Economic situation and coordination of macroeconomic policies in the euro area
We discussed today the economic situation in the euro area. I think we have two keywords: one is uncertainty and the other one is cooperation. Uncertainty, because despite everything, the euro area economy remained on a strong footing in the first half of the year: GDP grew by 0.7% in the first quarter and 0.8% in the second. Employment has continued to grow and the unemployment rate, at 6.6%, is at a record low.
But the latest sentiment indicators and the global overall situation, figures on prices, inflation, energy, all point to slowing economic momentum in the coming months. Inflation has climbed to 9.1%, with large differences across countries. This is eroding purchasing power and causing growing pain for households and businesses. A recession is not inevitable, but honestly the risk of one has evidently increased.
Governments have been responding to rising energy prices with a broad range of support measures. We have provided Ministers with an overall assessment of these measures. The net fiscal cost of the measures adopted up to 29 August is around 0.9% of EU GDP. Of course, we expect this figure to rise substantially before the end of the year because these kinds of measures are being taken by the day.
There is scope in our view for measures to be more targeted to the most vulnerable households and firms, as we have consistently recommended in our guidance to Member States. I recognise of course that this principle is not always easy to implement (so a difficult role for finance ministers, especially, and governments) when so many – also middle-income – households and businesses are facing difficulties.
We know that the key cause of these problems is Putin’s war against Ukraine and we should have this very clearly in mind and repeat this to citizens and on public occasions. Putin’s war and his weaponisation of Russia’s energy exports’ aim is to divide Europe and to weaken the resolve of the collective West to support Ukraine. The Russian government will try to use our economic difficulties. And he will fail.
Confronting inflation, risks for growth, risks of recession means increasing energy savings, boosting energy efficiency and developing alternative energy sources are all a part of the solution. Solution is a cooperation between fiscal and monetary policy and energy decisions going in the right direction. And so is fixing our electricity market. As you know, the Commission is working on an emergency intervention in this respect – with the ultimate goal of course being to ease pressure on households and businesses and we intend to come forward with concrete proposals in the College next Tuesday.
The coming months will be difficult, but we are prepared and we will manage the challenges ahead. I am convinced the role of the Eurogroup will be more and more important in the coming months.
Central Bank Digital Currencies, including update on the digital euro project
Very briefly on the digital euro. We took stock of the results of our targeted consultation, which showed very high support for this project. And we thank Christine and the ECB.
A number of points need to be discussed further, for example around use cases, legal tender status and balancing privacy with traceability.
The Commission will continue to discuss these issues with Member States and the ECB as we work to prepare a balanced legislative proposal for 2023.