Euro-area Finance Ministers believe that the fiscal stance in the euro area should remain expansionary in 2021 and 2022, in a statement they adopted on Monday 15 March.
We are united in our approach to deploying “the necessary level of fiscal support” until the health crisis is overcome and the economic recovery is “firmly” entrenched, the Eurogroup stresses. They then added, “Premature withdrawal of fiscal support should be avoided. The Eurogroup is committed to a supportive stance in the euro area in 2021 and in 2022, also taking into account the fiscal stimulus stemming from the Recovery and Resilience Facility”, the fiscal instrument at the heart of the Next Generation EU Recovery Plan.
However, the Ministers stress the importance of gradually shifting from emergency fiscal measures to more “targeted” measures to support the recovery, in particular by preventing “viable” companies from experiencing solvency problems. In addition, the European Recovery Plan should be used to stimulate productive investment and “ambitious reforms” to boost growth in the medium term. And only when the recovery is firmly entrenched will Member States need to put in place medium-term strategies to deal with high levels of public debt.
At this stage, the Eurogroup merely takes note of the European Commission’s suggestion to extend the general escape clause of the Stability and Growth Pact until the end of 2022, as the EU is not expected to return to its pre-crisis level before mid-2022 according to current economic forecasts (see EUROPE 12670/1).
A decision on this will be taken in May or June on the basis of updated data in early May.
See the Eurogroup statement: http://bit.ly/3vraAE1
On the same day, at a bilateral summit, France and Spain went further and already advocated freezing the European fiscal rules until the end of 2022.
According to the two countries, the consolidation of European public finances should not start prematurely and should not hinder the recovery as it did after the great recession. Good coordination of fiscal policies will require “differentiation” between countries, taking into account their budgetary margins on the one hand and the impact of the crisis on their economy and their capacity to rebound on the other, they add.
See the Franco-Spanish declaration (in French): http://bit.ly/3bL7wLf (Original version in French by Mathieu Bion)