‘Sword of Damocles’ is hanging over Spain and Portugal

EU Commission has announced further action against deficit offenders Spain and Portugal

According to the European Commission both countries missed the deadline to correct their deficits. Spain was not able to meet the target of 4.2% of GDP set by the Commission – instead Spain`s deficit reached 5.1%. Portugal was required to cut its budget deficit to 2.5%, but reached a deficit of 4.4%. On Tuesday (July 12) European finance ministers will decide whether to back the move to fine Spain and Portugal. Should the recommendation by the Commission be approved, the two euro area countries could be hit with fines as well as a partial suspension of funding commitments.