The Eurogroup will take stock of the macroeconomic situation in the euro area, and in particular the sharp rise in energy prices in the European Union, on Monday 4 October in Luxembourg.
No operational decisions will be taken, as the ball is in the court of the European Commission, which is preparing a ‘toolbox’ of European measures to tackle a global phenomenon (see EUROPE 12796/9).
Rising energy prices are the main factor behind the rebound in inflation observed since the beginning of 2021. ECB President Christine Lagarde told MEPs on Monday 27 September that the surge was temporary and should subside during 2022 (see EUROPE 12799/14), unless bullish factors such as equipment and raw material shortages persist.
Ministers will discuss the implications of rising inflation for growth and national budgets, an EU source said on Wednesday 29 September. She noted that the ECB’s position on the temporary nature of high inflation was shared.
RRF. The Eurogroup will discuss how the national recovery plans under the Next Generation EU Recovery Plan integrate the euro area dimension.
A Commission note analyses four elements: balancing budgetary support and long-term sustainability of public finances, fostering convergence in the euro area through the European Recovery Plan, modernising the institutional framework, and enhancing financial stability. It notes that although the average fiscal stance in the Eurozone is expansionary at 1.0% of GDP over 2021 and 2022, four countries—Luxembourg, Estonia, Ireland, and the Netherlands—have already started to consolidate their public finances.
See the Commission’s note: https://bit.ly/3ihL9QF
Banking Union. The 27 EU Finance Ministers will take stock of the banking union in the euro area on the basis of presentations by the ECB as the single banking supervisor and the Single Resolution Board (SRB), the European authority responsible for resolving a failing banking group.
According to the ECB, the average level of non-performing bank loans fell further in the first quarter of 2021, stabilising at 2.54% of total bank outstandings compared with 3.22% at the end of 2020. Nevertheless, it notes that other indicators point to a deterioration in the quality of bank assets. It notes that the massive injection of liquidity into the financial system has led to emerging risks, such as an increase in leveraged debt and increased opacity of transactions.
See the ECB presentation: https://bit.ly/2WouxyT
The Single Resolution Board will detail its work programme for 2022, a key year in the phasing-in of the rules requiring that full resolution is possible for any banking group supervised by the ECB from the end of 2023.
See the presentation of the Resolution Council: https://bit.ly/3ul9s4Z
In June, the Eurogroup was unable to adopt a detailed work programme on the completion of the Banking Union, partly because of the upcoming German parliamentary elections (see EUROPE 12743/8). An agreement is hoped for by the end of 2021 to relaunch the momentum.
Greece. Ministers will be briefed on the findings of the 11th post-bailout monitoring report on Greece. The report finds that Athens has met its commitments, although the source says that more needs to be done to reform the financial system. A 12th report is expected in November.
Finally, the ministers will prepare the autumn meetings of the G20 Finance and International Financial Organisations. They will also discuss their work programme for 2022.
Stability Pact. Reflection on the revision of the Stability and Growth Pact is not on the agenda of the Eurogroup.
Nevertheless, ministers are working on the assumption that the Commission will relaunch the work “before the end of October”, the source said.
On Tuesday, at a conference organised by the New Economics Foundation, Paschal Donohoe said that the Eurogroup, which he chairs, would discuss the economic governance framework “later this year” and adopt a statement on fiscal policy for the coming year. (Original version in French by Mathieu Bion)