Both countries have failed to take “effective action” to tackle their deficits but the Commission will refrain from sanctioning them for now, according to EU officials familiar with the plans who spoke to Reuters and Politico.
 
The move would represent a temporary compromise in the aftermath of the Brexit referendum. Italian Prime Minister Matteo Renzi last week openly urged not to fine Portugal and Spain, while Germany's central bank Jens Weidmann over the weekend called instead for not relaxing EU fiscal rules.
 
The Commission is expected to instead give Spain and Portugal until July 27 to propose effective remedies in order to escape financial penalties foreseen by EU rules, although these have never been applied.
 
The Commission decided in May to give Spain and Portugal one more year to reduce their deficits, but under pressure from its more strict members, said it would give its final assessment in July on whether sanctions were needed for past breaches.
 
Both Spain and Portugal last year breached budget rules which require keeping public deficits below 3% of Gross Domestic Product. Of course, they were not the only member states with such troubles.
 
The Commission will likely maintain a cautious approach as Spain remains entangled in complicated post-elections talks to form a government, and Portugal continues facing huge political hurdles to cut public expenses.