Geopolitical instability and the risk of escalation in the Middle East creates a difficult outlook for the economy, Economy Commissioner Paolo Gentiloni said today at the Eurogroup Council in Luxembourg.

The effects of geopolitical instability are becoming visible in trade and oil prices, P. Gentiloni said, noting that “geopolitical uncertainty affects our economies.” At the same time the eurozone is showing a “modest growth”, around 0.8% this year, the Italian Commissioner said. “We will present our economic forecasts in November, but we more or less believe that our previous forecast of 0.8% growth will not be too far from reality, despite the difficult situation,” he said.

P. Gentiloni estimated that the impact so far on the EU economy is “limited”. “We haven’t seen a big economic impact,” despite tensions in the Red Sea caused by Yemen’s Houthi rebels, he said. He said, however, that the rise in oil prices over the past ten days, linked to the prospect of tension in Iran, could have an impact on inflation, although he said: “not yet, at the moment inflation is falling.”

One of the main topics that will be discussed today at the Eurogroup is competitiveness and the Draghi report. The aim is to adopt a declaration in November on the follow-up to this report in the next political cycle of the European Commission. “Real decisions are needed” and not an “a la carte” use of this report’s findings, P. Gentiloni said. He admitted that the “political climate is as always difficult and there are different views” but stressed that “if we are aware of the urgency described in the report, we will manage to bridge our differences and implement its road map”.

In addition to competitiveness, the finance ministers of the eurozone countries will today discuss the Capital Markets Union (CMU) and the digital euro.