On Friday 9 September in Prague, the euro area finance ministers will take stock of the macroeconomic situation in the euro area, try to reach an agreement on the future Managing Director of the European Stability Mechanism (ESM) and discuss the project to create a digital euro.
The main discussion will focus on the coordination of policy and budgetary measures that States are taking to mitigate the impact of soaring energy prices on citizens and businesses, while on the same day in Brussels, EU energy ministers will meet to determine new emergency measures on the functioning of the energy market (see EUROPE 13016/1).
For example, Spain and Portugal have set a maximum price for electricity, Belgium has introduced a direct rebate of €100 on energy bills to individuals and France has a ceiling of €1.5 on the price of a litre of petrol at the pump. Germany announced a €65 billion aid package to support economic operators and citizens.
These measures “amount to about 1% of the GDP” of the euro area, an EU source said on Wednesday 7 September. In the short term, the source argued, they have a political implication, as governments fly to the aid of their citizens, but in the long term they will have a cost to public finances. At the same time, these measures do not necessarily have the effect of limiting inflation, since they help to fuel demand.
On Friday, the ECB will present to the ministers its monetary decisions taken the previous day, with a further rise in key rates from 0.5 to 0.75% not ruled out to counteract record-breaking inflation (9.1% in August).
On the economic front, the slowdown in growth in the euro area is expected to continue in the second half of the year, with the risk of a recession in 2022 no longer able to be dismissed.
“Uncertainty remains exceptionally high and the risk of a recession is rising.(...) We may well be heading into one the most challenging winters in generations”, warned the European Commissioner for Economy Paolo Gentiloni at a conference organised by the Bruegel think tank, while noting that unemployment remained at its lowest level.
ESM. Meeting as members of the ESM board, the 19 Member States will hold another vote to try to decide between the two remaining candidates - Pierre Gramegna from Luxembourg and João Leão from Portugal - for the position of Managing Director of the euro area’s permanent rescue fund (see EUROPE 12990/31).
Neither of the two former finance ministers has, so far, secured the supermajority (80% of weighted votes) needed to be elected, with Germany and France holding a veto. In order to be elected, Mr Leão must be able to count on the votes of Germany. Mr Gramegna must benefit from the Italian vote and France’s abstention.
In the event of continued disagreement, the ministerial meeting on Tuesday 4 October will be the last chance, as the current Managing Director, Klaus Regling, will step down on 7 October.
Digital euro. In an inclusive format, the ministers will briefly discuss the ECB-led project to create a digital euro (see EUROPE 12927/20).
“Work is progressing according to schedule”, the source said, referring to legislative proposals from the Commission in the first quarter of 2023. (Original version in French by Mathieu Bion)