Brussels, 15 July 2024
In regular format:
Euro area fiscal stance
Going forward, gradual and sustained fiscal consolidation is needed in the euro area. That said, we are all conscious that improving the quality of public spending and safeguarding investment are going to be crucial along the way as we try to minimise any negative impact on economic growth.
Paschal Donohoe, President of the Eurogroup
The chairman of the European Fiscal Board (EFB) Niels Thygesen presented the recent EFB report on the fiscal stance of the euro area.
Eurogroup work programme until March 2025
The President of the Eurogroup presented the Eurogroup work programme covering the period up to March 2025.
Functioning of exchange rate mechanism
The Eurogroup discussed the functioning of the exchange rate mechanism (ERM II), with the ministers and central bank governors of Bulgaria and Denmark.
Miscellaneous
The minister of finance of the Netherlands presented the new government’s economic and financial policy priorities.
Euro area competitiveness: addressing the funding gap, a conversation with Enrico Letta
The Eurogroup held an exchange of views on how to address the funding gap to finance investments needed to enhance competitiveness in the EU.
Ministers welcomed Enrico Letta, President of the Jacques Delors Institute and author of the recent report on the future of the single market, to share his perspective on the topic.
Addressing the funding gap for the EU’s investment needs is a real challenge. We absolutely need to accelerate all of our efforts with regards to the capital markets union.
Paschal Donohoe, President of the Eurogroup
Preparatory documents
Outcome documents
Press releases
Source – Eurogroup
Eurogroup statement on the fiscal stance for the euro area in 2025
Brussels, 15 July 2024
The conditions for a gradual acceleration of economic activity in 2024 and 2025 remain in place in the euro area. Based on the Commission spring forecast, consumption is emerging as a key driver, on the back of a further deceleration in inflation and a resilient labour market. Investment is expected to benefit from improving credit conditions and the continued deployment of the Recovery and Resilience Facility (RRF). Risks to the economic outlook remain tilted to the downside, amid a still challenging external environment.
After the period of extensive fiscal support over 2020-2022, when it was overall important to address the negative consequences of major economic shocks and to protect the most vulnerable, the euro area fiscal stance turned neutral in 2023. Fiscal developments have varied across countries in recent years, in some cases leading to underlying weakening of public finances. According to the latest Commission forecast and in line with the Eurogroup’s agreement outlined last December, the fiscal stance is set to turn contractionary in 2024, also as energy support measures are being unwound. At the same time investment is expected to be preserved, contrary to developments in the aftermath of the financial crisis. In 2025, the public deficit in the euro area is projected to decline to 2.8% of GDP. Euro area public debt is projected at around 90% of GDP over 2023-2025.
A gradual and sustained fiscal consolidation in the euro area continues to be necessary going forward, given the need to reduce the high levels of deficit and debt. At the same time, this should be carried out in a way that minimizes the impact on growth, while continuing to enhance productivity and to maintain or increase investment, which remains essential for a competitive, dynamic, and resilient economy. We are committed to strengthening our efforts to improve the effectiveness, quality and composition of public spending.
Following the entry into force of the reformed economic governance framework on 30 April 2024, we need to ensure its swift and consistent implementation, to promote sound and sustainable public finances, sustainable and inclusive growth and resilience through reforms and investments and prevent excessive government deficits. We are currently preparing national medium-term fiscal-structural plans in line with the revised framework, building on guidance from the Commission. The plans, expected to be submitted in autumn 2024, will be assessed by the Commission and have to be endorsed by the Council. They integrate country-specific net expenditure paths with a set of reforms and investments that meet the criteria set out in the legislation. Where applicable, the plans endorsed by the Council will ensure consistency with the Excessive Deficit Procedure.
The draft budgetary plans process will continue to contribute to the coordination of economic policies within the euro area. National fiscal policies will respect the requirements of the revised framework starting with the 2025 budgets. The implementation of the revised governance framework is expected to lead to a contractionary fiscal stance for the euro area as a whole in 2025. This is appropriate in light of the macroeconomic outlook, the need to continue to enhance fiscal sustainability, and to support the ongoing disinflationary process. The framework allows fiscal policies to address uncertainty.
The Eurogroup will continue to closely monitor economic and fiscal developments and reinforce its policy coordination. We will review euro area budgetary policies in December, informed by the Commission opinions on the draft budgetary plans for 2025.
Remarks by Paschal Donohoe following the Eurogroup meeting of 15 July 2024
Brussels, 15 July 2024
Good evening, everyone. Let me just give you a quick summary of our July Eurogroup meeting.
We started our meeting with our annual exchange on the euro area fiscal stance for 2025, ahead of budget preparations for next year. This year’s backdrop is especially important as we now move into a revised economic governance framework. That discussion was informed by the report by the European Fiscal Board presented by Professor Niels Thygesen. It was his last meeting as chair of the European Fiscal Board, and we thanked him for all his work in recent years.
We agreed on a statement on behalf of the Eurogroup in which we concur that going forward, gradual and sustained fiscal consolidation is needed in the euro area. That said, we are all very conscious that improving the quality of public spending and safeguarding investment is going to be crucial along the way, as we try to minimise any negative impact on economic growth. Our statement reaffirms our commitment to swiftly and consistently implementing the revised economic governance framework. For 2025 – the first year when the new framework is applicable – its implementation is expected to lead to a contractionary fiscal stance for the euro area overall. We’ll review where we stand on this in our December meeting.
Today we also agreed our work programme for the months ahead, taking us to March of next year. Again, there’s a lot of focus on our work with regard to budget coordination, capital markets, the future of our currency and competitiveness.
We held an important discussion in relation to the state of convergence for those countries in the exchange rate mechanism (ERM II), and in particular on the implementation of ERM II commitments by Bulgaria. As you know, according to the institutions, Bulgaria fulfils all of the convergence criteria except for the one with regard to price stability. Bulgaria has made good progress over the last years, and we all encourage it to continue with its reform efforts towards euro adoption, which will take place once sustainable convergence with the euro area is reached.
We then concluded our agenda with a discussion on euro area competitiveness. We were joined by Enrico Letta, who kicked off our discussion with a focus on the relevant elements of his report, entitled ‘Much more than a market’. Addressing the funding gap for the EU’s investment needs is a real challenge. We heard a divergence of views with regard to this, but we also heard a lot of common ground and consensus. This is true in particular with regard to the need to absolutely accelerate all of our efforts with the capital markets union and the Eurogroup will play a central role in this. There was acknowledgement regarding the benefits of exploring EU level common actions to support genuine EU public goods. We are going to continue to focus on implementing the roadmap we agreed to make the capital markets union a reality.
We agreed on the need to sum up these discussions when we return in September. We will aim to reach a common view on how we move this important discussion on competitiveness forward at the level of finance ministers.
Today that we also welcomed two new members to the Eurogroup: Eelco Heinen, the new Dutch finance minister, and my own colleague from Dublin, Jack Chambers.