Eurozone finance ministers will exchange views on the budgetary position of the 19 countries for 2022 and, in an inclusive format, will reopen the issue of banking union.
European Semester. The Eurogroup will consider the appropriate budgetary stance for the euro area next year on the basis of the specific draft recommendation submitted by the European Commission at the launch of the 2022 ‘European Semester’ budgetary process (see EUROPE 12839/1).
It recommends that the Eurozone fiscal stance remains moderately expansionary in 2022 (1.0% of GDP), at a lower level than in 2021 (1.75%).
In a macroeconomic context that is still fragile and uncertain despite the strong economic recovery, such a positioning should enable Member States to continue targeted support for the sectors most affected by the Covid-19 pandemic, to maintain an adequate level of public investment through, in particular, the Next Generation EU Recovery Plan, while maintaining an objective of sustainability of public finances in the medium term.
On Monday, the ministers will hold “a first exchange of views” and will discuss the issue again “in January”, an EU source said on Friday 3 December. The recommendation for the euro area will be endorsed by the European Council in March and endorsed by the Ecofin Council in May.
See the draft recommendation for the euro area: https://bit.ly/3reFhN0
The Eurogroup will also discuss the draft budget plans 2022 that the eurozone countries (except Portugal) submitted to the European level in mid-October.
Due to the continued freezing of the Stability and Growth Pact until the end of 2022, the Commission has only issued qualitative assessments and is not asking any country to change its draft budget plan. While generally satisfied with the projects received, it nevertheless calls for a prudent execution of budgets in order to limit the growth of public expenditure, especially in countries where, as in Italy, this situation is combined with a high level of public debt.
“I expect a broad consensus” from the Eurogroup, which will issue a specific statement, the source said. The important thing, the source said, is to look precisely at the nature - investment, targeted support, structural spending - of public spending in the draft budget plans and to find the right “balance”.
As for the discussion on the budgetary guidelines for 2023, when the Stability Pact will again be in force, it will not start until next March.
Banking Union. As announced by EUROPE (see EUROPE 12847/17), the President of the Eurogroup, Paschal Donohoe, invited his counterparts to a dinner dedicated to the re-launch of the Banking Union project.
The aim is to achieve renewed political support for the completion of this project through, among other things, the establishment of a European Deposit Insurance Scheme (EDIS) and the reduction of financial risks.
In June, the Eurogroup failed to agree on a comprehensive work programme due to the proximity of the German elections (see EUROPE 12743/8). Nor will it be able to achieve this by the end of 2021, as the German government is not yet in place.
Nevertheless, according to this source, the signals coming from Berlin on the willingness of the future German authorities to continue the work at European level on the banking union are encouraging.
Mr Donohoe will then send a letter to the leaders of the eurozone countries, who will meet on the margins of the EU summit on Friday 17 December.
IMF ‘Article 4’ report. IMF Managing Director Kristalina Georgieva will brief ministers on the international financial organisation’s regular report on the macroeconomic and financial situation of the euro area.
Greece. Ministers will be briefed on the twelfth enhanced surveillance report on Greece.
The Commission gives a positive assessment of Greek reform efforts (privatisation, competition in the electricity market). On this basis, the Eurogroup is expected to decide to grant further debt service relief to Greece of up to €767 million.
See the report: https://bit.ly/3oXhtKZ
Work Programme 2022. The Eurozone countries will approve their work programme for the coming year. They will focus on the reform of the European economic governance framework, the Banking Union, the digital euro and the international role of the single currency. (Original version in French by Mathieu Bion with Camille-Cerise Gessant)