September 28, 2020

The EU keeps the bar free on spending until the pandemic passes and “the path of adjustment” arrives

“Would it be more risky to withdraw fiscal support too soon or too late?” This is the reflection made aloud by Paolo Gentiloni, European Commissioner for Finance, during the meeting that the ministers of the euro zone hold in Berlin. “In our opinion,” he said, “the former is the main source of concern: a premature withdrawal of support would jeopardize the fragile recovery.”

The European Commission, in any case, states: “We must not forget the need to ensure sustainability in the medium term and the need to chart an adjustment path at some point. If we miscalculate the moment of this landing, we run the risk of damaging the European economy “.

The finance commissioner recalled the second quarter GDP figures published by Eurostat this week: “We are in a deep economic contraction in the euro area, with a drop in GDP of 11.8%. But this contraction is profoundly uneven, with quarterly falls in GDP that oscillate between 4% and 18% in different countries. The risk of fragmentation is there “.

The Community Executive acknowledges that “as the confinements decreased, we saw a strong rebound in activity in June and July, but the indicators suggest that activity has slowed down again in recent weeks due to the new outbreaks of the virus. We anticipate that most Member States will not have reached their pre-crisis GDP levels by the end of 2021 “.

The new president of the Eurogroup, Irish Paschal Donohoe, who made his debut at the informal meeting in Berlin on Friday, has insisted on the existence of “a significant rebound in activity in June and July.”

“Across the euro area, some crisis plans will be terminated, but others will expand and improve,” Donohoe said: “There will be no sudden stop, general fiscal policy will continue to support the economy. I am confident that we can build. a strong and inclusive recovery, recognizing the magnitude of a response that has already been approved. ”

The president of the European Central Bank (ECB), Christine Lagarde, for her part, has asked the ministers of the Eurogroup not to fall into “complacency” and to maintain economic stimuli until the crisis caused by the coronavirus pandemic has ended. : “Our monetary policy needs the support of fiscal policy. None of us can afford complacency for now,” said the head of the ECB after warning that the current situation is “surrounded by much uncertainty.” In her opinion, these policies “must be maintained until the crisis is over.”


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