Euro area Finance Ministers will review, at a face-to-face meeting on Friday 21 May in Lisbon. the macroeconomic and fiscal situation, but will not adopt a specific declaration.
According to the European Commission’s spring economic forecast, the economic rebound will be stronger than expected (+4.3% of GDP) in 2021 (see EUROPE 12719/2). The gradual lifting of health restrictions, made possible by the Covid-19 vaccination campaigns, will boost consumption. But downside risks remain, including the potential impact of variants of the pandemic virus.
Joined by the Chair of the European Parliament’s Committee on Economic and Monetary Affairs, Irene Tinagli, the ministers will stress the need for continued public support for the economy.
On Wednesday 19 May, an EU source recalled that the Eurogroup is advocating for a positive fiscal stance in 2021 and 2022 (see EUROPE 12678/5). “This will not be called into question”, the source stressed, noting that “uncertainties” are too great at this stage to advocate for a return to fiscal consolidation.
The Commission is expected to make a formal proposal in June on the continued activation of the Stability Pact escape clause.
However, as the economic recovery strengthens, Member States will be asked to gradually shift their emergency public support to focus more on the sectors that have suffered most from the pandemic and to stimulate an economic recovery driven by the green and digital transitions.
This is a delicate phase. On Wednesday 19 May, the ECB warned of considerably higher insolvency rates than before the pandemic when public support was withdrawn, especially in countries with a highly developed service sector.
Conversely, another challenge is to avoid providing excess capital to ‘zombie’ firms that would no longer be viable, but artificially kept alive. However, the question of the criteria for identifying this type of firm remains.
The approach is therefore to move gradually from a situation where jobs are preserved to one where workers develop their skills and move into high-growth sectors, says the Commission in a document that will serve as a basis for ministerial discussions.
See the Commission document: https://bit.ly/3fzKaZX
Banking Union. It should also be noted that the Eurogroup will take stock of operational aspects related to the banking union in the euro area, in the presence of the Chairs of the Single Supervisory Board (SSB) and the Single Resolution Board (SRB).
In a preparatory note, the SRB states that the Single Resolution Fund (SRF), the financial arm of the ‘resolution’ part of the banking union, will attain an increase of €11 billion by July, bringing the total endowment of the fund to almost €53 billion.
See the SRB note: https://bit.ly/3u65ZFn
Lastly, the Eurogroup will adopt, on Friday, a revised work programme for the second half of 2021. (Original version in French by Mathieu Bion)