Good evening everybody, we just had a very worthwhile Eurogroup meeting. We started our meeting with a discussion on the economic situation, which continues to be challenging due to the impact of Russia’s military aggression and all the global developments that arise from that. As always, our thoughts go out to all who are bearing the brunt of this war. We begun by the IMF giving us an overview of their most recent euro area staff visit. Listening to the Fund, to the Commission and to the ECB, it is clear that there is a common diagnosis on the challenges we face in terms of growth slowdown, inflation, shielding the most vulnerable, and getting back to a sustainable recovery. On the policies, the key part of our agenda today was to get to a common view on budget policy orientations for 2023. We achieved this, and we have issued a statement. You can read the statement in more detail and I want to outline a few points: First, the focus of fiscal policy in 2023 reflects the economic outlook and the nature of our risks – in particular, as conditions currently stand, there is consensus that supporting overall demand is not warranted and that our focus should be on protecting the most vulnerable; Second, we will aim to preserve debt sustainability and focus on how we can sustain growth in the long run. We will also avoid taking decisions that add to inflationary pressures and that complicate monetary policy transmission; There are already many schemes in place to cushion the impact of high energy prices, but we cannot collectively spend our way out of high energy prices – that is why we focused on the importance of targeting support and investing in durable solutions in terms of renewables and energy efficiency; And finally, the statement is testament to the continued commitment by euro area finance ministers to closely coordinate budgetary policies to ensure a coherent approach that can respond to different situations across member states and also to adapt to changes over time. We also had a very useful input from the European Fiscal Board and Professor Thygesen helped very much with our discussion. We then held a very constructive exchange of views on the digital euro. The ECB presented its recent work to us, on options to limit unwanted impacts on the financial sector, including outright limits or tools to disincentivise very large holdings of digital euros. We also discussed the issue of the continued use of physical cash alongside a digital euro. The Eurogroup agreed that the issuance of a digital euro should not impede the ECB’s ability to fulfil its mandate and should not impair financial stability. At the same time, we need to make sure that the digital euro can be an attractive means of payment and support innovation in a digitalised economy. A clear outcome of our discussion was that a digital euro would only complement cash, it would not replace it. In October we will discuss the fourth topic of our work plan: the business models of the various public and private actors in the future digital ecosystem. To round off the meeting, we briefly took stock on Croatia, since tomorrow the Council is set to adopt the regulation setting the conversion rate from the kuna to the euro. This is the last procedural step that is needed to allow Croatia to join the euro as of the 1st of January 2023. There was actually no need for significant discussion in our meeting – everything is going smoothly and I am very much looking forward to welcoming the Croatian Finance Minister as an observer to the Eurogroup meetings as from September. I’ll say a few words about the ESM. We took the opportunity today to convene the ESM Board of Governors to select a successor to Klaus when he reaches the end of his term. Italy decided to withdraw their excellent candidate and then we held a round of voting on the two remaining candidates, João Leão and Pierre Gramegna: they're both excellent candidates, they both have a lot of support, but none of them reached the 80% threshold. We will return to this issue again in September, when we will aim to make further progress and put in place a new managing director in time for the end of Mr. Regling’s mandate. So a wide variety of different topics discussed this evening. In particular, our agreement in a very constructive fashion on a budget statement for fiscal policy in the euro area for 2023. It's an important development and we will return to the digital euro in October, by which point we will have made further progress on the new managing director of the ESM.
| Russia’s war of aggression against Ukraine, in the wake of the global pandemic, has significantly altered the geopolitical and economic context. Thro… |
| ● Eurogroup | | | 11/07/2022 17:14 | Statements and remarks | | | | | Russia’s war of aggression against Ukraine, in the wake of the global pandemic, has significantly altered the geopolitical and economic context. Through the repercussions in international trade, the impact of the war on the economies of the euro area member states has been felt through higher prices for energy, and food and raw materials, adding inflationary pressures and dampening growth prospects. In March this year, the Eurogroup agreed on fiscal guidance for 2023, underlining the importance of continued coordination of fiscal policy in the euro area to weather the heightened risks and uncertainties, and their impact on our economy. We also concurred that our policies have to remain agile and flexible, and that we stand ready to adjust our policy stance to the rapidly evolving circumstances as needed. Since then, the macro-economic environment, including growth prospects and inflationary dynamics, has deteriorated, as confirmed by the latest forecasts of the European Commission and the ECB. While our economies remain resilient, supported by our sizable policy actions at the EU, euro area and national levels, global risk factors, including those related to the war, the pandemic and financial market volatility, remain elevated. Various supply-side constraints, including increasingly the availability of labour in some member states and sectors, could limit short-term growth. Although these developments and risks affect the entire euro area economy, the level of impact is heterogeneous across member states. The current economic situation and heightened uncertainty call for a careful design of fiscal policy, including the quality of measures, and coordination of fiscal policies in the euro area in 2023. In light of the current circumstances and as reflected in the country-specific recommendations, the Eurogroup considers that supporting overall demand through fiscal policies in 2023 is not warranted, the focus being instead on protecting the most vulnerable, while maintaining the agility to adjust, if needed. Fiscal policies in all countries should aim at preserving debt sustainability, as well as raising the growth potential in a sustainable manner to enhance the recovery, thus also facilitating the task of monetary policy to ensure price stability by not adding inflationary pressures. Fiscal policies should continue to be appropriately differentiated according to member states’ economic and fiscal situation, including as regards their exposure to the crisis and the inflow of displaced persons from Ukraine. Fiscal measures should focus on alleviating the supply-side constraints that are holding back our economies. Implementing structural reforms and supporting investment for the green and digital transitions remain priorities, while also structurally diversifying energy supplies and improving energy independence, taking into account the REPowerEU initiative and making efficient use of the RRF and other EU funds, where appropriate. Moreover, the Versailles Declaration defines an agenda to bolster our defence capabilities, reduce our energy dependencies, and build a more robust economic base that needs to be taken forward by all, individual member states and collectively at the European level. Broad-based fiscal measures, such as general reductions of taxes and excise duties, were aimed to mitigate the impact of rapidly rising energy prices at the national level, but these should be temporary and increasingly adjusted towards targeting the most vulnerable. As we prepare our national budgets for 2023, policy adjustments should preserve incentives for the energy transition. In this respect, income measures are, in principle, preferable to price measures. We will continue to coordinate our measures in this respect and take stock of our progress in the context of our Draft Budgetary Plan exercise towards the end of the year. We recognise that the negative effect on incomes due to high energy prices cannot be durably addressed through compensatory fiscal measures but will require investments over the medium term in energy efficiency and the development of environmentally sustainable local sources of energy. Although the current global context poses significant challenges, the Eurogroup has full confidence in the resilience of the euro area economies and remains fully committed to ensuring the conditions for high sustainable growth and achieving our policy objectives in a united manner. As agreed by the Leaders at the June Euro Summit, the Eurogroup will continue to closely monitor economic developments and ensure our policy response remains well-coordinated, determined and agile. Statement of the Euro Summit (24 June 2022) |
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