European Commission threatens to cut off funding to Portugal if deficit increases

15 April 2010

Brussels, Belgium, 15 April – The European Commission Wednesday threatened to cut off community fund if Portugal did not keep its budget deficit at below 3 percent of gross domestic product (GDP), Portuguese newspaper Jornal Económic reported Thursday.

Environmental or transport infrastructure projects, such as the high-speed railway (TGV) in Portugal, in countries that repeatedly have budget overspends may see access to funding become more difficult, according to a new Commission initiative launched following the crisis in Greece.

Brussels wants to bring an end to cohesion funding for countries that repeatedly violate the euro budgetary rules, and also speed up the application of monetary fines outlined in the Stability Pact.

Portugal is the country with the longest history of excessive budget deficits in the European Union and also one of the biggest beneficiaries of the cohesion fund, from which it has received 3.1 billion euros for 2007/13 to fund large transport and environmental infrastructure projects.

The penalties are included in the EU regulation but have so far never been imposed.

“We have to use the best existing mechanisms which, based on a political evaluation, allow us to suspend cohesion funds to countries that repeatedly fail to comply with the growth and stability pact,” said commissioner Olli Rehn in Brussels. (macauhub)