, in particular with a view to increasing the automaticity of mechanisms to prevent and correct deviations from the budgetary targets and to strengthening the contribution of the Stability Law's spending rule to public finance sustainability. It also required the Spanish government to set up a consistent framework to ensure transparency and coordination of public procurement policy across all contracting authorities and entities, including appropriate ex-ante and ex-post control mechanisms to ensure efficiency and legal compliance.

In accordance with Article 3(4a) of Council Regulation (EC) No 1467/97, the Council established the deadline of 15 October 2016 for Portugal and Spain to report in detail on action taken in response to the Council decision. A report to the Council and the Commission highlighitng the fiscal policy measures taken to achieve the targets set by the Council was submitted by Spain on 15 October 2016 and a report was submitted by Portugal on 17 October 2016. The Commission has examined the budgetary strategies of Portugal and Spain based on the information included in the reports on action taken in order to assess whether both Member States have complied with the Council decisions of 8 August 2016.

EUR-Lex: COM(2016)900: Proposal for a Council Opinion on the economic partnership programme presented by Portugal http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52016PC0900(01)

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