Brussels postpones decision on excessive deficit in Portugal, Spain until July

The European Union's executive arm postponed its decision on whether Portugal and Spain should be fined for exceeding their respective goals for deficit reduction in 2015 and 2016 until July.

Madrid missed the target agreed with Brussels for slashing its 'excessive' government spending to 4.2% of gross domestic product in 2015, which finally came in at 5.1%, partially due to overspending by some regions and statistical 'one-off's', but also by an attempt to give the economy a boost ahead of the last national elections.

Spain had been also been asked to reduce its deficit to 2.8% of GDP, which was now expected to reach 3.9%.

"The Commission recommends to the Council to recommend a durable correction of the excessive deficit in 2016 and 2017 respectively, by taking the necessary structural measures and by using all windfall gains for deficit and debt reduction," the Brussels-based European Commission aid in a statement.

In an interview with the Financial Times on Wednesday, Spanish Prime Minister Mariano Rajoy promised new tax cuts - to both corporate and personal income tax rates - to austerity-weary Spaniards if re-elected and fiscal revenues continued to rise.

Rajoy pointed to the fact that Madrid's tax-take grew last year despite the tax cuts which were approved and the fact that the deficit had been slashed from the level of 10.4% of GDP at which it stood in 2012 to justify his decision.

"We lowered the deficit by 4.3 percentage points in four years, even though we spent two years in recession [...] No one can say Spain is not willing to comply with the rules of the game and do things well," he told the FT.

As of 14:22 BST the yield on the benchmark 10-year Spanish government bond was up by two basis points to 1.58%.