Portugal, Spain face prospect of EU budget fines

"Both Portugal and Spain weren't in compliance with the rules and so it's justa matter of fact that that finding will be made and should be made", Ireland's Noonan said.

The European Commission will have an additional 10 days to weigh their appeals and put forth a penalty recommendation.

Last week, the Commission's Vice President Valdis Dombrovskis recognized efforts at reforms and fiscal adjustments in both countries but said that lately they had "veered off track in the correction of their excessive deficits and have not met their budgetary targets". Last week, the Commission said that Portugal had not corrected its "excessive" deficit by the deadline it was given of 2015 and that Spain was unlikely to correct its deficit by the 2016 deadline.

EU Economic Affairs Commissioner Pierre Moscovici said the June 23 referendum may lower gross domestic product growth by between 0.2 percent and 0.5 percent over the next year and a half.

Dijsselbloem said that a decision should come "as soon as possible" in order to give "clarity and certainty".

Bailed-out Portugal, long considered a star reformer, sharply cut its budget deficit from close to 10 percent of GDP in 2010 to 4.4% a year ago, but that still overshoots targets. Following the meeting, Dijsselbloem took a slightly more conciliatory stance with the need to work on solutions should any liquidity or capital needs arise without breaking rules.

European Union finance ministers on Tuesday threatened Spain and Portugal with fines for their deficit spending.

The ministers took the rare step despite fears that too much austerity by Brussels will further stoke anti-EU populism after the Brexit vote.

On Monday, German finance minister Wolfgang Schaeuble repeated that "all agree that the rules must be applied".

After the meeting, Portugal's Mario Centeno said that zero sanctions would be "a positive result". Spanish minister Luis de Guindos said sanctions would be "sheer nonsense".

At the same time, the ministers highlighted the flexibility within Europe's fiscal rulebook to spare offending euro-area countries fines as high as 0.2 percent of their GDP and a suspension of European regional funds of up to 0.5 percent of their GDP. The debate will intensify political tensions within Spain and Portugal with Spain still not having a government in place.

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