Eurozone: The Stability and Growth Pact is dead.

econoblog101

As Reuters reported two days ago, the EU has decided not to punish the government of Spain and Portugal respectively for running deficits that were higher than the EU demanded:

The European Commission said on Wednesday it will not suspend EU funds for Spain and Portugal next year following their breach of EU budget rules, as it also called for looser fiscal policy across the euro zone.

The European Union’s executive Commission has the power to impose fines and to suspend EU funds for countries that run deficits above 3 percent of their gross domestic product and do not take measures to correct their excessive gaps.

Spain and Portugal were found in breach of EU fiscal rules last year, but the Commission has concluded there is no need to sanction them as they have taken sufficient measures to correct their imbalances, Commission vice president Valdis Dombrovskis told a news conference.

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