Portugal First EU Errant

Portugal First EU Errant


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Portugal has become the first country in the 12-nation EU monetary bloc to violate the European single currency’s good conduct rules. Now, the European Commission (EC) has begun the process of forcing the errant nation to cut its budget deficit and bring order to its auditing house. EU officials have noted that although the possibility of a heavy EU fine does exist, many years would pass before it could be levied. Portugal recently admitted to a deficit of 4.1 percent of GDP in 2001 – this is well over the three percent deficit ceiling agreed to since the currency entered common circulation on January 1, 2002. EU rules stipulate that violators of sound financial practices could face fines of up to 0.5 percent of the GDP. An AP report noted that in Portugal’s case, that amounts to some 613 million Euros. The EC will formally notify EU finance ministers, whom then have until December 1 to assess Portugal’s finances. If they reach consensus that Portugal has broken the rules, they will have the opportunity to suggest how it can bring deficit to under three percent of GDP. To dismiss talk of sanctions, this scenario will only be considered if Portugal ignores suggestions put forward by ministers. For now, there is a stay of execution. (640)

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