(Reuters) Portugal has got off too easy for not reducing its budget deficit, and the European Union’s soft line poses a risk to its credibility, Finland’s new finance minister Petteri Orpo said in an interview.
With signs of euro scepticism growing in the bloc, Spain and Portugal in July escaped being fined by the European Union for not reducing their budget gaps to below 3 percent of their gross domestic product.
“Spain does not have a government in place, so action against Spain with no responsible administration would not perhaps be very wise,” Orpo, who replaced Alexander Stubb as the finance minister in June, told Reuters in his office.
“But regarding Portugal, they do have a government, so I think it would be necessary, according to the growth and stability pact, to demand measures that will balance public finances.”
He said a suitable sanction could be to withhold money from the EU’s structural funds until sufficient reforms are under way.
“If there is no sanction at all, we will lose the credibility of the monetary union.”
Finland itself is struggling to get back to economic growth after a long period of stagnation, and the EU last year warned Helsinki about its rising debt and budget deficits.
“There must be some principles to hold on to, regardless of the fact that we are on the same path ourselves,” Orpo noted.
He said the Nordic country, known for its stiff opposition to bailouts during the euro zone debt crisis, must practice as it preaches and curb public debt growth along with the government’s 10 billion euro long-term savings plan.
Orpo, returning from his first European finance ministers’ meeting in Bratislava, also said he opposed proposed new fiscal stabilization tools for the monetary union.
“This is not the time to invent new tools which will surely face opposition in the member countries.”