The European Commissioner for the Economy, Paolo Gentiloni, estimated the cumulative fiscal stimulus that euro area countries have put in place to deal with soaring energy prices at “2%” of GDP by 2022, on Monday 7 November, at the end of the Eurogroup.
Clearly, Mr Gentiloni noted, “such a strong fiscal expansion risks adding to inflationary pressures”. He called on Member States to ensure that these measures are fiscally sustainable and “targeted”, as “around 70%” of them benefit a large part of the population. He also noted the good performance of investment based on the analyses of the draft national budget plans for 2023.
The President of the Eurogroup, Paschal Donohoe, did not deny the difficulty of finding the right balance between fighting inflation and supporting vulnerable citizen categories. “A key issue for the overall policy mix and for the budget outlook for next year is what happens if measures are extended into spring and beyond”, he added.
While GDP growth in the euro area slowed to 0.2% in the second quarter, the Commissioner considered a “possible” contraction “at least for the winter months”. The European Commission will present new economic forecasts on Friday 11 November. (Original version in French by Mathieu Bion)