The Swedish Presidency of the Council of the European Union wants EU finance ministers to focus on long-term economic issues (the impact of high inflation and high interest rates on public finances, private financing of innovation and the reconstruction of Ukraine) at their informal meeting in Stockholm on Friday 28 and Saturday 29 April. The legislative package reforming the Stability and Growth Pact is also expected to be widely commented on in the margins of the ministerial proceedings (see EUROPE 13170/1).
At lunch on Friday, the ministers will discuss the challenges of high inflation for public finances. One of the issues that will be discussed is how Member States intend to phase out the emergency measures taken this winter to protect vulnerable households and businesses from the soaring energy prices exacerbated by Russia’s aggression against Ukraine.
Capital markets. Joined by national central bankers, the ministers will discuss the financing of innovation in the afternoon, including how capital markets can be used to mobilise private capital to finance innovations in the climate and digital transitions.
In a preparatory note, the Swedish authorities observe that capital markets in the EU remain underdeveloped compared to the UK and US markets and fragmented at national level. Wishing to focus their attention on companies that find it difficult to attract non-bank financing, they ask participants what measures could be taken to attract capital to the EU, while keeping in mind the principle of European strategic autonomy.
On the French side, the importance of reviving “securitisation, an extremely important element in the United States, but which has almost disappeared in Europe”, is stressed. This financial technique, accused of contributing to the global impact of the US subprime mortgage crisis during the 2008 financial crisis, has since been heavily regulated in the EU.
See the Swedish note: https://aeur.eu/f/6l8
See a specific note from the New Financial think tank: https://aeur.eu/f/6l9
Fiscal policy. On Saturday, EU economy and finance ministers and central bank governors will discuss fiscal policy in its stabilising function in the event of an economic crisis and the extent to which ‘semi-automatic stabilisers’ (targeted tax measures, social aid, short-time working, etc.) should be activated to cushion the blow for struggling households and businesses.
The Swedish Presidency will ask the participants about an optimal fiscal policy by taking two scenarios, one involving a return to low interest rates and the other involving the maintenance of high rates over a long period. There will also be discussion of which public reforms and investments are most likely to generate growth and room for manoeuvre for fiscal policy in the medium term.
See the Swedish Presidency note: https://aeur.eu/f/6le
Ukraine. The third working session will be devoted to the reconstruction of Ukraine, with the presence of the Ukrainian Finance Minister, Sergii Marchenko, and the Canadian Finance Minister, Chrystia Freeland.
The aim will be to strengthen and optimise the coordination within the dedicated platform of international organisations that will be involved in this long-term project.
In February, the World Bank estimated the financial needs for reconstruction in Ukraine at more than $400 billion, with costs increasing as the war goes on.
In a note, the Swedish Presidency expresses a wish to hear from the ministers on how to move from emergency macroeconomic assistance to enable the Ukrainian state to meet its financial commitments to longer-term economic support focused on rebuilding the country and transforming it on the road to EU membership.
The question of using frozen Russian assets will not be specifically addressed on Saturday.
See the Swedish note: https://aeur.eu/f/6lf (Original version in French by Mathieu Bion)