Press Releases Remarks by Paschal Donohoe following the Eurogroup meeting of 15 May 2023

Remarks by Paschal Donohoe following the Eurogroup meeting of 15 May 2023

We kicked off today with a presentation of the Commission’s spring economic forecast that came out earlier today, Paolo may say another word about it. Overall, the picture is still one of economic resilience within the euro area. However, also one where our growth is continuing to hold up at a level that is better than we would have expected. At the same time, inflation is still too high and it needs to come down. We acknowledged that what continues to be so important to our societies is the level of employment, which is a real bright spot where you see a record number of people at work.
We moved on to a discussion on the corporate sector, particularly with regard to firms that are potentially vulnerable to higher energy prices. It is overall a mixed picture, we saw some sectors that have been hit by the surge in energy prices. But we also saw other sectors that have actually seen a growth in their profitability. Unlike households, companies that are receiving support will have to look at how they can support their own long-term viability, as the support measures that we have in place will have to come to an end at some point and can’t undermine the ability of our economies and our governments to efficiently allocate resources.
We also underscored the need for support measures that avoid the fragmentation of the single market and maintain consistency with the longer-term policy goals that are there, such as the green transition and a greater degree of energy independence. We’re going to keep on coming back to this topic, particularly with an eye to our July statement on the fiscal policy stance of the euro area. This is an area that ministers have emphasised that we need to continue to monitor. We can’t end up in a situation where we are seeing a surge in corporate profitability exactly at a time in which inflation is also too high for too many.
I then debriefed my colleagues on the recent international meetings, including the G7 meeting that took place in Japan last week. I updated them on the points that I made on their behalf regarding budget policy coordination and also the discussions that are underway regarding how we can deepen our Banking Union and our Capital Markets Union.
This nicely then set the scene for the second half of the meeting. We began by getting an update from the chair of the Supervisory Board, Andrea, and the Single Resolution Board, Dominique, on their recent efforts with regard to the regulation of the banking sector. We’ve had so many events over the last number of months that have continued to sharpen our focus on the financial sector. We believe the European banking system has demonstrated its resilience in no small part due to the decisions that we have taken in recent years.
But there are risks that do lie ahead. There are risks that we can’t ignore, and we have more work that we need to do. In terms of what that work will look like, it’s to continue to look at how we can deepen the ability of the Single Resolution Fund to act as a liquidity backstop. And it is also the steps that we need to take now in acting on the initiatives that have been brought forward by the Commission with regard to Banking Union that followed on from the Eurogroup discussions on this over the last number of years. These are two really important steps that we can take to continue to strengthen our Banking Union and our banking systems.
From this, we moved on to a discussion regarding the digital euro. This is a topic that the Eurogroup has really prioritised over the last 18 months. We discussed the benefits and the drawbacks of potentially allowing users outside of the euro area to have access to the digital euro and the ECB presented to us the options and the trade-offs that are involved in making the digital euro work with other central bank digital currencies. We all acknowledge the importance of international cooperation in this area and our Swedish colleague Elisabeth also updated us on work that is happening elsewhere in the European Union regarding the development of the e-krona. So we’ll come back to this topic again shortly as the ECB continues its work in concluding the investigative phase of a digital euro.
We also discussed the future of the Capital Markets Union. This is a subject that we have been discussing in recent months. Ministers have emphasised the need for our capital markets to make a bigger contribution to how we can have a greener, more digital and more competitive European Union. Today, following on from the discussion that took place on this subject at the recent Euro Summit, I put forward a process to ministers that was agreed tonight. We will set ourselves the aim of, by March 2024, reaching agreement on areas that we would ask the next Commission to consider regarding how we would deepen the Capital Markets Union.
This is all about a strategic discussion regarding areas in which further progress is possible and likely in the years ahead. We want to go beyond those topics that are already on the legislative agenda and have a strategic reflection on further topics that we, the Commission and the European Parliament could tackle that would make a difference to how we can better fund growth within the European Union.
I know there’ll be lots of challenges and discussions. As I acknowledged in the Eurogroup, there are no easy next steps left, but developments that are taking place across the world remind us of the fact that the European Union will have to find other ways in which we can be competitive beyond the spending of taxpayers’ money. And we are so aware of all of the different changes for which we need to find ways of funding. I look forward to working with all of my colleagues across the next 12 months to identify those priority areas that are capable of making a difference.
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