MNI: EU Fiscal Scolding Seen Falling On Deaf Ears

EU officials will make a fresh bid at Monday’s Eurogroup meeting of eurozone finance ministers to persuade member states to better align their fiscal policies and energy support measures with the European Central Bank’s monetary policy stance, officials told MNI, admitting that their chances of success were modest.

While Eurogroup Chair Paschal Donohoe has repeatedly urged finance ministers to make fiscal support for consumers and business “temporary and targeted,” his advice has so far fallen on deaf ears.

“It’s no secret that measures have not been as targeted and as temporary as we would like. Most have been broad based, which are the easiest to implement of course, but not sustainable. We need more targeted and more income- than price-based measures,” one EU official said.

A recent proposal from ECB President Christine Lagarde for subsidies to support only basic levels of electricity consumption will give officials a concrete reason to reopen the topic, they said.

STABILITY AND GROWTH PACT

Officials from Spain and Italy, which have both provided substantial support for their economies in response to the energy crisis told MNI that they expected little significant criticism of their measures.

More substantive discussions on the eurozone’s fiscal stance should take place in talks on reforming the EU’s Stability and Growth Pact, which sets rules for public borrowing, a Spanish finance ministry source said. Italy will continue to push for an expansion of EU funding in response to energy-driven inflation, an Italian source said.

While doubtful as to their chances of success, EU officials said they might at least secure agreement on general principles or best practices for fiscal support.

“At the very least, the exercise raises awareness and keeps finance ministers alert to the danger that the current approach presents problems, including negative implications for inflation and debt sustainability,” one source said.