In a joint statement issued on Monday 3 October, euro area finance ministers stressed the importance of coordinating the emergency fiscal measures that the 19 countries are taking to help businesses and families cope with soaring energy prices caused by Russia’s invasion of Ukraine in order to “preserve the level playing field and the integrity of the single market, including by refraining from harmful tax adjustments”.
To this end, the Eurogroup reiterates the need for Member States to adopt “measures that are exceptional, temporary and targeted” and aimed at the people and businesses most affected by the energy crisis. While necessary, these measures “weigh [...] on national budgets” and “may, in some cases, slow down the necessary adjustment of energy demand”, acknowledged Eurogroup President Paschal Donohoe.
This focus on the integrity of the single market was not included in the Eurogroup’s July recommendation on Member States’ fiscal policies for 2023 (see EUROPE 12990/15). It comes just days after Germany announced an emergency package of up to €200 billion. The size of this package raises the question of the unequal room for manoeuvre available to Member States to support their economies in a competitive environment.
German minister Christian Lindner defended the German budgetary shield as “proportionate” to the size of his country’s economy. It will be in place “until 2024”, he noted. He assured that the German government did not intend, through this aid package, to stimulate demand and thus, ultimately, to increase inflationary pressure.
“The reaction of the Member States is justified and, at the same time, we must preserve our internal market by avoiding any fragmentation and by strengthening our tools of solidarity”, said the European Commissioner for the Economy, Paolo Gentiloni. Mr Lindner’s speech clarified “the intentions” of the German government, he said, convinced that this was not the time to criticise any particular effort.
His French counterpart, Bruno Le Maire, called for “a global economic strategy” to deal with the energy crisis based on the following principles: - targeting aid to those economic operators who need it most; - a solidarity-based distribution of the loan component of the Next Generation EU Recovery Plan among Member States; - close cooperation between the capitals; - quick decisions.
He welcomed the fact that the Commission had agreed to present an updated framework for State aid in “October”.
Finally, the Eurogroup urges Member States, in the context of energy price shocks, to refrain from any policy that would increase inflationary pressure (‘second round effect’). This includes wage increases that tend to keep the consumption of energy products high.
See the Eurogroup statement: https://aeur.eu/f/3d9 (Original version in French by Mathieu Bion)