Since Monday 28 February, coordination meetings between the Finance Ministers of the European Union and the G7 countries have been taking place with the aim of presenting a fourth package of economic and financial sanctions aimed at suffocating Russia’s economy after its invasion of Ukraine.
On Tuesday 1 March, in the presence of Ukrainian Finance Minister Sergii Marchenko, the G7 Finance Group exchanged views “on the implementation of the current sanctions and we also exchanged proposals on additional measures that could be taken”, said German Finance Minister Christian Lindner, whose country holds the G7 presidency in 2022.
The aim was to take stock of the sanctions already imposed on the assets of the Bank of Russia and the Russian banking sector (see EUROPE 12900/8). These measures aim, no more and no less, to “cause the collapse of the Russian economy”, said the French minister, Bruno Le Maire, speaking to Radio France. According to him, “the economic and financial balance of power is totally in favour of the EU, which is discovering its economic power”.
Announced as imminent, a new set of measures will include the expulsion of a number of Russian banks from the Swift system, the financial architecture that enables the exchange of information on interbank payments on a global scale between 11,000 financial institutions.
“Negotiations are ongoing at EU level”, said a French source. According to this source, it is necessary to foresee that the capacity of the banking system to handle the exit of the targeted banks from the system is a procedure that implies “delays”. The source recalled that such a measure is “exceptional”, as it had only been used twice since the 1970s: against North Korea and Iran. Even if there are alternative mechanisms, the Iranian example shows that when banks are excluded from the Swift system, this has “virtually put an end to transactions”, noted this financial source.
On Wednesday, EU finance ministers will meet by video conference to continue the coordination exercise and assess the impact of the economic and financial sanctions on the European economy.
The European Commission will present its guidelines for the preparation of the Member States’ draft 2023 budgets. With the uncertainty created by the war on the EU’s eastern border and the increased risk of inflation driven by energy prices, questions are once again being asked about the return of the Stability and Growth Pact.
The Pact’s escape clause was activated in response to the European economy coming to a standstill at the outbreak of the pandemic in spring 2020 and is due to be deactivated in early 2023.
“I don’t think we’re in the same situation at all”, said a second French source. This source did not rule out “negative consequences” of the Russian invasion on European growth. However, these impacts would occur on “sound fundamentals and a recovering European economy”.
On the other hand, a reflection could be opened at the European level on the creation of a fund to help European countries face the energy crisis. (Original version in French by Mathieu Bion)