Following the Eurogroup meeting the day before (see EUROPE 12988/19), European Finance Ministers will take stock of the macroeconomic situation in the European Union on Tuesday 12 July in Brussels at the first Ecofin Council under the Czech Presidency (EUROPE 12986/19).
Member States are facing record inflation, exacerbated by soaring energy prices as a result of the Russian invasion of Ukraine, slowing growth, as well as more expensive financing conditions for public debt.
“The EU institutions are keen not to talk about recession” a European source said on Friday 8 July, with the European Commission presenting its summer growth forecasts on Thursday 14 July.
The situation raises the question of the budgetary policies to be carried out in an uncertain context, while the derogation clause of the Stability and Growth Pact will remain activate until the end of 2023.
On the monetary side, record inflation is forcing the ECB to normalise its policy. On Thursday 21 July, it will raise its three main policy rates by 0.25% (see EUROPE 12968/1). It is also expected to unveil a new ‘anti-fragmentation’ tool to combat excessive spreads of interest rates on eurozone sovereign securities in relation to the rate on the German Bund.
In the budgetary field, the Commission will take stock of the implementation of the Recovery and Resilience Facility (RRF), the budgetary instrument at the heart of the Next Generation EU Recovery Plan. On Friday, the Netherlands officially submitted its recovery plan to the Commission. Only the Dutch and Hungarian plans remain to be adopted.
Ministers will be invited to set guidelines for technical work on the legislative proposal to use the loan component of the RRF to finance the REPowerEU strategy to reduce the EU’s dependence on Russian hydrocarbons (see EUROPE 12960/9).
It should also be noted that the EU Council will adopt conclusions on the Commission’s report on macroeconomic imbalances (see EUROPE 12958/1). In particular, the conclusions recognise that Greece, Italy and Cyprus have excessive imbalances and ask the Commission to explain why it does not open specific infringement proceedings when a country is in such a situation.
See the draft Council conclusions: https://aeur.eu/f/2kk
Ukraine. In addition, the Czech Presidency will ask the Ministers about the role that the Ecofin Council will play in providing macrofinancial assistance to Ukraine.
On Tuesday, the EU Council is expected to adopt the €1 billion macrofinancial assistance that the European Commission tabled at the beginning of July to enable Kyiv to honour its financial commitments (see EUROPE 12984/16). The first stage of an exceptional aid package due to reach €9 billion in total, this aid will consist of a single 25-year soft loan with 70% of its value matched by the EU budget.
Pointing out the limits of the EU budget in a paper that will serve as a basis for discussions, the Czech Presidency will ask Ministers which sources are most appropriate to finance the remaining promised macrofinancial assistance.
Croatia. The Ecofin Council will adopt the legal acts that will allow Croatia to join the euro area on 1 January 2023, including the setting of the final exchange rate between the Croatian kuna and the euro.
It is also up to the European Stability Mechanism (ESM) to decide on Croatia’s contribution to the euro area’s permanent rescue fund.
Ministers will adopt conclusions on the sustainability of public finances, according to which the reforms included in the national recovery plans will contribute to reducing risks to public finances.
See the draft conclusions: https://aeur.eu/f/2kj
Finally, the Ecofin Council will coordinate the position that the participating European countries will adopt at the G20 Finance meeting on Friday 15 and Saturday 16 July in Bali under the Indonesian Presidency. (Original version in French by Mathieu Bion)