Brussels, 11 March 2024
The Eurogroup welcomes the political agreement, which was reached in February 2024 on a comprehensive reform of the EU’s economic governance framework and looks forward to its timely adoption by the co-legislators. Work is ongoing on preparing for the implementation of the revised framework, once in force.
While the economy entered 2024 on a weak footing, the conditions for an acceleration of economic activity in the euro area in 2025 appear to be in place based on the Commission winter forecast. The labour market remains strong. Inflation is on a declining path and is expected to be close to the ECB target in 2025, while the effects of tighter monetary policy work their way through the economy. Risks to the economic outlook are nevertheless tilted to the downside, as global uncertainty weighs on the economic outlook.
The euro area is facing multiple budgetary demands in parallel to the need to continue to rebuild fiscal buffers. The reformed framework is designed to strengthen debt sustainability and promote sustainable and inclusive growth through structural reforms and investments, while fostering national ownership and enhancing enforcement. We are committed to ensure its consistent and swift implementation over the course of this year. The draft budgetary plans and orientations on the fiscal stance remain important, as close coordination of Member States’ fiscal policies significantly contributes to the strength and cohesion of the euro area.
Based on the latest available data, the requirements of the revised economic governance framework would translate into an overall slightly contractionary fiscal stance in the euro area in 2025. This would be appropriate in light of the current macroeconomic outlook, of the need to continue to enhance fiscal sustainability, and to support the ongoing disinflationary process, while policies should remain agile in view of the prevailing uncertainty.
We will continue to pursue ambitious structural reforms and preserve and where appropriate increase the level of investment, including in areas of common priority, such as the green and digital transitions, as well as defence capabilities, financed through national and EU sources, including the Recovery and Resilience Facility. We are committed to strengthening our efforts to improve the effectiveness, quality and composition of public spending. In line with our December statement, we will continue to phase-out the remaining energy support measures as soon as possible in 2024 and use the related savings to reduce government deficits.
We will take into account these considerations when preparing the medium-term fiscal-structural plans, including the reform and investment commitments of the recovery and resilience plans, and the budgets for next year, in line with the revised governance framework. In that context, we look forward to further Commission guidance and discussion with the Member States, in order to ensure effective preparation and predictable and transparent assessment of the medium-term fiscal-structural plans.
The Eurogroup will continue to closely monitor economic and fiscal developments regularly and reinforce its policy coordination.
Source – EU Council