On Monday 5 December, the euro area finance ministers endorsed the European Commission’s analysis that the 19 countries should “progressively” withdraw emergency measures to help households and businesses cope with the energy crisis as energy prices fall.
Noting that many of the measures in place are due to expire “early next year”, the ministers promise to coordinate the policies in place, including by discussing at their next meetings “a common approach” to the withdrawal of measures specifically targeted at households.
The Eurogroup recognises that the measures taken in 2022 are broad based and focused on prices instead of being targeted according to the income of beneficiaries and that they may have an inflationary effect. It estimates the aggregate cost of emergency aid deployed in 2022 at 1.3% of euro area GDP and those still in place in 2023 at 0.9% of GDP. The cost of the latter could increase “significantly” if they are maintained throughout next year, it warns.
If this is the case, the fiscal stance at the euro area level would no longer be neutral in 2023, but expansionary, according to the European Commission.
However, “broad-based fiscal stimulus to aggregate demand in 2023 is not warranted, the focus being instead on protecting the vulnerable households and firms”, the euro area ministers point out.
The Eurogroup, which does not rule out a technical recession for most euro area countries, supports the Commission’s qualitative analysis of the national draft budgetary plans for 2023 (see EUROPE 13068/23). Belgium and Portugal, classified as highly indebted countries, and Austria, Lithuania, Germany, Estonia, Luxembourg, the Netherlands, Slovenia and Slovakia, classified as low indebted countries, are invited to take measures to comply fully with these recommendations.
See the Eurogroup statement: https://aeur.eu/f/4hm (Original version in French by Mathieu Bion)