Populism and SGP Fines for Portugal and Spain

In a statement published on the European news platform EurActiv, Professor Friedrich Heinemann, head of the Research Department "Corporate Taxation and Public Finance" at the Centre for European Economic Research (ZEW) in Mannheim, has spoken in favour of implementing the provisions of the Stability and Growth Pact (SGP) without taking political considerations into account. If this is not done, the EU risks losing all credibility, also in future deficit procedures against possible populist governments.

Heinemann warns against a decision to refrain from punishing certain EU Member states for irresponsible national budgeting for fear of encouraging increased support of populist political groups. Heinemann's statement was made in response to conclusions drawn by the EU Economic and Financial Affairs Council (ECOFIN) that Portugal and Spain have failed to take effective action to reduce their deficits. The European Commission may now choose to impose financial penalties on the two countries, or to suspend funding from EU Cohesion Policy. In Heinemann's view, opting not to take either of these courses of action for fear of encouraging populist movements would be the wrong approach. The credibility of the newly reformed SGP would be significantly damaged just as it is put to the test for the first time.

According to Heinemann, EU rules may under no circumstances become contingent on political developments and impending elections. The decision whether to impose financial penalties on Portugal and Spain must therefore be made not in view of political factors but exclusively on the basis of the existing regulatory framework. This is the only way to limit the damage populist groups may cause, both today and in the future, if they enter governments and become responsible for budgetary policy.

For more information please contact

Prof. Dr. Friedrich Heinemann, Phone +49 (0)621/1235-156, E-Mail heinemann@zew.de