On Friday 22 May in Nicosia, the finance ministers of the euro area countries, the central bankers, the European Commission and the European Stability Mechanism (ESM) expressed the same desire to limit economic support measures to targeted and temporary measures to respond to the inflationary shock caused by the surge in energy prices following the blockade of the Strait of Hormuz.
“As the crisis persists, Europe must maintain a difficult but necessary balance. From the one hand, it is crucial to protect fiscal stability, but on the other hand, we cannot ignore the significant pressures faced by households, businesses, and the European economies. What is needed is adaptability and the carefully designed collective interventions aimed at supporting the economy without undermining the long-term stability”, said Eurogroup President, Kyriakos Pierrakakis, at a press conference on Friday lunchtime, following an informal meeting.
Governing in a way that does not “contradict monetary policy”. Following on from the general conclusions adopted earlier this week by the finance ministers of the G7 countries (see EUROPE 13870/1), ECB President, Christine Lagarde, European Commissioner for Economy, Valdis Dombrovskis, ESM Managing Director, Pierre Gramegna, and Mr Pierrakakis all favoured “temporary, targeted and tailored” measures.
“Any deviation from those three principles would actually hurt and lead to different monetary policy stance as a result”, warned Ms Lagarde.
Asked about the Italian request to extend the application of a flexibility clause in the Stability and Growth Pact to expenditure on the energy transition, both Mr Pierrakakis and Mr Dombrovskis advocated respecting the European budgetary framework.
“There are certain countries which are closer to fully sticking to the rules, and others that are closer to introducing certain flexibility. But (...) we all understand that we shouldn't be counterproductive”, said the President of the Eurogroup.
And he added that: “We all understand that we have a set of official rules, which is working. So, we’re trying to be surgical and optimal in how we respond to the crisis (...) we shouldn’t contradict monetary policy”.
ECB outlook. While the ECB Governing Council could decide to raise its key rates at its next meeting, on 11 June (see EUROPE 13861/19), the ECB President reiterated on Friday that the monetary institute was pursuing a data-driven approach, looking in particular at second-round effects and the anchoring of inflation expectations.
“Another aspect that maybe you want to take into consideration is the volume of reserves available in terms of oil, in particular, and the number of days ahead of us in order to respond to the demand without compressing that amount”, said Ms Lagarde.
Affordable housing. During their meeting, on Friday morning, the finance ministers of the euro area countries also discussed the accessibility of housing, a social issue that is gradually becoming part of the EU’s competitiveness agenda.
“We listen with interest to the experience of countries that have addressed certain aspects of the problem effectively, and at the same time there was a common understanding that there are no one size fits all solutions that can be applied uniformly everywhere. National particularities often require different policy approaches”, said the President of the Eurogroup.
Digital euro. The ministers also met with the Chair of the European Parliament’s Committee on Economic and Monetary Affairs (ECON), Aurore Lalucq (S&D, French), to review the progress of the legislative work. Mr Pierrakakis spoke of “good discussions”.
“We must now maintain this positive momentum, with a view of concluding intercessions by the end of the year”, he said. (Original version in French by Bernard Denuit)