Eurozone keep budget rules looser for longer amid war fallout

Well there are going to be important discussions concerning the economic and fiscal situation and developments in the EU. As you know earlier today the European Commission presented the spring European Semester package, so we're looking forward for first exchange of use on those topics. Even though it will be probably a more structured discussion and the European Semester will follow later as it's just this morning that we presented the package.

And in today's inclusive Eurogroup we will be working further towards an agreement on the banking union on the work plan on the Banking Union where you know as President of Eurogroup aims to conclude those discussions in June. So from the Commission side we are very much willing to support.

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EU Finance and Economy Ministers of the Eurogroup meet on 23 May 2022 in Luxembourg. The meeting is chaired by Paschal DONOHOE, President of the Eurogroup. Ministers discuss macroeconomic and fiscal developments in the euro area, including the European Commission Spring Forecast. The upcoming vacancy of the Managing Director of the ESM is addressed. Discussions are held on a draft work plan for the Banking Union.

EU Finance and Economy Ministers of the Eurogroup meet on 23 May 2022 in Brussels. The meeting is chaired by Paschal DONOHOE, President of the Eurogroup. Ministers discuss macroeconomic and fiscal developments in the euro area, including the European Commission Spring Forecast. They also focus on the upcoming vacancy of Managing Director of the ESM and the Banking Union.

The Eurogroup will try to reach an agreement on a work programme to complete the banking union in the euro area by 2030 in Luxembourg on Thursday 16 June. The European Union has moved to prolong looser limits on spending by member countries for an extra year in a bid to counter the economic fallout from Russia’s war in Ukraine.

#eudebates the unique initiative aiming to promote debate, dialogue, knowledge, participation and communication among citizens. #EURO #Banks #Economy #Currency #BankingUnion #Eurozone #Eurogroup

The European Commission recommended on Monday suspending the EU’s regular rules on national budget discipline through 2023. The 27-nation bloc’s executive arm said member countries need the longer fiscal flexibility to tackle heightened economic risks since the Russian invasion on Feb. 24.

The EU deactivated its full controls on national debt levels in 2020 as a response to the COVID-19 pandemic. That laxer framework was due to end at the end of this year. The planned extension until the start of 2024 comes as EU countries face a drop in energy trade with Russia, a surge in inflation and many disruptions to supply chains.

“Our economy is living through a second external shock — the second in two years,” European Economy Commissioner Paolo Gentiloni told reporters in Brussels. “The outlook is subject to downside risks and very high uncertainty.”

The European Commission’s recommendation, which needs the approval of EU finance ministers, seeks to address short-term spending needs by member countries to aid their economies without undermining a rulebook meant to prevent budget deficits from soaring to levels that triggered the Greek debt crisis in 2009.

A week ago, the commission slashed its forecasts for EU economic growth to 2.7% this year and 2.3% in 2023. Its previous outlook, published before Russia’s full-scale attack on Ukraine, foresaw EU growth of 4% this year and 2.8% in 2023.

Last year, the bloc’s economy expanded 5.4% following a deep recession prompted by the COVID-19 pandemic. EU gross domestic product shrank 5.9% in 2020.

The plan to prolong the looser EU fiscal framework for an extra year comes amid expectations that inflationary pressures will prompt the European Central Bank in coming months to end years of loose monetary policy — including record-low interest rates — meant to help fuel economic activity in the 19-nation zone that uses the shared euro currency.

“As we navigate the new period of turbulence caused by Russia’s invasion of Ukraine, governments must also have the flexibility to adapt their policies to unpredictable developments,” Gentiloni said. “We are far from economic normality.”

The finance ministers of Germany and the Netherlands, which are traditional defenders of budget austerity across Europe, signaled no intention to try to torpedo the European Commission recommendation. Nonetheless, they urged spending restraint by EU countries.

“Should it be agreed, the ability to spend more doesn’t mean one should,” Dutch Finance Minister Sigrid Kaag told reporters in Brussels at a meeting with her euro-area counterparts. “Debt sustainability and debt reduction in a transparent and clear manner should also take place.”