The economy and finance ministers of the euro area (Eurogroup) today committed to reorient its energy aid so that it is more focused on vulnerable groups and the companies most affected by the impact of the war in Ukraine, thus leaving behind the most universal actions.
The ministers of the 19 countries that make up the Eurogroup approved a joint declaration in which they guarantee that are working so that the measures that make up their response to high energy prices are “more efficientbetter coordinated and affordable from a fiscal point of view”.
“In 2023 we will review our measures to ensure they are more targeted and focused on vulnerable households and viable businesses that are temporarily exposed” to the consequences of Russia’s military aggression on Ukraine, especially the exorbitant gas prices and their transfer to the electricity bill.
Although he stressed that it is an area of national competence, the president of the Eurogroup, Paschal Donohoe, re-elected today for a second term, affirmed that the euro partners will work “month by month” in 2023 to “further improve the quality” of the energy measures, ensure that the level of support for the economy is “appropriate” and move towards a “common approach” in this regard.
Along these lines, those responsible for the Economy of the common Eurogroup point out in the agreed text that The “dual” model proposed by the European Commission may be an option to better target support aidbut always taking into account the “national characteristics”.
The Brussels system would consist of subsidizing a part of the energy consumption of families and companies, while the rest would be paid at the market price, which should make it possible to help the beneficiaries but without ceasing to encourage a reduction in demand.
The Eurogroup thus addresses one of the main concerns expressed both by the Community Executive and by the European Central Bank (ECB), which have been months warning that most aid is universal and benefits the population as a whole without discrimination, generating inflationary pressures.
The Commissioner for the Economy, Paolo Gentiloni, even sent a letter in the first weeks of the war in which he asked the finance ministers to refrain from adopting general measures, especially cuts in VAT on electricity or gas as which finally approved many capitals.
The Eurogroup itself acknowledges this in its statement today, in which it states that “many of the measures are broad and focused on prices, rather than being specific and addressing income” for households and businesses. The cost of these aids in 2023, they add, is estimated at 0.9% (compared to 1.3% this year), but they admit that “it could increase significantly if the measures already announced are maintained throughout the year.”
“If the current measures are extended or new ones are adopted, deficits could increase much more than expected and this would go against the ECB’s efforts to reduce inflation,” Gentiloni warned at the post-meeting press conference.
In fact, the Nineteen stress that it is not “justified” to maintain universal stimuli in 2023, but the focus of the aid must be placed on the parts most affected by inflation while “maintaining agility to quickly adjust to the changing situation if necessary.”
Upon arrival at the meeting, the Spanish Vice President for Economic Affairs, Nadia Calvino, He assured that the Government is studying precisely which of the measures deployed so far can be extended to 2023, which can be withdrawn and which can be “limited” to a specific group.
“Little by little we are trying to focus them on those sectors most affected, on those most vulnerable groups or also the middle classes,” said Calviño, who later specified that the only measure that the Executive has decided to extend for now is the free trains of Medium Distance and Cercanías.
Donohue, President of the Eurogroup
In addition, the Eurogroup ministers re-elected on Monday the Irish Finance Minister, Paschal Donohoe, as president of this forum to a new term of two and a half years starting next January.
“Since autumn 2021, the Eurogroup has been at the forefront to assess and analyze the impact of energy prices and inflation on the eurozone economy. Now that I have been re-elected, my first priority will be to strengthen coordination,” Donohoe said in a statement, thanking his counterparts for their renewed confidence in him.
The Irish minister, who has chaired the Eurogroup since July 2020was the only candidate for the position and his election will leave Ireland in the unusual situation of having two representatives in the forum that brings together the economic ministers of the euro countries.
Donohoe must leave the Finance portfolio as a result of the reshuffle of the Irish Government that will take place in December, in accordance with the coalition agreement sealed in that country, according to which he will be replaced by a representative of the coalition partner Fianna Fáil, expectedly Michael McGrath.
The path proposed by Dublin, and now endorsed by the Nineteen, involves Donohoe assuming the portfolio of Public Expenditure and Reforms in his country and combining it with the presidency of the Eurogroup, while his replacement would represent Ireland with the Finance portfolio.
Traditionally, the head of the Eurogroup is attributed to one of the eurozone finance ministers, but this is not explicitly included in the simple rules that regulate this informal forum and there is some precedent of countries that temporarily had two representatives.
Donohoe has been the visible head of the Eurogroup during the pandemic crisis and the one generated more recently by the war in Ukraineadvocating in both cases for a close coordination of the fiscal policies of the Nineteen, and has led the work to advance in the banking union that, however, has not achieved significant progress before the divisions of the partners.
The Irish minister received congratulations from the new managing director of the eurozone rescue fund, former Luxembourg Finance Minister Pierre Gramegna, who today took part in his first Eurogroup meeting in his newly released position. “Well deserved! Your dedication and diplomacy are exceptional and necessary in the future,” he said on Twitter.
