The EU Economy and Finance Ministers (Ecofin) agreed this Tuesday on the need to apply a "prudent" fiscal policy and move from the global stimulus policy of the pandemic to the path of fiscal discipline, to face the inflationary spiral, rising energy prices and the consequences of the war in Ukraine.
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"On the fiscal side, it is important to embark on the path towards a prudent fiscal policy, leaving behind the global stimuli that we applied during the pandemic," said the economic vice president of the European Commission, Valdis Dombrovskis, at a press conference after the meeting. of EU economy and finance ministers.
A line in which the Czech Finance Minister, Zbynek Stanjura, has also pointed out, who has advocated returning to "fiscal discipline" as part of one of the priorities of the Czech rotating presidency of the EU, which will last until the end of year.
Thus, Dombrovskis has pointed out that the European Commission intends to present its guidelines on fiscal policy for the EU in the autumn, after both the Ecofin on Tuesday and the Eurogroup on Monday have discussed the fiscal recommendations for 2023.
The guide presented by "the European Commission will move towards a prudent fiscal policy", assured Dombrovskis. In a further step, he has stressed that the additional investments that will be necessary to finance the plan to cut Russia's energy dependency, Repower EU, must be combined with "strict spending control."
“I believe that particularly in difficult times we cannot forget fiscal discipline”, added Stanjura, who pointed out that a balance must be found between this “fiscal discipline” and “social peace”, as well as a balance between “the need investment and large investments.
In a further step, the Czech Finance Minister has recalled that tools such as the Next Generation EU funds "are unique and will not happen again" and therefore must help economic recovery and break Russia's dependence on fossil fuels
"Despite the shocks that are affecting the European economy, it is showing significant resilience," said Dombrovskis, who stressed the importance of reducing Russia's dependence on fossil fuels and, at the same time, promoting the use of renewable and energy efficient.
For this purpose, the economic vice-president of the European Commission has indicated, additional investments will be necessary, which must be combined with fiscal discipline. "We are providing additional resources to make the Repower EU plan viable," explained Dombrovskis, who recalled that the Twenty-seven have discussed the use of loans from the Recovery Plan for this purpose.
The economic vice president of the European Commission has stressed that inflation is at record levels and that economic conditions are "tightening". Thus, he has indicated that it is not possible to continue with a global fiscal stimulus policy and, therefore, that it must be "specific" to face the energy transition and high price levels.
"We need realistic rules and foresight, because the rules must be applicable and we have to find an agreement on this between the Member States and the Commission", the Czech Finance Minister has indicated.
After the presentation at the meeting of the Twenty-seven of the 2021 Fiscal Sustainability report prepared by the Community Executive, the EU Ministers of Economy and Finance have agreed that "high levels of public debt can hinder economic growth and reduce the capacity of Member States to provide countercyclical stabilization in cases of economic recession.
Thus, the Twenty-seven have also stressed the importance of implementing prudent fiscal policies and maintaining debt sustainability in the medium term, while boosting investment. In addition, the text establishes the policies to face the challenges of fiscal sustainability should focus "on improving growth and the soundness of public finances."
In this framework, Ecofin has recommended, especially to countries with high levels of debt, that they apply a prudent fiscal policy to guarantee a "credible" debt and redirect "gradually" towards "fiscal sustainability" in the medium term.