EU flexes its new oversight muscles, proposes fining Spain for fudged deficit figures

MADRID – European Union authorities have used their increased financial oversight of national governments for the first time, recommending Thursday that Spain be fined almost 19 million euros ($21 million) for manipulating economic statistics.

The European Commission, the EU’s executive branch, has won new powers in recent years to monitor the finances of European governments. Much of the blame for the continent’s recent debt crisis was placed on misreported and unreliable government accounting, especially by Greece which turned out to have much bigger debts than the EU thought.

The Commission said an investigation found that the Spanish regional government of Valencia was “seriously negligent” in recording health expenditure and failed to use proper accounting procedures, leading to Spain’s “incorrect reporting” of its national deficit data in 2012.

However, the Commission said the misrepresentation was “the result of serious negligence rather than intentional.”

It said Spain co-operated with the investigation, which began 10 months ago, and that the deficit numbers were corrected later in 2012. The misreporting stopped that year, it added.

The sanction must be approved by EU leaders.

Since 2011, reforms of European economic governance policies have granted the Commission wider powers to ensure budget discipline and take swift action against offenders.