For some time, the Eurogroup has been talking about the need for us to change the direction of budget policy in the aftermath of the pandemic, at a time in which we are looking to bring down inflation, while finding the space needed to invest in those projects that can make a difference to the future of the EU and all of its member states.
Today the Eurogroup reached an agreement on a statement with regard to budget policy for 2024 that attains that balance. It stresses that while we need to maintain agility and be capable of adapting to conditions in the world and in Europe, an overall restrictive budget stance in the euro area for 2024 is appropriate.
This is consistent with the statement that we issued on budget policy before the summer. We emphasised that a coordinated and careful approach to fiscal policies is essential not only for next year, but beyond.
We agreed again on the need to phase out the energy measures that have been in place in recent years to deal with the higher cost of energy and to feed the savings from those changes into lower levels of borrowing.
The statement recognises the differentiated recommendations that have come from the Council with regard to national budget plans. It acknowledges the three different groups that are contained within the work of the Commission – those groups that are in line, those that are broadly in line, and those that are at risk of not being in line in terms of their budget plans for next year, and how that is consistent with the approach that we are outlining for budget policy.
Where plans are not considered to be in line with recommendations, we are asking that actions be taken as soon as necessary to reduce the value of energy support measures, in order to generate savings for deficit reduction.
The statement also notes the reduction that has taken place in borrowing levels at national and European level and takes good note of the Commission’s intentions with regard to the excessive deficit procedure. We encourage those member states with deficits above 3% of GDP to take measures.
Budgetary surveillance will again have a very important quantitative dimension, and we hope that work that is underway will reach agreement on a reformed economic governance framework.
I want to emphasise in any case, that the Eurogroup statement from today provides an important anchor for budget policies for next year and continues to change the approach to budget policy that we began earlier in 2023.
We then turned to the draft recommendations on the economic policy of the euro area – the euro area recommendations – that were proposed by the Commission as part of the Autumn package. These cover a wide range of fiscal, structural and financial priorities. Today, we had a first exchange of views on the recommendations to guide work at the technical level.
There was a clear understanding of the importance of achieving an appropriate policy mix in the euro area to address inflation, as well as developing policies to support the euro area competitiveness. We will be endorsing the recommendations in January, once the technical work is concluded.
We continued our meeting with a stocktake on the ESM Treaty ratification, informed by an update from the Italian Minister of Finance, Giancarlo Giorgetti. We re-emphasised our hope that the process would be concluded swiftly. Our banking sector is well-capitalised, and the Single Resolution Fund has recently reached full capitalisation. But the absence of ESM Treaty ratification means the Single Resolution Fund remains without the common backstop. In the case of a major shock or heightened volatility, it would be important to have the common backstop in place to reinforce our safety net.
After this regular part of the meeting, we were joined by our Bulgarian and Danish colleagues to discuss the state of play of implementation of the Exchange Rate Mechanism (ERM II) post-entry commitments by Bulgaria. Bulgaria gave an update on its progress in implementing its policy commitments. This is an important part of preparing for the smooth adoption of the euro in due course. Ministers welcomed the important progress that Bulgaria has made in its reform efforts and encouraged it to continue on this path. The Eurogroup supports Bulgaria’s path to euro area membership and its efforts to meet the criteria for accession as defined in the Treaty. We will come back to this next summer when the 2024 Commission and ECB Convergence Reports are published.
Finally, we were joined by our non-euro area colleagues for another discussion on the future of European Capital and Financial Markets.
To enrich today’s discussion, we welcomed two highly-esteemed guests. First, Mathias CORMANN, Secretary General of the OECD, brought a global point of view to the discussion, sharing best practices from non-EU capital markets.
Then, we welcomed back Thomas WIESER, who is a veteran of Eurogroup meetings, former President of the Economic and Financial Committee and of the High-Level Forum on Capital Markets Union. His input highlighted the need for complementary policies at national and EU levels.
Both our guests pointed to policy areas that they view as crucial to develop European capital and financial markets.
Today’s discussion confirmed the strong engagement from Ministers to take work forward in a decisive manner.
We have now concluded our exploratory phase of identifying obstacles, drivers for progress and possible solutions to develop our capital markets.
From early next year, we will work towards a concluding political statement to which we can all subscribe. In this statement, we intend to set political priorities for the work ahead, both at EU and national level. The end objective would be to allow our capital markets to play their role as a catalyst for our growth, competitiveness, twin transition, resilience and strategic autonomy.
That brings me to the end of our agenda, and us towards the end of a busy 2023 for the Eurogroup.