The Eurogroup discussed the next steps for fiscal policy, building on its July statement on fiscal guidance for 2023 even as the euro area economy has been marked by new disruptions due to the Russia-Ukraine war causing rising global inflation to multi-decade highs.
“The Russian war of aggression in Ukraine has brought new disruptions to the fore and pushed already rising global inflation to multi-decade highs. Recent forecasts and survey indicators point to a deterioration in the near-term growth and inflation outlook with further gas supply disruptions,” said an official statement.
It called for mitigating the adverse impact of the external shock on the economies and providing support to vulnerable households and businesses.
“Given the urgency of this issue, we have taken emergency measures that can be easily and rapidly deployed, many of which have been broad-based and target prices. Nevertheless, such measures will weigh increasingly on our national budgets and may, in some cases, slow down the necessary adjustment of energy demand,” it added.
“Given the strong spill-overs in the European energy markets, we will coordinate our measures to preserve the level playing field and the integrity of the single market, including refraining from harmful tax adjustments,” it added further.
It noted that, in particular, the EU should seek to avoid the energy price shock to develop into second-round effects and a more persistent acceleration of inflation dynamics which would damage their economies. It cautioned to refrain from policies that would add to inflationary pressures.
The Eurogroup underscored that speeding up the reduction of energy consumption is key to stabilizing energy prices and reducing reliance on Russian fossil fuels.
“We recall the importance of investments in energy efficiency and interconnectivity of energy networks, the diversification of energy sources, the development of low-carbon energy production, and well-functioning energy markets,” it highlighted.
The members agreed that these steps are critical to enhance resilience, shield EU economies from future increases in fossil fuel prices and build the foundations for long-term, sustainable growth.