BRUSSELS (Reuters) – Eurozone finance ministers on Monday pledged continued budget support to their economies and discussed the design of post-pandemic stimulus packages as the European Commission warned that the COVID was exacerbating the bloc’s economic imbalances.
“Our discussion today reconfirmed the very strong consensus on the need to maintain a favorable fiscal stance,” Prime Minister Paschal Donohoe said at a press conference after the meeting.
“The ministers also underlined the importance of coordinating our efforts at euro area level and the fundamental fact that we can achieve more collectively than individually.”
The Commission said in a note prepared for ministers that the pandemic was pushing already heavily indebted countries into further debt and exacerbating problems in areas such as competitiveness or employment.
Such divergences between economies sharing the same currency increase the risk of crises and make the single monetary policy of the European Central Bank less effective.
To avoid this, the EU has agreed on a € 750 billion stimulus fund, to be borrowed and repaid jointly, which will finance reforms and investments in each of the 27 EU countries to boost their potential for growth. growth while avoiding a build-up of debt.
“We will have to pay close attention to the imbalances linked to the social impact of the crisis, which have not yet been fully felt. We must avoid a further aggravation of the already worrying inequalities within our societies and between our countries ”, declared the European Commissioner for Economic and Financial Affairs Paolo Gentiloni during the press conference.
Before they can get any money from the stimulus fund, EU governments must prepare plans on how to spend it under the guidance of the Commission. The plans must meet the EU’s demands to make economies greener, more digitized, improve their resilience to crises and boost their potential growth.
They must also take into account the recommendations of each country issued by the Commission last year.
The Commission said Germany and the Netherlands should boost investment and household income to reduce their huge current account surpluses. Italy, Greece, Spain, France and Portugal, however, had to deal with high public and private debts, competitiveness and productivity issues, he said.
Gentiloni said governments would likely be able to formally submit their plans, currently under informal discussion with the Commission, by the end of February. The EU executive will then have two months to approve them and EU finance ministers will have another month to give their approval.
The Commission would then borrow the money from the bond market on behalf of the EU and pass it on to the governments whose plans have been approved, paying around 10% of the money up front and the rest in installments as they go. that investments increase.
Asked about a stimulus package for Italy, whose government is in turmoil, Gentiloni said the plans the Commission saw so far were broadly in line with EU targets, but needed more work.
“The Italian plan is largely convergent with our general objectives and policies but, like many other draft proposals, needs to be discussed and strengthened,” he said.
“We have a very good basis, but we must strengthen it, not only for the Italian plan, but also for all the draft plans that we are currently discussing with the Member States.”
Reporting by Jan Strupczewski; Editing by Hugh Lawson and Catherine Evans