European finance ministers will discuss, on Thursday 11 June in Luxembourg, the recent European Commission proposal aimed at granting certain EU countries limited fiscal flexibility allowing them to invest in reducing dependence on fossil fuels (see EUROPE 13880/5).
This discussion will take place as part of the periodic analysis of the macroeconomic situation in the euro area in the light of the European Semester package, as well as the updated forecasts and monetary decisions that the ECB will take on the same day.
The Eurogroup expects the Commission to clarify its reasoning regarding the limited extension of the national escape clause of the Stability and Growth Pact, activated in 2025 to increase their military spending.
A European source described as “quite intelligent” the approach taken by the EU institution, which is seeking the point of balance between granting “a limited exemption” from EU fiscal rules in order to promote geostrategic objectives, “while preserving the sustainability of public finances”. According to this source, “the vast majority of the emergency fiscal measures” already taken by the Member States to support households and businesses most affected by the surge in energy prices “are not eligible” for the flexibility envisaged by the Commission. In that sense, the flexibility would restrict the possibility for Member States simply to carry out budgetary reshuffling.
The EU institution is expected to send EU Council experts a note aimed at refining eligible expenditure such as aid for the purchase of electric vehicles or for the installation of less polluting heating solutions.
The fiscal flexibility would be reserved for the 17 countries that have already activated the national escape clause of the Pact to increase their annual military spending by 1.5% of national GDP over the period 2025-2028.
Having called for such flexibility to boost decarbonisation, Italy will probably have to activate the national escape clause for defence in order to benefit from the flexibility to increase energy resilience. According to this source, this expenditure must be understood in a broader context of strengthening EU security.
Also interested, Spain is expected to see its request approved as early as Friday by the Ecofin Council.
IMF. The IMF Managing Director, Kristalina Georgieva, will present to the Eurogroup the findings of the international organisation’s traditional report on the macroeconomic situation in the euro area, marked by slowing growth and a rise in inflation. She will address recommendations to it making it possible to strengthen competitiveness and mobilise private savings.
In an inclusive format, the Eurogroup will tackle the energy issue, as an important factor for economic competitiveness. A specific section of the IMF report on the euro area is in fact devoted to the energy question.
The ministers will also discuss technological sovereignty, as new technologies represent an increasingly important share in the creation of the value of a product or service.
This discussion will be illustrated by a presentation from Professor David Eaves, of University College London.
Lastly, the ministers will dine with Jean-Claude Juncker, former Luxembourg Prime Minister and former president of the European Commission and the Eurogroup, who will share his reflections on the challenges facing the euro area. (Original version in French by Mathieu Bion)