Brussels“We had forecast economic growth of 4% for this year, but these figures are no longer realistic,” Economy Commissioner Paolo Gentiloni said on Monday in his arrival at the meeting of economy and finance ministers. of the Eurozone, the Eurogroup. It has already been assumed in Brussels that the economic consequences of the war in Ukraine will not be “insignificant” for a long time, so now the aim is to dampen the blow as much as possible because the recovery that had begun after the pandemic does not derail.
“If we react strongly, we can avoid a recession, of course the recovery will deviate quickly, but we can reduce its impact if we react strongly,” said the Italian. What this “strong and united” response means is now the main debate in the Belgian capital. The options are varied and the discrepancies common. Southern Europe claims to share responsibilities and the North prefers more localized measures.
More Eurobonds or reuse existing ones
The “elephant in the room”, in the words of the Dutch Minister of Finance, Sigrid Kaag, is the demand to repeat the experience of the coronavirus crisis with a new issue of Eurobonds to finance a further increase in the public spending at a time when it was necessary to set the timetable just to start reducing it again. Countries such as France and Italy have spearheaded the demands to open this route, to also fund an increase in defense spending that the EU symbolically sealed last week in Versailles. But the debate is embryonic and has the usual skeptical voices of the north. The Spanish vice-president, Nadia Calviño, acknowledged this: “We are in an incipient phase in which the focus is on minimizing the impact on negative growth in terms of rising prices or the scarcity of raw materials. […] But Spain will always be among those who support a coordinated and European response to a challenge that clearly transcends national borders and therefore requires joint action. ”
There are other meanings to this “strong and joint” response, such as a new version of the SURE scheme, the backbone of the pandemic that served to prevent mass layoffs; the reorientation of anti-pandemic reform plans still halfway to deploy to deal with this new crisis, or also to exclude from the deficit and debt count certain expenses to boost them, as was already under discussion in the reform of fiscal rules that was about the table before this crisis. But in The Hague they are not clear: “Countries like Poland have always demanded that defense spending be exempt from the deficit count, others have called for the exception of green investment. In the Netherlands we have always been reluctant, there there is a risk of circumvention, of not measuring things in the same way, “said Minister Kaag.
Reduce debt despite uncertainty
Eurozone finance ministers agreed on Monday that, despite uncertainty and all the necessary flexibility, eurozone countries must start reducing public debt by 2023. Brussels is already planning to return to the eurozone. deficit and debt rules in 2023, but that was before the attack on Ukraine began. In view of the events, the European Commission warned that it would be possible to postpone the date depending on the impact of the conflict. However, members of the Eurogroup believe that it is still possible to set this goal: “We believe that it is feasible for countries with a lot of debt to start making gradual changes and reduce debt by 2023,” he said. the Eurogroup, Pascal Donohoe. “The reduction is necessary, the goal must be there in a realistic, flexible way and without killing growth,” Gentiloni said.
But all of this is wrapped up in a lot of butts and questions, waiting to be able to start putting numbers in the pot. “It’s too early to do calculations,” Gentiloni said. It will present its economic forecasts in mid-May and it is from these forecasts that more concrete decisions will be made regarding the return to deficit and debt rules. As long as this debate continues, however, Brussels has already moved the tab to make state aid more flexible for companies suffering most from the energy crisis and has opened the door to limiting the price of electricity and taxing profits fell from the sky of the electric ones. And despite the usual discrepancies, there is unity regarding the need to act and, above all, to avoid a new recession: “If you talk about recession, you end up calling it quits,” Kaag said.