MNI BRIEF: Hawks To Swoop On Energy Spending At Eurogroup

This weekend’s meeting of eurozone finance ministers is likely to see robust exchanges between fiscally hawkish and more dovish states over the potential inflation and fiscal impact of measures taken by some to mitigate rising energy prices, judging from comments from a senior EU official who wants more policy coordination by the Eurogroup.

The comments came as inflation prompts the EU’s fiscal hawks to take a tougher line on reforming rules on public borrowing. (See MNI: Inflation Strengthens Hawks' Resolve In EU Debt Talks)

Noting that measures to reduce the impact of higher energy prices now totalled around 1% of GDP, the official today warned the “scale and importance” of such policies is becoming “highly relevant for debt sustainability”, as well as for the role of fiscal policy in controlling inflation”.

Yields for benchmark German 10-year bonds have risen by almost 180 basis points this year, while yields for France, Spain and Italy have gained between roughly 200 and 270 basis points.

Finance ministers in July called for any energy measures to be temporary and targeted, the official lamented, yet “what we are seeing are big handouts and tax cuts which cover the whole population, and this makes it harder to bring down inflation.”

The official said that Eurogroup needed to coordinate fiscal policies.