The European Fiscal Board This Wednesday he questioned the decision of the European Commission to forgive Spain procedure of excessive deficit – the first step for a sanctioning file – despite having closed the 2023 fiscal year with 3.6%, six tenths above the threshold of the 3% of GDP which has been reactivated with the new fiscal rules after four years frozen by the pandemic.
«This element of judgment adds a new element of discretion that does not appear in the legal provisions “relevant”, states the annual report of the independent tax body of the EU, presented in Brussels, regarding the case of Spain.
In a context in which Brussels evaluates the deficit of several European countries, the European Commission justified its decision not to open a file against Spain based on the economic forecasts of the Spanish Government itself and the Commission.
These projections indicate that the Spanish deficit will be reduced to the 3% threshold in 2024, which is why they considered the current non-compliance as “temporary.” However, Niels Thygesenpresident of the European Fiscal Board, has criticized this decision, arguing that excessive deficit procedures should be based on confirmed data and not future projections. According to Thygesen, the 3.6% deficit recorded in Spain is solid data and Brussels’ decision not to sanction the country “does not strictly comply with current regulations.”
Furthermore, the report notes that the Commission has been inconsistent in its treatment of the deficit between different countries. In June 2024, Brussels opened excessive deficit procedures for countries such as BelgiumFrance, Italy, HungaryMalta, Poland and Slovakiawho will be required to make an annual adjustment of 0.5% of GDP, thus raising problems of consistency in the application of corrective measures.
However, Spain was freed from the file despite having a deficit of 3.6% of GDP in 2023, well above the 3% of GDP threshold required by fiscal rules. The European Tax Board recalls that the Commission “explicitly stated that the double condition for considering relevant factors was not met”, a situation that, in similar cases in the past, led “systematically to a proposal for a Council decision to establish the existence of a excessive deficit.
Ursula von der Leyen, president of the European Commission.
“This time, however, the Commission departed from this established practice, which is supported by the EU legislationarguing that an excessive deficit procedure would not, at this stage, serve a useful purpose,” the report qualifies.
In the opinion of the European Tax Board, “this element of judgment adds a new element of discretion that does not appear in the relevant legal provisions” and adds that “although formally it complies with the provisions of the Community tax rules, this nominal strategy undermines the goal of creating tax buffers during good times
