Reuters reports that the European Union could take action against Spain for delaying austerity measures and purportedly manipulating deficit statistics to make Spain’s government appear that it is doing more to address its crisis.
Spain has up until now been regarded as one of the more docile and compliant countries that has come under fire during the eurozone crisis, and the imposition of a fine against the government for failing to meet EU guidelines would jeopardize this image.
Reuters cites three senior EU officials on the report. “It is not that we want to [punish Spain],” one official said anonymously. “But if there is a deviation, and it is almost inevitable, then we will have to.”
To date, newly elected PM Mario Rajoy has comforted investors in his measures to lead Spain back to stability and mitigate problems in the Spanish banking sector.
His government says that there has been no delay in the enactment of new austerity measures or manipulation of statistics (Spain’s deficit ended up being higher than the European Commission expected), and says it is waiting on the Commission’s new forecasts to draft a new budget.
On the other hand, EU officials believe the delay is politically motivated because it would allow the budget debate to take place after regional elections. “This delay is a pity. The new budget will be sent only in April and that’s really unfortunate. I don’t think they’ve realised how bad the situation is,” one official said.
Either way, this willingness to punish Spain is troubling given the country’s slowing growth. Unlike Greece and Italy, the central Spanish government has not amassed massive unsustainable public debts; Spain’s problems emanate from a cyclical housing bubble that crippled its banking sector. Austerity could be devastating to restarting the Spanish economy.