May 24, 2016 / 3:58 PM / a year ago

Deficit sanctions still possible for Spain, Portugal - Eurogroup chief

Eurogroup President Jeroen Dijsselbloem arrives at a European Union finance ministers meeting in Brussels, Belgium, January 15, 2016.Yves Herman

BRUSSELS (Reuters) - Spain and Portugal might yet face economic sanctions for their excessive budget deficits, the head of euro zone finance ministers said on Tuesday, after the European Commission gave them a reprieve last week.

Madrid and Lisbon both breach EU rules that require deficits stay below 3 percent of national gross domestic product.

The European Union's executive could have imposed economic sanctions on the two countries, but the Commission proposed last week to give them more time to plug their fiscal gaps, citing political and economic reasons.

"Sanctions are absolutely a possibility because they are in our rules and regulations and when you look at the current situation in Spain and Portugal there was a serious reason to look at sanctions," Eurogroup head Jeroen Dijsselbloem said before a euro zone finance ministers' meeting in Brussels.

The meeting will focus on Greece, but ministers may also discuss the reprieve conceded to Spain and Portugal, Dijsselbloem said.

Commission decisions on member states' budgets need the approval of EU finance ministers. They will adopt a position on last week's proposals at their next regular meeting, in June. The Commission said it would review its decisions on Spain and Portugal in July.

Dijsselbloem's line mirrors German concerns that Brussels is failing to enforce the stricter budget rules adopted by EU countries during the euro zone financial crisis between 2010 and 2013.

The Commission has given Italy wide leeway over additional spending on reforms, investments and the migration crisis, despite Rome's debt being above agreed limits and not decreasing as it should.

Last year France was given two more years to bring its deficit below the 3 percent ceiling, causing criticism from more thrifty euro zone countries.

Southern European countries have urged more flexible fiscal rules to revive the bloc's sluggish economy.

Editing by Robin Pomeroy

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