On Friday 15 September in Santiago de Compostela, the President of the Eurogroup, Paschal Donohoe, said that although the euro area economy had lost “a little momentum”, it remained “resilient” despite geopolitical uncertainty and certain monetary policy decisions that were having an impact on the financing conditions of economic operators.
Earlier this week, the European Commission revised its growth forecasts for the euro area downwards compared with the spring, to 0.8% of GDP in 2023 and 1.3% in 2024, due in particular to the recession that Germany is expected to experience this year (GDP down by 0.4%), before a rebound next year (see EUROPE 13247/1).
According to the German Minister, Christian Lindner, this situation is cyclical and his country’s economy is strong enough to reverse this trend. He pointed out that the German public deficit should be reduced to 2.5% of national GDP this year, as a result of a “moderately restrictive” budgetary policy. In his view, this performance illustrates the way in which German fiscal policy accompanies the monetary policy decisions taken by the ECB, which are deemed appropriate in Berlin.
Mr Donohoe indicated that the Eurogroup declaration of July remains valid. Before the summer break, the twenty finance ministers of the euro area countries had recommended “a restrictive fiscal stance” at euro area level for 2024, without however setting an average target for reducing public deficits (see EUROPE 13222/13). And this must continue “for as long as necessary”, so that the ECB can achieve its objective, added its President, Christine Lagarde, of putting inflation back on a path of 2% in the medium term.
The European Commissioner for Economy, Paolo Gentiloni, agreed: “Fiscal policy needs to be restrictive . “This does not mean cutting back on investment, but it does mean, in particular, phasing out any remaining energy support measures – and ensuring that any new measures, should they prove necessary, are much better targeted at the most vulnerable”, he elaborated.
For his part, the French Finance Minister, Bruno Le Maire, focused on measures to stimulate economic growth, citing the simplification of rules for businesses, the completion of the capital markets union and investment in innovation. (Original version in French by Mathieu Bion)