| Today, the Council adopted conclusions on the Fiscal Sustainability Report 2021. The Council (Ecofin): WELCOMES the Commission's "Fiscal Sustainabili… |
| ● Council of the EU | | | 12/07/2022 13:34 | Press release | | | | | Today, the Council adopted conclusions on the Fiscal Sustainability Report 2021. The Council (Ecofin): - WELCOMES the Commission's "Fiscal Sustainability Report 2021", which updates the assessment of fiscal sustainability risks across the European Union, based on an enriched multidimensional approach and drawing from the 2021 Ageing Report. ACKNOWLEDGES the methodological improvements introduced in the report, notably the simplification and the refinements of the Debt Sustainability Analysis also by taking into account the impact of the NextGenerationEU induced investments on medium-term GDP growth and the presentation of an analysis illustrating climate change-related fiscal risks into the analysis, while noting that the potential impact of the NextGenerationEU induced reforms on medium-term GDP growth has not been taken into account in the analysis so far. REAFFIRMS the different functions of the Commission fiscal sustainability analysis, including the identification of potential fiscal risks in Member States to inform policy requirements and recommendations in the context of the Stability and Growth Pact and the European Semester. ACKNOWLEDGES that the update within the Commission Spring package overall confirms the findings of the Fiscal Sustainability Report 2021, with few changes observed in the risk classification.
- TAKES NOTE of the Commission’s assessment that overall, there appear to be limited imminent fiscal risks in most Member States, although fiscal and macroeconomic vulnerabilities remain. NextGenerationEU funding and the expected growth impact of investments under the Recovery and Resilience Facility play an important role in mitigating short-term risks. However, high debt levels, which further increased as a consequence of the COVID-19 crisis, and very negative net international investment positions in some Member States represent an important source of short-term vulnerability.
- TAKES NOTE that over the medium term, under unchanged policies, the Commission’s assessment shows that several Member States face high risks, mainly due to elevated government debt levels and increasing debt trajectories, reflecting a weak initial fiscal position and, in some cases, projected increases in age-related public spending, as well as sensitivity to adverse shocks, including a less favourable interest-growth differential. RECOGNISES that additional factors are considered in the assessment: on the one hand, contingent liabilities, notably linked to government guarantees, are an additional source of risk; on the other hand, the improved structure of government debt, in particular through extended average maturities, and the expected favourable impact of structural reforms under the Recovery and Resilience Facility represent mitigating risk factors. NOTES the exceptional uncertainty on the economic outlook created by the Russian war of aggression against Ukraine and the challenges arising from the elevated inflation levels.
- TAKES NOTE that over the long term, under unchanged policies, the Commission’s assessment shows that several Member States face high risks, mainly due to projected increases in costs of ageing, and in some cases due to vulnerabilities linked to elevated government debt levels. RECALLS the important challenges for the sustainability of public finances over the long-term imposed by demographic change.
- RECOGNISES that high levels of public debt may hamper economic growth and reduce the ability of Member States to provide counter-cyclical stabilisation in cases of further economic downturn, and may imply negative spillovers particularly within the euro area.
- HIGHLIGHTS that the findings of the Fiscal Sustainability Report 2021 call to pursue, once economic conditions allow, fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment, not least to meet the green and digital transitions. RECOGNISES that the implementation of planned structural reforms, including under the Recovery and Resilience Facility, and in line with the country-specific recommendations issued under the European Semester, will be an important element in reducing fiscal sustainability risks. HIGHLIGHTS that the appropriate combination of policies to deal with fiscal sustainability challenges should focus on enhancing growth, sound public finances, including through reforming pension, health care and long-term care systems, and on ensuring macro-financial stability. NOTES that the climate change challenge calls for Member States to increasingly consider its implications in budgetary planning, alongside with effective mitigation and adaptation policies.
- REAFFIRMS the need to continue appropriate policy action on all age-related areas taking into account country-specific situations, while avoiding measures that reverse sustainability-enhancing reforms already undertaken. These include taking further steps to raise the effective retirement age, including by promoting longer and higher participation in, and avoiding early exit from, the labour market, while taking into account the evolution of life expectancy in the design of pension systems.
- CALLS ON Member States, especially those found at high sustainability risk over the medium term, for the period beyond 2023, to pursue a fiscal policy aimed at achieving prudent medium-term fiscal positions and ensuring credible and gradual debt reduction and fiscal sustainability in the medium term through gradual consolidation, investment and reforms in line with the Country-Specific Recommendations. INVITES Member States and the Commission to take into account the findings of the report in their analyses, subsequent policy requirements and recommendations in the framework of the Stability and Growth Pact and of the European Semester. These strategies and developments of the sustainability of public finances will continue to be regularly monitored by the Council and the Commission, including by incorporating in their assessment new developments in macroeconomic and financial conditions, fiscal policies and structural reforms, notably in the areas of pension, healthcare and long-term care systems.
- INVITES the Commission to undertake its regular in-depth overall assessment of the sustainability of public finances by early 2025 including using the updated age-related expenditure projections in the forthcoming 2024 Ageing Report, and to inform relevant Council preparatory bodies timely of relevant revisions to the underlying methodology of the Debt Sustainability Analysis. This includes improving further the methodologies for assessing the sustainability of public finances and continuing its work, in cooperation with the Member States, on the analysis of climate change related fiscal risks. INVITES the Commission to regularly update the Commission's sustainability assessment in between (through the Debt Sustainability Monitor). The Economic and Financial Committee and the Economic Policy Committee should report back to the Council on the basis of the in-depth overall assessment.
Council conclusions Fiscal Sustainability Report 2021 European Semester (background information) |
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| Today, the Council adopted conclusions on the 2022 in-depth reviews under the macroeconomic imbalance procedure. The Council (Ecofin): RECALLS that t… |
| ● Council of the EU | | | 12/07/2022 13:20 | Press release | | | | | Today, the Council adopted conclusions on the 2022 in-depth reviews under the macroeconomic imbalance procedure. The Council (Ecofin): - RECALLS that the EU economy is recovering from the COVID-19 crisis, while uncertainties remain high and rising, in particular due to the surging energy and commodity prices and other impacts from the Russian war of aggression against Ukraine. STRESSES that the full and timely implementation of the Recovery and Resilience Facility via the reforms and investments scheduled in the national recovery and resilience plans is crucial, and would increase the resilience of the EU economies, enhance potential growth and reduce macroeconomic vulnerabilities.
- UNDERLINES the importance of the continued close EU economic policy coordination, including detecting, preventing and correcting macroeconomic imbalances that hinder the proper functioning of Member State economies, the Economic and Monetary Union or the European Union economy as a whole. WELCOMES the publication of the 2022 in-depth reviews in the context of the Macroeconomic Imbalance Procedure.
- ACKNOWLEDGES that with the recovery during 2021, macroeconomic imbalances overall started to recede again, after a setback due to the COVID-19 crisis, yet in an environment of high uncertainty. NOTES that public debt-to-GDP ratios remain elevated and largely above their pre-COVID-19 levels (despite some reduction), mostly due to the impact of the pandemic-induced recession and due to the necessary public support to cushion the impact of the shock and to sustain the economy. TAKES NOTE of the heterogeneity of private debt developments across Member States. Despite private debt falling in 2021 in most Member States, it remains high and above pre-COVID-19 levels in many cases. UNDERLINES that rising prices put pressure on real incomes, which together with tighter financing conditions and exchange rate volatility may weigh on debt servicing by corporations, households and governments, which should be more rigorously monitored going forward.
- RECOGNISES that external positions are improving again. Current account deficits of some net-debtor countries with significant cross-border tourism sectors narrowed somewhat, but still exceed their pre-COVID-19 levels. NOTES that large current account surpluses in some Member States persist despite some temporary reduction during the pandemic, potentially with cross-border relevance. Most of the large negative net international investment positions started to improve in 2021. ACKNOWLEDGES that higher energy and commodities import prices are likely to affect the current account balances. UNDERLINES the need to closely monitor wage growth and inflation developments that may raise competitiveness concerns, including within the euro area.
- TAKES NOTE of the strong growth of house prices in many Member States, with buoyant demand meeting constrained supply. RECOGNISES that households and banks may display increased vulnerability to downward corrections of house prices, in particular in Member States combining strong signals of house price overvaluation with high and rising household indebtedness.
- ACKNOWLEDGES the resilience of the banking sector during the pandemic and its aftermath, benefitting from past reforms. RECOGNISES that sovereign bond volatility may constitute a potential short-term vulnerability, requiring close monitoring. NOTES that Member States with high legacy non-performing loans continued to reduce them, sometimes substantially.
- CALLS for vigilance and timely policy action, as necessary, as regards soaring inflation rates, mainly driven by the sharp increase of energy and food prices, supply disruptions as well as strong demand, to protect the most vulnerable groups in a targeted and temporary way, and to prevent the deterioration and emergence of macroeconomic imbalances. UNDERLINES the urgency to address the ongoing challenges related to the digital and green transitions, including reducing the reliance on fossil fuels and shifting fossil fuel imports away from Russia, for strengthening the resilience of the EU economies and reducing current and future macroeconomic imbalances.
- AGREES with the Commission analysis in the 2022 in-depth reviews that Ireland and Croatia are no longer experiencing imbalances. ACKNOWLEDGES that debt-to-GDP ratios have declined significantly over the years in these Member States and continue to display strong downward dynamics. AGREES that Greece, Italy, and Cyprus continue to experience excessive imbalances. AGREES that Germany, Spain, France, the Netherlands, Portugal, Romania, and Sweden continue to experience imbalances.
- CONSIDERS that the 2022 in-depth reviews present a high quality and comprehensive analysis of the country situation in each Member State under review. NOTES that the Commission has applied relevant analytical tools, complemented by substantive qualitative analysis, in view of the specific challenges of each economy. WELCOMES the increased importance of forward-looking analysis in the context of the current high uncertainties and the assessment of relevant policies. UNDERLINES the continued high relevance of the assessment of cross-country spillover effects.
- UNDERLINES that the Macroeconomic Imbalance Procedure is a central procedure within the European Semester. CALLS for continued implementation of the Macroeconomic Imbalance Procedure, including the close monitoring of existing and possible emerging new imbalances, distinguishing between cyclical and structural factors, and of policy progress and needs. STRESSES the importance of timely regular comprehensive multilateral reviews of macroeconomic imbalances and the need to further incorporate sensitivity analyses to consider the fast-changing and unpredictable global environment. Without prejudice to the outcome of the economic governance review, UNDERLINES the need to resume the traditional European Semester calendar, including early publication of in-depth reviews.
- REITERATES that the Macroeconomic Imbalance Procedure should be used to its full potential and in a transparent and consistent way, ensuring Member States’ ownership of the procedure, including the activation of the Excessive Imbalance Procedure where appropriate. NOTES that under the present circumstances, the Commission has not deemed appropriate to launch the Excessive Imbalance Procedure. MAINTAINS that whenever the Commission concludes that a Member State is experiencing excessive imbalances, but does not propose to the Council the opening of the Excessive Imbalance Procedure, it should explain clearly and publicly its reasons. RECALLS that the Council will discuss the Macroeconomic Imbalance Procedure as part of the review of the economic governance.
BackgroundIntroduced in 2010, the European Semester enables EU member states to coordinate their economic, fiscal and employment policies throughout the year and address the economic challenges facing the EU. Council conclusions European Semester in 2022 (background information) European Semester (background information) |
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| The Council today decided to provide € 1 billion of additional macro-financial assistance (MFA) to Ukraine, as a matter of urgency. Together with the… |
| ● Council of the EU | | | 12/07/2022 11:20 | Press release | | | | | The Council today decided to provide € 1 billion of additional macro-financial assistance (MFA) to Ukraine, as a matter of urgency. Together with the emergency MFA of € 1.2 billion disbursed earlier this year, the total macro-financial support from the EU to Ukraine since the start of the war now reaches € 2.2 billion and it is expected to increase further in the coming months. This financial assistance complements other EU support to Ukraine in the humanitarian, development, customs and defence fields. "The continuation of material and financial aid is not an option, but our duty. Therefore I am very pleased that we have fast-tracked the decision to provide € 1 billion of macro-financial assistance. This will give Ukraine the necessary funds to cover urgent needs and ensure the operation of critical infrastructure."
Zbyněk Stanjura, Minister of Finance of Czechia |
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