The Eurozone finance ministers ended up today in agreement on the fiscal policy orientation for 2025.

According to his statement Eurogroupthe fiscal stance in the euro area in 2025 will be “slightly accommodative”, but policies should remain flexible, given the prevailing uncertainty.

The Eurogroup welcomes the political agreement reached in February 2024 on a comprehensive reform of the EU’s economic governance framework and looks forward to its early approval by the co-legislators. Work continues to prepare for the implementation of the revised framework once it enters into force.

While the economy entered 2024 with a weak base, the Eurogroup points out, the conditions appear to be in place for economic activity to pick up in the euro area in 2025. The labor market remains strong. Inflation is on the decline and is expected to be close to the ECB’s target in 2025, while the effects of tighter monetary policy are working their way through the economy. However, risks to the economic outlook remain as global uncertainty weighs on economic expectations.

The Eurogroup stresses that the eurozone faces multiple fiscal demands alongside the need to continue to rebuild fiscal buffers. “The reformed framework is designed to strengthen debt sustainability and promote sustainable and inclusive growth through structural reforms and investment, while encouraging national ownership and strengthening enforcement. We are committed to ensuring its consistent and rapid implementation during this year,” the eurozone finance ministers point out.

“Based on the latest available data, the requirements of the revised economic governance framework will translate into an overall slightly accommodative fiscal stance in the euro area in 2025,” the Eurogroup stresses, adding: “This would be appropriate, in light of the current macroeconomic outlook, the need to continue to strengthen fiscal sustainability and to support the ongoing deflationary process, while policies must remain flexible in the face of prevailing uncertainty.”

Then the finance ministers of the eurozone emphasize the following:

“We will continue to pursue ambitious structural reforms and maintain and, where necessary, increase the level of investment, including in common priority areas such as the green and digital transition, as well as defense capabilities, funded by national and Community funds , including the Recovery and Resilience Facility (RRF). We are committed to strengthening our efforts to improve the efficiency, quality and composition of public spending. In line with our statement in December, we will continue to phase out remaining energy support measures as soon as possible in 2024 and use the associated savings to reduce government deficits.

We will take these considerations into account when preparing the medium-term fiscal-structural plans, including the reform and investment commitments of the Recovery and Resilience Plans, and the budgets for the coming year, under the revised governance framework. In this context, we look forward to further guidance and discussion by the Commission with the Member States in order to ensure the effective preparation and predictable and transparent evaluation of the medium-term fiscal-structural plans.”