Portugal will not take any additional austerity measures to reduce the budget deficit despite the threat of EU sanctions, the Portuguese newspaper Publico reported Wednesday.

"There will be no extra measures," said Prime Minister Antonio Costa in the interview.

EU finance ministers gave Portugal 10 days to present arguments on why they should not be hit with fines for failing to whittle down their public deficits. Spain is also at a risk of being fined.

Member states are supposed to limit their deficits to 3 per cent of gross domestic product (GDP) under the EU's Stablility and Growth Pact, rules meant to ensure that member countries have "sound public finances and coordinate their fiscal policies."

Portugal was supposed to reach that goal last year, while Spain has until the end of 2016, but is off track. The fiscal efforts by the two former bailout recipients fell "significantly short of what was recommended," EU finance ministers said in a joint statement.

"This is about the deficit in 2015," Costa said in the report. "And we can't change anything on the 2015 deficit in 2016."

Costa warned that sanctions against Lisbon and Madrid would be "unjustified" and that their effect would be "profoundly counterproductive. Lisbon is hoping for a symbolic penalty that won't require a financial payout.

"I hope that in the end, common sense prevails," Costa said.

The two cases have left the EU walking a tightrope between credibility in applying budget rules and ensuring that its actions do not hamper the bloc's fragile economic recovery, which is already set to be battered due to British plans to leave the EU.

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