In Luxembourg on Monday 3 October, and in the presence of the Secretary General of the OECD, Mathias Cormann, the nineteen finance ministers of the euro area will take stock of the macroeconomic situation, still marked by very high inflation and a slowdown in the economy, two phenomena exacerbated by the Russian invasion of Ukraine.
The Eurogroup could issue a statement on appropriate fiscal policies in such a situation, updating its previous statement adopted in July (see EUROPE 12990/15).
According to a European source, the priority is to define non-inflationary policies that do not further complicate the task of the ECB in raising its main policy rates. This requires the adoption of urgent, targeted and temporary support measures for the categories of people and companies affected by the energy price hike, and measures that do not lead to second-round effects, i.e. wage increases that would fuel the price hike.
The ministers should also note the robustness of the euro area economy, with historically low unemployment, even if the risk of a recession in the medium term can no longer be ruled out in the event of a complete cut-off of Russian gas supplies.
The Eurogroup will briefly review the euro area-specific aspects of the European Recovery and Resilience Facility (RRF), the central instrument of the Next Generation EU recovery plan. The emphasis here will be on the consistency of the European Recovery Plan with the fiscal stance at the euro area level.
Digital euro. The ministers will have a further exchange of views on the pilot project for the creation of a digital euro by 2026. The role of the private sector will be discussed, as well as the regulatory framework that financial intermediaries involved in the implementation of the dedicated digital platform will have to respect. The Eurogroup could adopt a declaration on the digital euro by the end of 2022.
The Eurogroup will also prepare for the annual meetings of the IMF and the World Bank, which will take place from Monday 10 October in Washington. They will consider whether the traditional position of the world’s leading monetary authorities on exchange rates - that rates are determined by markets and that excessive volatility is undesirable - should be changed.
ESM. On Monday, the nineteen ministers will have to agree on who will replace Klaus Regling as head of the European Stability Mechanism (ESM), the euro area’s permanent rescue fund, from 7 October.
Last week, the two remaining candidates - Luxembourg’s Pierre Gramegna and Portugal’s João Leão - threw in the towel, neither of them being able to obtain the necessary 80% supermajority (see EUROPE 13025/27). Germany and France, each with a veto, supported different candidates.
“We will make sure that this seat is not left empty”, the European source assured. (Original version in French by Mathieu Bion)