The Russian invasion of Ukraine is clearly “a challenge” to the European Union’s prosperity, values and security, but the EU can overcome this challenge and the Eurogroup’s main contribution to doing so will be to “work together to safeguard the recovery”, says Eurogroup President Paschal Donohoe in his letter dated Friday 18 March to the Euro area leaders, who will meet on Friday 25 March in Brussels.
Mr Donohoe makes no secret of the fact that the war in Ukraine will have a “high” cost, because it is “denting growth momentum and exacerbating inflationary pressures”. “These negative impacts come through several channels – energy supply and energy prices are a key factor, but confidence effects, financial flows, and supply disruptions, are among the many other factors also at play”, he notes, also observing impacts related to the reception of refugees fleeing Ukraine.
At this stage, the Eurogroup continues to advocate moving from a moderately expansionary fiscal stance in 2022 to a “broadly neutral” one in 2023, while emphasising the ability of euro area countries to pursue “agile and flexible” policies.
In May, the Commission will reassess the appropriateness of deactivating the general escape clause of the Stability and Growth Pact from the beginning of 2023 in the light of macroeconomic developments in the EU.
Banking Union. Furthermore, Donohoe reports “strong support” from the Eurogroup for the approach that would allow a work programme to complete the banking union in the euro area to be agreed by “mid-2022” (see EUROPE 12911/18). (Original version in French by Mathieu Bion)