For the first time ever, the Eurogroup will officially bring together, on Monday 16 January, the twenty ministers of the euro area countries, after Croatia’s accession since 1 January 2023.
The twenty members will also take stock of the changeover from the kuna to the euro on Croatian territory, a process which, according to the stakeholders, is going smoothly (see EUROPE 13091/7). Bulgaria is expected to be the next country to join the currency area, potentially in early 2024.
Regarding the macroeconomic situation in the euro area, the ministers will listen to the Commission, the ECB and the IMF set out their outlook for 2023 despite the many uncertainties that remain, such as the level of inflation and the impact of Russian aggression in Ukraine.
Announced at the end of 2022, the risk of even a limited recession could be averted. According to several sources, certain signals seem to confirm this hypothesis: good performance of investment and employment, gradual slowing of price increases, even if core inflation (excluding energy and food prices) has not yet reached its peak.
Energy crisis. The Eurogroup will continue its coordination of emergency measures taken in 2022 to counter soaring energy prices, with the presentation of decisions taken in France (e.g.: energy price shield, petrol at the pump) and in the Netherlands (e.g.: dual system capping energy prices up to a certain consumption level). Because of their impact on public finances, it recommends that the targeted application of emergency aid should fade away during 2023 as inflation recedes, even if the withdrawal of these measures is politically difficult (see EUROPE 13077/14).
Last Monday in Rome, Eurogroup President Paschal Donohoe estimated that public aid linked to energy prices represents 1.2% of euro area GDP, with a potential cost of 2% of GDP, if extended to the whole of 2023. “The aim is to ensure that measures are more effective, better coordinated and at the same time affordable”, he said.
Digital euro. The ministers will discuss the digital euro project being piloted by the ECB. They will adopt a declaration summarising the various aspects already discussed at previous meetings (data protection, roles of private/public actors, etc.) as well as the principles that should underpin the creation of such a dematerialised central bank currency.
The aim is to guide the work of the European Commission, which is expected to present a proposal for a regulatory framework for the digital euro in the second quarter to launch the implementation phase.
However, according to a European source, this process will still leave the ECB free to decide until the last moment to stop such a project which is supposed to be completed by 2026. The political will exists to make the digital euro a reality, the source noted.
Economic governance. The Eurogroup will also discuss euro area-specific aspects of the reform of the European economic governance framework, such as multiannual fiscal programming, financial sanctions, post-financial rescue package surveillance. This dossier, which requires political agreement in the Ecofin Council, is a priority for the Swedish Presidency of the EU Council (see EUROPE 13095/11).
The fiscal policy recommendation for the euro area, which calls for a broadly neutral fiscal stance for 2023 (see EUROPE 13096/8), should also be endorsed soon.
ESM. Finally, the ministers will take stock of the ratification of the reform of the European Stability Mechanism (ESM), the euro area’s permanent rescue fund (see EUROPE 12613/4). The positive opinion of the German Constitutional Court allows Germany to ratify the instrument and is likely to encourage Italy to do the same. During Mr Donohoe’s visit to Rome, the Italian authorities indicated that Italy would initiate its ratification process. These two countries are the last to complete their ratification process.
Asked about Italian requests for clarification, the European source stressed that “there will be no renegotiation” of the ESM reform. In a second phase, a reflection could be undertaken on a reorientation of the activities of the rescue fund, the source added. (Original version in French by Mathieu Bion)