The Member States’ ambassadors to the European Union (Coreper) will discuss the euro area’s fiscal stance on Wednesday 11 January, in preparation for the Ecofin Council on Tuesday 17 January.
In its proposal for a recommendation on economic and budgetary policy in the euro area, the European Commission had proposed last November that the EU20’s fiscal stance should be “broadly neutral” in 2023 (see EUROPE 13068/23), after an expansionary stance in 2022 due to emergency measures to tackle the energy crisis and those still in place to combat the Covid-19 pandemic.
Nevertheless, if the twenty euro area countries maintain their emergency measures to relieve households and companies most affected by the surge in energy prices for longer than expected, the Eurozone could return to an expansionary stance this year.
The draft recommendation, which Member States are expected to endorse politically next week, is along these lines: it rejects any cross-sectional fiscal stimulus despite the serious economic and social difficulties faced by some countries.
In December, the Eurogroup called on euro area countries to target their emergency support and phase out the measures as inflation falls so that they do not put too much pressure on public finances or fuel inflation by not changing behaviour (see EUROPE 13077/14).
On Monday, in Rome, in front of the Luigi Sturzo Institute, the president of the Eurogroup, Paschal Donohoe, estimated that the public aid linked to energy prices represents 1.2% of the Eurozone’s GDP, with a potential cost of 2% of GDP, if it is extended to the whole of 2023.
“The aim is to ensure that measures are more efficient, better coordinated, while being fiscally affordable”, he said.
Wages. The draft recommendation agreed by the national experts notes that wages will increase on average in 2023, although at a lower level than inflation. Member States are invited to “protect the purchasing power” of workers by focusing on low incomes, while avoiding that this development contributes to price increases.
Finally, on the issue of public investment, Member States support the importance of using the Next Generation EU Recovery Plan and EU cohesion policy funds to continue investing in the climate and digital transitions. However, unlike the European Commission, they want the acceleration of transition investments to be for the energy sector as a whole, not just for clean energy, which they say is not defined.
“The agreed text aims to ensure that the focus is on the broad range of energies and technologies that are environmentally sound and socially acceptable”, the Council says.
See the draft recommendation agreed by the Member States’ experts: https://aeur.eu/f/4u1 (Original version in French by Mathieu Bion)