Fiscal policies should continue to be appropriately differentiated according to the economic and fiscal situation of Member States, including their exposure to the crisis and the influx of displaced persons from Ukraine.
“The current economic situation and heightened uncertainty call for careful fiscal policy design, including the quality of measures, and coordination of fiscal policies in the euro area in 2023”. This is what his statement says Eurogroup which met today on Brussels.
In light of the current circumstances and as reflected in the country-by-country recommendations, the Eurogroup considers that supporting aggregate demand through fiscal policies in 2023 is not justified, but instead the focus should be on protecting the most vulnerable while maintaining flexibility adjustment, if required. Fiscal policies in all countries should aim to maintain debt sustainability as well as increase growth potential in a sustainable manner to enhance recovery, thus also facilitating the task of monetary policy to ensure price stability without adds inflationary pressures.
The fiscal policies they should continue to be appropriately differentiated according to the economic and fiscal situation of the Member States, including their exposure to the crisis and the influx of displaced persons from Ukraine.
The Eurogroup also agreed that implementing structural reforms and supporting investments for the green and digital transition remain priorities, as well as structurally diversifying energy supply and improving energy independence, taking into account the REPowerEU initiative and making effective use of RRF and other EU funds where appropriate.
In addition, it is pointed out that Declaration of Versailles sets out an agenda to strengthen defense capabilities, reduce energy dependencies and build a stronger economic base to be promoted individually by Member States and collectively at European level.
“Broad-based fiscal measures, such as across-the-board tax and excise cuts, were intended to cushion the impact of soaring energy prices nationally, but these should be temporary and increasingly adjusted to target the most vulnerable”points out the Eurogroup.
It is also pointed out that “income measures are, in principle, preferable to price measures”. It is recognized that the negative impact on incomes due to high energy prices cannot be permanently addressed through compensatory fiscal measures, but investments in energy efficiency and the development of environmentally sustainable local energy sources will be required in the medium term.
In the same statement the Eurogroup points out: “Russia’s war of aggression against Ukraine, in the wake of the global pandemic, has significantly changed the geopolitical and economic context. Through the impact on international trade, the impact of the war on the economies of euro area member states was felt through higher energy, food and raw material prices, adding to inflationary pressures and limiting growth prospects.”. It is also recalled that Member States’ policies must remain flexible and ready to adapt to rapidly evolving conditions as required.
Finally, it is noted that “while our economies remain resilient, supported by our important policy actions at EU, euro area and national level, global risk factors, including those related to war, pandemic and financial market volatility, remain elevated.”
RES-EMP
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