“In a gradual fiscal adjustment of Member States with high public debt and ‘if conditions allow,'” the Eurogroup agreed today.
Specifically, the Eurogroup statement on fiscal planning in 2023 states: “In order to maintain debt sustainability in Member States with high public debt, we agree that it is appropriate to launch a gradual fiscal adjustment to reduce their public debt. if conditions allow. This adjustment should be integrated into a credible medium-term strategy that continues to drive the investment and reforms needed for the dual transition and improving the composition of public finances. On the other hand, Member States with low and medium debt levels should give priority to expanding public investment where necessary. All this would contribute to the achievement of an appropriate comprehensive policy. “Therefore, all Member States should increase the resilience of their economies and promote and protect high-quality nationally funded investments to lay the foundations for high sustainable development and achieve the dual transition goals.”
In this regard, the President of the Eurogroup, Pascal Donahue, during his press conference shortly after the end of the Council, noted that during the year, the appropriate fiscal policy for the euro area should be evaluated, given that the This objective is based on current economic conditions. “We believe that it is possible for countries with high debt to be able to make gradual adjustments to their fiscal policy, and this will be combined with a certain level of growth, in order to improve their debt dynamics in 2023. From 2023 onwards, “We believe that the issue of debt sustainability will continue to be extremely important,” said Donachio. He also noted that the debt level due to the coronavirus pandemic has risen in the last two years and therefore stressed the need to strike a balance between a secure debt level and meeting the economic challenges. “This balance has been and will always be very important,” he added, expressing confidence that by reassessing fiscal policy during the year, this balance for 2023 will be achieved.
For his part, Economy Commissioner Paolo Gentiloni said that in the last two years, the pandemic crisis has brought debt to the eurozone to unprecedented levels. “The debt peak in the eurozone exceeded 100% of GDP and fell to 97.7% in 2021,” Gentiloni said, noting that in some countries the debt is very high. “Debt reduction is necessary and is of course linked to the circumstances. Debt reduction can be significant when growth is significant, as was the case in 2021 in some countries, and less so if growth is poor. “In general, I believe that this should be the goal, but in a gradual and realistic way that will not kill growth,” he said.
EU: Increased uncertainty due to war in Ukraine and risks arising from high energy prices and inflation, Eurogroup underlines in its 2023 fiscal planning statement
The growing uncertainty over the war in Ukraine and the growing risks posed by continuing supply chain problems, higher energy prices and inflation that remains high for longer than expected were underscored by the Eurogroup meeting in Brussels today.
In a statement on fiscal planning in 2023, the Eurogroup said that “after two years of the Covid-19 pandemic, the EU is facing a critical moment triggered by the unprovoked and unjustified Russian military offensive against Ukraine.” It also notes that “the Eurogroup fully supports all the actions and sanctions taken by the EU and its allies against the aggressor” and “recognizes that additional financial measures may be required to support Ukraine and defend its core values ​​in the EU”.
The Eurogroup emphasizes that “the fundamentals of the eurozone economy are strong” and that “the Commission’s winter economic forecast confirms that the economy has recovered strongly from the Covid-19 pandemic with output estimated to be above pre-crisis levels. levels by the end of 2022 in all Member States and with unemployment reaching a record low by the end of 2021, despite the continuing high uncertainty surrounding the evolution of the pandemic “.
However, uncertainty has risen sharply, eurozone finance ministers say. and inflation that remains high for longer than expected. We continue to have strong fiscal policy coordination in the euro area to address the increased risks and uncertainties, as well as the impact on our economy. Our fiscal policies must remain flexible and adaptable, and we are ready to adapt our policy stance to changing circumstances as required. At the same time, we will urgently consider specific options, based on the Commission Communication of 8 March 2022 on addressing the impact of rising energy prices on our citizens and businesses, especially vulnerable citizens and small and medium-sized enterprises. “The financial guidance agreed today by the Eurogroup will depend on the evolution of the economic situation.”
In addition, in their statement, the eurozone finance ministers stress that “based on the Commission’s winter forecast for 2022, the transition from an overall supportive fiscal stance in the euro area to a generally neutral overall fiscal stance next year seems to be the appropriate one while we are ready to react to the evolving economic situation, also in view of the high level of uncertainty “. They also note the Commission ‘s readiness to adjust its guidance as required by the Commission’ s spring proposals for the European Semester at the end of May 2022 at the latest.
At the same time, the Eurogroup emphasizes that in the light of the current assessment of the economic situation, it is necessary to differentiate fiscal strategies between Member States. “This will also help to achieve a balanced overall fiscal position in the euro area. In particular, in order to maintain debt sustainability, in Member States with high public debt, we agree that it is appropriate to initiate a gradual fiscal adjustment to reduce their public debt, if conditions allow. This adjustment should be integrated into a credible medium-term strategy that continues to drive the investment and reforms needed for green and digital transitions and improve the composition of public finances. On the other hand, Member States with low and medium debt levels should give priority to expanding public investment where necessary. All this would contribute to the achievement of an appropriate comprehensive policy. “Therefore, all Member States should increase the resilience of their economies and promote and protect high-quality nationally funded investments to lay the foundations for high sustainable development and achieve the dual transition goals.”
Finally, in connection with the review of economic governance, the Eurogroup will continue to be actively involved in this process in accordance with the work program and in cooperation with the Presidency of the Council and in the appropriate form.
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