Brussels, 16 January 2023
Euro area enlargement: update on euro cash changeover in Croatia
The Eurogroup marked the particular occasion of Croatia’s euro accession. The Croatian minister, the Commission and the ECB updated ministers on the state of play on the changeover to the euro.
We are now a Euro family that has 20 family members, which is a sign not only of the continued resilience and strength of the euro – both now and in the years to come – but it is also a recognition of the exceptional work that has been carried out by Croatian authorities and the government of Croatia to implement this very complex transition so successfully. We were also delighted to welcome Marko Primorac as a full member of our group and we all look forward to working closely with him.
Paschal Donohoe, President of the Eurogroup
Digital euro – stocktake on the advancement of the project
The Eurogroup took stock of the advancement of the digital euro project and discussed the way forward. Ministers adopted a Eurogroup statement which summarises the views expressed on the policy topics discussed so far and outlines the continuation of the Eurogroup involvement in this project.
After 18 months of very detailed discussions in relation to different strands of this project, we took some time to reflect on the work that has happened, on where we are now, and on the views of the Eurogroup on key areas of this project. What we plan to do is continue with our political engagement with the ECB and with the Commission as they move forward in their processes, because what the Eurogroup recognised today is that many decisions that await are inherently political.
Paschal Donohoe, President of the Eurogroup
- Eurogroup statement on the digital euro project, 16 January 2023
- Digital finance (background information)
Economic situation and IMF Article IV review of euro area policies – interim staff visit
The International Monetary Fund presented the outcome of its interim Article IV staff visit to the euro area. The IMF review is expected to be concluded by mid-2023. Ministers also heard from the institutions on their assessment of the latest macroeconomic developments and outlook.
The Article IV review of the euro area is a regular exercise in which the IMF reviews economic developments, consults with euro area policy-makers and provides targeted policy advice. The discussions in the Eurogroup are a valuable opportunity to exchange views on current developments and emerging challenges.
Fiscal policy coordination in the euro area – energy support to households and firms – case studies
Ministers continued their coordination exercise on fiscal policy focusing on the energy support measures, with a presentation of case studies. The French and Dutch ministers presented their national experience and provided a basis for the Eurogroup to discuss the challenges faced in designing and implementing measures to alleviate the impact of the surge in the price of energy on households and firms.
Conscious that as we move into the second quarter of this year, finance ministers and governments will be making decisions on the extension of measures and or their design. We are grateful to the Dutch and French ministers for the work that they presented to us regarding their thinking on how they are going to lead this transition across this year. We are going to continue with this work and we are hoping as we approach our meeting in March, that we will be in a position to discuss fiscal guidance for 2024, and also see what opportunities there are for better coordination of decisions that will be made as we approach the summer.
Paschal Donohoe, President of the Eurogroup
Euro area aspects of the economic governance review
Ministers discussed the euro area aspects of the economic governance review, such as the draft budgetary plans exercise, the euro area fiscal stance and macroeconomic stabilisation, as well as the post-programme surveillance process and the application of the Macroeconomic Imbalances Procedure to euro area member states.
We concurred with a number of proposals in the Commission orientations relating specifically to the euro area, most notably in the area of the draft budgetary plans and the post-programme surveillance framework. Discussions on the wider issues in the economic governance framework will continue, but mostly in the ECOFIN Council.
Paschal Donohoe, President of the Eurogroup
The euro area recommendations for 2023
Ministers discussed the draft recommendations on the economic policy of the euro area for 2023, ahead of their approval at the Economic and Financial Affairs Council.
Based on Commission proposals, the Council addresses annual recommendations on economic policy to the euro area as a whole within the European Semester. The recommendations are first discussed in the Eurogroup and formally adopted by the Council after endorsement by the European Council at its meeting in March.
Other topics
Stocktake on the ESM treaty ratification
The Eurogroup took stock on progress made with the ratification of the ESM treaty.
Policy priorities of the Latvian government
The Latvian minister presented the policy priorities of the new Latvian government. This is standard practice in the Eurogroup when new governments take office.
Source – EU Council
Eurogroup statement on the digital euro project, 16 January 2023
Brussels, 16 January 2023
Since the launch of the investigation into the possible issuance of a digital euro in October 20211 in response to the invitation by Leaders at the Eurosummit, the Eurogroup has held regular exchanges of views on the key political dimensions of a digital euro. This investigation does not prejudge any future decision on the possible issuance of a digital euro, which would only come after further exploration in a possible realisation phase.
In order to be successful, a digital euro needs to be a common European and inclusive project, supported by the European public, and built on a solid democratic basis. We therefore welcome the engagement from the European Central Bank and the European Commission in regularly informing the Eurogroup and EU Member States and ensuring thorough technical preparations of our discussions.
The Eurogroup considers that the introduction of a digital euro as well as its main features and design choices requires political decisions that should be discussed and taken at the political level. The creation of a digital euro would require an appropriate legal basis, involving the European Parliament and the Council of the European Union based on a legislative proposal by the European Commission.
Today, the Eurogroup took stock of the progress in the digital euro project. The ECB President presented the design and distribution options that were recently endorsed by the ECB Governing Council2. The Commission’s Executive Vice-President updated us on their preparatory work towards a legislative proposal.
The Eurogroup reaffirms its support for the continued efforts of all European and national institutions involved in the preparatory work for the potential issuance of a digital euro, and encourages a high level of innovation and ambition in exploring its possible design and distribution options. Depending on its design, a digital euro could play a key role in an increasingly digitalised economy by strengthening the open strategic autonomy of the European Union, reflecting the central geopolitical role played by payment systems, in fostering financial sector innovation and delivering benefits for citizens, businesses, and Member States, while preserving the role of central bank money as an anchor for our monetary system.
In line with our statement adopted in February 20223 the Eurogroup discussed several key issues regarding the digital euro over the last year and provided views4 on the general objectives and political dimensions of a digital euro, thereby complementing the work carried out by the ECB and the Commission, in full respect of the institutional roles and mandates of all actors involved. During our discussions, the following issues were raised:
- A digital euro should complement, and not replace cash, and should guarantee access to central bank money for euro area users in times of increased digitalisation in payments5. A digital euro should be safe and resilient, ensure a high level of privacy, be easy and convenient to use and widely accessible to the public, including in terms of costs for end-users. Ministers also called for considering the environmental implications of the digital euro design.
- To succeed, the digital euro should ensure and maintain users’ trust, for which privacy is a key dimension and a fundamental right. At the same time, the Eurogroup also considered that the design of a digital euro should comply with other policy objectives such as preventing money laundering, illicit financing, tax evasion, and ensuring sanctions compliance. A risk-based approach could be followed to allow for more privacy in the case of less risky transactions, which could ensure a wider adoption of the digital euro among citizens with a stronger preference for privacy. The Eurogroup also supports the exploration of an offline functionality which would serve a wider range of use cases and also contribute to financial inclusion by facilitating the use by citizens in different scenarios.
- A digital euro should aim to safeguard the financial stability of the euro area. Potential risks to financial stability should be limited, for example by imposing holding limits and constraints in the design of the digital euro, while maintaining its attractiveness as a means of payment. The parameters of such features should be further analysed and discussed based on a thorough quantitative analysis and their implementation should take into account the prevailing economic and financial environment. The design and introduction of a digital euro should not impair the ability and the independence of the European System of Central Banks in ensuring monetary transmission in order to fulfil its price stability mandate.
- Ensuring a pan-European reach of the digital euro whilst also catalysing innovation in the financial sector and complementarity with private solutions should be a priority. The digital euro ecosystem should leverage the strength and experience of public and private participants and build on European infrastructure. Whilst further work is needed on the precise allocation of competencies, we consider that supervised intermediaries could play an important role in the digital euro ecosystem.
- The digital euro could be a building block of the future architecture for state-of-the-art payment solutions. To this end, it could allow for initiating a payment automatically when predefined conditions are met – meaning that users would be able to program payments. As money however, digital euro should at all times and throughout the euro area be convertible at par with other forms of the euro, such as banknotes and commercial bank deposits. The digital euro therefore cannot be a programmable money6.
- Appropriate regulatory measures, including granting the digital euro legal tender status, should be considered in order to ensure consistency with cash and to make digital central bank money widely accessible for retail use to all end-users in the euro area, whilst taking into account the distribution of the costs and required technologies.
- The digital euro should focus as a priority on the needs and specificities of the euro area. Interoperability with other Central Bank Digital Currencies should be an important feature of the digital euro, including for cross-currency transactions. This will also take into account the development of CBDCs by other jurisdictions, in order to reap the potential benefits of faster, cheaper and safer cross-border transactions. On the other end, the risks associated with the use of a digital euro outside the euro area must be mitigated and monitored.
The Eurogroup will continue to play an active role in discussing the key political issues underlying a digital euro7. We look forward to the further work by the ECB, the euro area national central banks and the Commission in assessing key aspects of the digital euro, and stand ready to contribute to these discussions, including regarding the costs and benefits, the international use of the digital euro and policy implications of the underlying architecture. We will also discuss in inclusive format the relevant implications for non-euro area Member States and hear on their progress and plans on the introduction of CBDCs. We look forward to the results of the prototyping exercise conducted by the ECB. Furthermore, the appropriate technical solutions and business arrangements necessary to provide a digital euro will be a key aspect to be considered in the realisation of a digital euro.
We also welcome the Commission’s intention to table in the first half of 2023 a legislative proposal that would establish the digital euro and regulate its main features, subject to the decision of the co-legislators.
We note that the ECB Governing Council will review the outcome of the investigation phase in autumn 2023 and decide on this basis whether to move to a realisation phase. The possible issuance of a digital euro would only come at a later stage and would necessarily depend on the EU legislative developments.
1 See Press release.
2 See the ECB first progress report (September 2022) and second progress report (December 2022) on the investigation phase of a digital euro.
3 See Eurogroup statement adopted on 25 February 2022.
4 See Summing-Up letters of the relevant Eurogroup meetings on 12 July 2021, 10 September 2021, 8 November 2021, 25 February 2022, 4 April 2022, 11 July 2022, 9 September 2022 and 3 October 2022.
5 See for instance the Study on the payment attitudes of consumers in the euro area (SPACE).
6 There would for example be no restrictions in the types of goods and services to be purchased, or restrictions in time when a digital euro can be used.
7 See the Eurogroup work programme adopted in December 2022.
Source – EU Council
Remarks by Paschal Donohoe following the Eurogroup meeting of 16 January 2023
Brussels, 16 January 2023
We have just finished a lengthy and important Eurogroup meeting, and I will do my best to briefly summarise the key points that have emerged from our long and good meeting.
Our meeting began by a moment of recognition and celebration as we formally welcomed our Croatian friends into the euro area and congratulated them on the very successful changeover from the kuna to the euro that happened on 1 January this year.
We are now a Euro family that has 20 family members, which is a sign not only of the continued resilience and strength of the euro – both now and in the years to come – but it is also a recognition of the exceptional work that has been carried out by Croatian authorities and the government of Croatia to implement this very complex transition so successfully.
We were also delighted to welcome Marko Primorac as a full member of our group and we all look forward to working closely with him. While on the topic of welcomes, I also want to note that we welcomed my close colleague Michael McGrath as the new Finance Minister of Ireland, and Arvils Ašeradens who presented the new priorities of the Latvian government.
With that said, a quick update on the agenda. The first substantial topic was the digital euro. After 18 months of very detailed discussions in relation to different strands of this project, we took some time to reflect on the work that has happened, on where we are now, and on the views of the Eurogroup on key areas of this project.
The President of the ECB informed us of the progress that has been made in narrowing down design choices regarding the digital euro. We were informed that the Governing Council of the ECB is expected to decide by the autumn of this year whether to move to a realisation phase in this process, where technical solutions would actually be developed and then tested. This phase would take around three years and does not in itself represent or imply a decision on the possible issuance of the digital euro. The Vice-President of the Commission updated us on the preparatory work that is underway towards the publication of a legislative proposal that would give the digital euro a proper legal basis.
Following on from this, we adopted a Eurogroup statement that summarised the main discussions that we have had on this topic over six different Eurogroup meetings and drew some intermediate conclusions regarding what we believe to be the most important political dimensions of this project. What we plan to do is continue with our political engagement with the ECB and with the Commission as they move forward in their processes, because what the Eurogroup recognised today is that many decisions that await are inherently political. We believe it is vital that we make our views known on many areas and I want to acknowledge the recognition by the Commission and the ECB of our mandate in this area. I won’t go into our particular policy views on this because it has been summarised in the statement that we issued earlier in the day.
From this, we moved on to a very broad discussion regarding where we stand economically. This was introduced first by the IMF, who gave their perspective on the performance of the euro area and also some global observations. Positively, the euro area again has demonstrated its resilience in 2022. Despite everything, we had a growth performance of the year that exceeded expectations, staying above 3%. We also saw an employment performance for last year that was exceptionally positive in the context of the economic consequences of the terrible war.
All of that being said, we recognised again the real challenge that high energy prices and inflation are posing for all economies. We are focussed on the policies that will bring down inflation and make the slowdown as mild and as short as possible, while of course protecting the most vulnerable. But I think it’s fair at this point to conclude that our tone regarding the actual economic events of last year has improved as the year drew to a close. We face into this year conscious again of how deep the economic foundations of the euro are; and despite our challenges, we are confident that we will navigate our way through them.
We continued with a lengthy discussion regarding fiscal policy choices for 2023. At the beginning of this meeting, I gave a presentation regarding the different scenarios that could develop in 2023 with regard to borrowing, inflation, and design choices that will be made by ministers regarding policy measures that are in place at the moment to support households and businesses with the cost of energy. We agreed again that we need to deepen our cooperation in this area. Conscious that as we move into the second quarter of this year, finance ministers and governments will be making decisions on the extension of measures and or their design. We are grateful to the Dutch and French ministers for the work that they presented to us regarding their thinking on how they are going to lead this transition across this year. We are going to continue with this work and we are hoping as we approach our meeting in March, that we will be in a position to discuss fiscal guidance for 2024, and also see what opportunities there are for better coordination of decisions that will be made as we approach the summer.
We then moved on to a discussion on the Economic governance review. This evening’s discussion really only focussed on the euro area aspects of the economic governance review. But it did afford an opportunity for all governments to offer a view regarding where the process stands at the moment and on the work they believe needs to take place in the coming months. Much of this discussion will happen in ECOFIN and I will give a brief update in the morning regarding what happened this afternoon.
Finally we closed the meeting with an update on where we are with the revised ESM treaty. Germany has successfully ratified the revised treaty. Croatia is making very speedy progress to deliver this and from visiting Rome last week, I want to recognise the work that is underway on this important topic in the government of Italy.
Source – EU Council