Thu. Sep 19th, 2024

Main results of the Eurogroup, 20 June 2024

Jun 21, 2024

Luxembourg, 20 June 2024

In regular format:

Article IV review of euro area policies

The International Monetary Fund (IMF) presented the main messages of its regular review of euro area policies. Its concluding statement will be published shortly.

International role of the euro 

The Eurogroup exchanged views on the international role of the euro, based on the annual review published by the European Central Bank. The European Commission also presented its views and analysis.

The euro continues to be the second most important international currency behind the dollar. Nonetheless, we are all aware of challenges created by the current geopolitical and economic context. Sound economic policies in the euro area and a deeper Economic and Monetary Union are at the top of the list of the steps that we can take to continue preserving the international role of the euro and to strengthen it in the future.

Paschal Donohoe, President of the Eurogroup

In inclusive format:

Euro area competitiveness: the role of industrial policy and market integration

The Eurogroup held a fifth exchange of views on euro area competitiveness, focusing on the role of industrial policy. Kristalina Georgieva, the IMF Managing Director, joined this discussion.

Building on the analysis by the Commission and the IMF, ministers discussed possible conditions for a successful industrial policy in a European context.

We acknowledged that there can be situations in which carefully designed industrial policies can play a useful role, for example for pan-European public goods. At the same time, ministers are aware that it is not as easy as it sounds – so there was a lot of emphasis on supportive framework conditions for businesses, to preserve the level playing field within the Single Market.

Paschal Donohoe, President of the Eurogroup

Preparatory documents
Press releases

 

    Remarks by Paschal Donohoe following the Eurogroup meeting of 20 June 2024

    We had a very good set of discussions on different topics today in the Eurogroup meeting. We started by taking stock of the macroeconomic and budget developments in the euro area with the managing director of the IMF. This discussion was a very timely reminder of the resilience of the euro area, considering the shocks we have experienced in the last few years. But we still face a very careful balancing act to foster growth, to bring down borrowing and debt, and to ensure that we have financial stability in place while responding back to common challenges. We’ll come back to the budget situation in our July meeting, when we will issue our regular statement on euro area budgetary policy.

    We then continued our meeting, with a discussion on the euro as an international currency. The ECB informed us that despite a difficult geopolitical context last year, the euro remains resilient and broadly stable in 2023 and continues to be the second most important international currency behind the dollar. Nonetheless, we’re also aware of the challenges created by the current geopolitical context, and we need to continue to monitor risks to the international role of the euro, such as the rise of alternative reserve assets and the increasing fragmentation in the global payment system. There are a number of steps we can take to continue to preserve the international role of the euro and to strengthen it in the future. Sound economic policies in the euro area and a deeper Economic and Monetary Union are on the top of the list. How we progress in the Banking Union and Capital Markets Union, alongside improvements in cross-border payment systems between the euro and other currencies, are also important.

    We then turned to our meeting in inclusive format with all EU finance ministers present. We had our fifth discussion under this workstream on competitiveness – this time with a focus on the role of industrial policy. The IMF, as well as the Commission provided some really helpful insights for our discussion. We noted that recent trends show a resurgence of industrial policy worldwide. The reasons are multiple: attempts to secure presence in digital industry, efforts to decarbonise the economy and efforts to increase competitive advantage and reduce dependencies in the context of increased geopolitical tensions. The Eurogroup reflected on the potential roles for industrial policy in Europe, noticing the different national specifics of our economies.  But all ministers emphasised the value, the role of the single market, the need to protect it, and the need to find ways to grow it. And there was wide agreement on this being one of our greatest achievements and on how we need to look after it with care.

    We did acknowledge that there can be situations in which carefully designed industrial policies can play a useful role, but these tend to be where market failures are present, where ‘first-best’ solutions are not available, or more positively, where we are trying to identify and deliver pan European public goods. So industrial policy in those areas may not be particularly useful for raising productivity and our growth potential, but it may be useful to longer-term objectives of a green transition, energy security and supply chain resilience. At the same time, as is frequently the case, adopting carefully designed policies is not as easy as it sounds. And many ministers were aware of this. So there was a lot of emphasis on support of frameworks for conditions for businesses to preserve the level playing field within the single market.

    I ended the meeting with a quick summary of my work representing the euro area at the G7 Finance Ministers level.

    Visit the meeting page

     

    Remarks of Commissioner Gentiloni at the Eurogroup press conference

    Brussels, 21 June 2024

    We had a very good exchange of views with Kristalina Georgieva on the economic outlook and policy priorities for the euro area.

    Our assessments of the outlook are broadly aligned: the picture is that of a gradual economic recovery, with cooling inflation and a still very strong labour market, so despite the geopolitical tensions and tension a shared moderate optimism for the euro area economy.

    We are also very much aligned with the IMF in the analysis of the structural challenges that need to be tackled. The recommendations we presented yesterday pinpoint many of these challenges, including on improving the business environment, increasing research and innovation and addressing skills mismatches and labour shortages.

    Let me also welcome the Fund’s support for our new economic governance framework that yesterday made its first significant step.

    As the President of the Eurogroup said we also took stock of the international role of the euro. The euro accounted for 20% of foreign exchange reserves at the end of 2023, which is in line with the medium-term trend; and it strengthened somewhat its position as a funding currency in international debt financing last year.

    At the same time, there are also some warning signs we should not ignore. Other currencies are gaining in prominence at the expense of both the dollar and the euro, increasing risks of potential fragmentation of global payment systems.

    Of course to support the international role of the euro we need, first and foremost, a strong euro area at home.

    And with China issuing the e-yuan and several other countries considering issuing central bank digital currencies, we must also continue to advance work on the digital euro. As you know, we tabled our proposal one year ago, so it is now up to co-legislators to take it forward.

    Finally, we addressed one of the chapters of the competitiveness challenge. And I want to thank Paschal because we had several discussions on this issue. It was today the turn of industrial policy.

    There is a growing recognition that with many of the world’s largest economies taking a more activist approach to industrial policy, Europe cannot afford to be a bystander.

    In the current geopolitical landscape, there are limits to what we can achieve by continuing to conduct industrial policy only at the national level.  We know that designing industrial policy is fraught with challenges. But we also have European success stories.

    So while we must continue to preserve basic framework conditions, like the single market and State aid rules, we must also strengthen the European dimension of our industrial competitiveness, with appropriate competencies and funding for industrial policy at EU level. This should be part of the broader reflection on what happens after the expiry of NextGenerationEU and the RRF in 2026. And it is a discussion that will need to be had sooner rather than later.

    Thank you.

    Source – EU Commission

     

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