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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