Euro zone to tighten fiscal policy in 2023, but ready to reverse amid Ukraine war

Date:

  • Euro zone sees hit from Ukraine war as serious, but bearable
  • Fiscal stance to tighten in 2023, but could be reversed

BRUSSELS, March 14 (Reuters) – Euro zone finance ministers agreed on Monday to tighten fiscal policy a little next year after three years of pumping billions into the economy due to the coronavirus pandemic, but also to be ready with more cash should the war in Ukraine make it necessary.

Thank you for reading this post, don't forget to subscribe!

“The fundamentals of the euro area economy are strong,” the ministers from the 19 countries sharing the euro said in a statement after regular talks.

“However, the uncertainty has increased significantly. The economic impact of Russia’s war against Ukraine is yet to be determined and adds to risks stemming from ongoing supply chain problems, higher energy prices and inflation remaining elevated for longer than previously expected,” the ministers said.

The Commission, the EU’s executive, recommended on March 2 that EU governments should move to a neutral fiscal stance next year from a supportive stance now as the economy is growing and EU countries have large debts as a result of the pandemic

But it also said governments should be ready to quickly move back to supporting the economy with public money depending on what challenges Russia’s invasion of Ukraine brings.

“We support the Commission’s view that… transitioning from an aggregate supportive fiscal stance in the euro area to a broadly neutral aggregate fiscal stance next year appears to be appropriate while standing ready to react to the evolving economic situation, also in view of the high level of uncertainty,” the ministers said in the statement.

A potential quick policy change will be made easier by the fact that EU government borrowing limits, first suspended in 2020 to help fight the pandemic, are likely to stay suspended in 2023 because of the uncertainty brought by war.

Still, the ministers agreed that high debt countries like Italy or Greece should focus on cutting debt, while low debt ones focus more on investment. read more

The European Central Bank forecast last week that euro zone growth will be 0.5 percentage points slower this year than previously expected because of the war in Ukraine, but still come in at 3.7%, and at 2.8% in 2023.

Inflation, however, is set to average 5.1% in 2022, well above the bank’s target of 2.0%, falling to 2.1% in 2023, the ECB forecast. The Commission will publish its own updated economic growth forecasts for the euro zone in May.

Reporting by Jan Strupczewski; Editing by Emelia Sithole-Matarise, Catherine Evans and Hugh Lawson
Naija247news
Naija247newshttps://www.naija247news.com/
Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

Share post:

Subscribe

Popular

More like this
Related

Thirteen Residents Arrested For Failing To Use Pedestrian Bridge in Lagos

March 28, 2024. Azonuchechi Chukwu. Thirteen residents in Lagos state have...

Dangote budgets N15bn for food intervention across Nigeria

March 28, 2024. Azonuchechi Chukwu The Aliko Dangote Foundation, (ADF) has...

Lagos Police Arrest Man For Allegedly Beating His Wife To Death

March 28, 2024. Azonuchechi Chukwu. The police in Lagos state have...

Access Holdings to pay N1.80 as final dividend to shareholder

March 28, 2024. Azonuchechi Chukwu. Access Holdings has revealed plans to...
Social Media Auto Publish Powered By : XYZScripts.com

Discover more from Naija247news

Subscribe now to keep reading and get access to the full archive.

Continue reading