Main results of the Eurogroup, 11 July 2022

Good evening everybody, we just had a very worthwhile Eurogroup meeting. We started our meeting with a discussion on the economic situation, which continues to be challenging due to the impact of Russia’s military aggression and all the global developments that arise from that. As always, our thoughts go out to all who are bearing the brunt of this war.

We begun by the IMF giving us an overview of their most recent euro area staff visit. Listening to the Fund, to the Commission and to the ECB, it is clear that there is a common diagnosis on the challenges we face in terms of growth slowdown, inflation, shielding the most vulnerable, and getting back to a sustainable recovery.

On the policies, the key part of our agenda today was to get to a common view on budget policy orientations for 2023. We achieved this, and we have issued a statement. You can read the statement in more detail and I want to outline a few points:

First, the focus of fiscal policy in 2023 reflects the economic outlook and the nature of our risks – in particular, as conditions currently stand, there is consensus that supporting overall demand is not warranted and that our focus should be on protecting the most vulnerable;

Second, we will aim to preserve debt sustainability and focus on how we can sustain growth in the long run. We will also avoid taking decisions that add to inflationary pressures and that complicate monetary policy transmission;

There are already many schemes in place to cushion the impact of high energy prices, but we cannot collectively spend our way out of high energy prices – that is why we focused on the importance of targeting support and investing in durable solutions in terms of renewables and energy efficiency;

And finally, the statement is testament to the continued commitment by euro area finance ministers to closely coordinate budgetary policies to ensure a coherent approach that can respond to different situations across member states and also to adapt to changes over time.

We also had a very useful input from the European Fiscal Board and Professor Thygesen helped very much with our discussion.

We then held a very constructive exchange of views on the digital euro. The ECB presented its recent work to us, on options to limit unwanted impacts on the financial sector, including outright limits or tools to disincentivise very large holdings of digital euros. We also discussed the issue of the continued use of physical cash alongside a digital euro.

The Eurogroup agreed that the issuance of a digital euro should not impede the ECB’s ability to fulfil its mandate and should not impair financial stability. At the same time, we need to make sure that the digital euro can be an attractive means of payment and support innovation in a digitalised economy. A clear outcome of our discussion was that a digital euro would only complement cash, it would not replace it. In October we will discuss the fourth topic of our work plan: the business models of the various public and private actors in the future digital ecosystem.

To round off the meeting, we briefly took stock on Croatia, since tomorrow the Council is set to adopt the regulation setting the conversion rate from the kuna to the euro. This is the last procedural step that is needed to allow Croatia to join the euro as of the 1st of January 2023. There was actually no need for significant discussion in our meeting – everything is going smoothly and I am very much looking forward to welcoming the Croatian Finance Minister as an observer to the Eurogroup meetings as from September.

I’ll say a few words about the ESM. We took the opportunity today to convene the ESM Board of Governors to select a successor to Klaus when he reaches the end of his term.

Italy decided to withdraw their excellent candidate and then we held a round of voting on the two remaining candidates, João Leão and Pierre Gramegna: they’re both excellent candidates, they both have a lot of support, but none of them reached the 80% threshold. We will return to this issue again in September, when we will aim to make further progress and put in place a new managing director in time for the end of Mr. Regling’s mandate.

So a wide variety of different topics discussed this evening. In particular, our agreement in a very constructive fashion on a budget statement for fiscal policy in the euro area for 2023. It’s an important development and we will return to the digital euro in October, by which point we will have made further progress on the new managing director of the ESM.

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