On Monday 14 March, the European finance ministers will discuss the coordination of budgetary policies and the completion of the banking union in the euro area.
The 19 ministers will try to develop a common understanding of the macroeconomic situation, characterised by a continued surge in inflation fuelled by soaring energy prices and high levels of uncertainty generated by the Russian invasion of Ukraine.
“There are good reasons to be optimistic” despite very high uncertainty and increasing downside risks, a European source said on Thursday 10 March. In her view, the risk of “stagflation” is not materialising, not least because the European economy continues to grow, albeit at a slower pace due to health restrictions linked to combatting the Covid-19 pandemic, and supply not keeping pace with demand. She stressed the importance of being prepared to readjust fiscal policies in the light of geopolitical tensions and the impact of international sanctions against Russia on the European economy.
These discussions will feed into the preparation of the National Stability and Reform Programmes that Member States are due to produce in the spring and the preparations for the draft budget plans for next year.
The European Commission recommends a broadly neutral fiscal stance for 2023 in the EU (see EUROPE 12902/18), following a strong expansionary stance in 2021 and a moderate expansionary stance in 2022. It does not rule out the possibility of postponing the deactivation of the general escape clause of the Stability and Growth Pact until after January 2023, in the light of the spring economic forecasts expected in May.
Greece. On Monday, the Eurogroup will be briefed on the thirteenth monitoring report on Greece, which gives a clean bill of health on Greece’s fiscal and economic policy (see EUROPE 12898/19). It should be noted that by the end of June, it will have to determine what kind of post-bailout surveillance will be in place after four years of close budgetary monitoring (see EUROPE 12305/8).
This source expressed confidence that a satisfactory solution will be found without too much difficulty.
ESM. The Eurogroup will on Monday initiate the process leading to the appointment of Klaus Regling’s successor as head of the European Stability Mechanism (ESM), the euro area’s permanent rescue fund. A decision is expected in May with a view to a successor taking office in October after Mr Regling’s second term of office.
Banking Union. The 27 ministers will take stock of the technical work on completing the banking union, a priority for the president of the Eurogroup, Paschal Donohoe.
According to our source, Mr Donohoe now has a “clear vision” on the contours of the work programme that the Eurogroup will adopt in June to bring this dossier to a successful conclusion. On Monday, he will not table a draft work programme, but will present a set of principles to guide future work. These principles include the establishment of a European deposit guarantee, improved financial crisis management, greater integration of the European banking sector and the treatment of banks’ exposure to sovereign risk.
On the guarantee of bank deposits, a step-by-step process is foreseen with, initially, the provision of liquidity and, once certain conditions have been met, the gradual introduction of loss sharing.
“This is clearly the objective”, the EU source said.
These ministerial discussions on banking union will be reflected in the letter that Mr Donohoe will send to the euro area leaders who will meet alongside the European Council on Thursday 24 and Friday 25 March. (Original version in French by Mathieu Bion)