Several political leaders spoke, on Monday 16 January, of positive signs that the euro area will not go into recession in 2023, despite the repercussions for the European Union of Russia’s military aggression in Ukraine, such as abnormally high energy prices.
“Inflation may have peaked”, by the end of 2022, noted the European Commission Executive Vice-President, Valdis Dombrovskis.
After reaching 10.6% in October, price inflation has since fallen to 10.1% in November and 9.2% in December. This level forces the ECB to continue normalising its monetary policy by tightening its main key rates.
The European Commissioner for the Economy, Paolo Gentiloni, has noted the fall in energy prices, notably thanks to the introduction of a cap on gas prices. For him, “there is a chance to avoid a deep recession” in the euro area this year, although the economic slowdown could lead to “more limited, shallow contraction”, early in the year.
French Finance Minister Bruno Le Maire described the situation as “better than expected”, a sign of the “solidity” of the euro area economy, despite the uncertainties and difficulties.
Mr Dombrovskis and Mr Gentiloni pointed out the importance of properly calibrating fiscal policy so that it does not fuel inflation and ultimately contradict monetary policy. This includes better targeting of emergency aid to households and businesses most affected by the energy crisis, which is the leitmotiv of the Eurogroup launched in autumn 2022 (see EUROPE 13077/14).
Mr Gentiloni also called for a rapid implementation of national recovery plans under the Next Generation EU Recovery Plan. He said that he hoped for an agreement on the reform of the European economic governance framework.
On this point, the Spanish Finance Minister, Nadia Calviño, regretted that ministerial discussions were only scheduled for February. A political agreement is possible under the Spanish Presidency of the EU Council in the second half of 2023, she said. (Original version in French by Mathieu Bion)