MNI BRIEF: Eurogroup Move Toward Restrictive Fiscal Stance

Euro Area finance ministers are moving in the direction of calling for a restrictive fiscal stance, in light of sticky core inflation trends and the need to support the ECB’s tighter monetary policy, a senior EU official said Friday.

Asked if euro zone governments needed to adopt restrictive fiscal policies rather than the mere avoidance of broad fiscal stimulus, as advised by the EU Commission in its 2024 fiscal guidance earlier this week, the official replied: “I share your conclusions that this is the direction in which we are moving.” The official noted that euro zone labour markets remain “quite resilient” even while the growth outlook looked subdued and that core inflation is still trending upwards.

The official said that the Commission’s advice represented only “a minimal” goal and added that a more restrictive fiscal stance ought to be reflected in the Commission’s Country Specific Recommendations when those are published later this year. Euro Area finance ministers will discuss the Commission’s fiscal guidance, among other policy topics, when they meet in Brussels on Monday.