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MNI: Eurozone Finance Ministers, ECB, To Discuss Coordination

MNI BRIEF: Euro Area House Prices Grow At Record Pace in 2020

Eurozone finance ministers will review fiscal and monetary policy coordination in light of much better-than-expected economic developments in talks with the president of the European Central Bank and other ECB chiefs in Ljubjana, Slovenia, this weekend, though the time for discussing the reduction of the bloc's Covid stimulus is still months away, a source close to preparations for the meetings said.

Talks will examine the impact of the EU's Recovery Fund and the pandemic on the state of the economy and convergence between member states.

"That will influence the discussion on policy objectives, meaning how do we move from blanket support to a more targeted support. That is a discussion which will evolve, and I think by year end we should expect a new approach in terms of fiscal coordination," the official added.

The source underlined that the Eurogroup does not feel it is at a point where major changes are immediately needed. The European Central Bank Governing Council meeting on Thursday is also unlikely to produce major announcements, the source said.

"It's more towards November that things could be evolving," the source said.

BETTER THAN EXPECTED

"The discussion is still about coordination between fiscal and monetary policy – and also preparations for what's ahead," the source added.

The ministers will also discuss corporate insolvency, in light of a much-improved economic outlook.

"In the first semester, we were looking at the risk of 'bifurcation' between different sectors) of the economy and the danger we would see lots of businesses going down," the source added.

"The first assessments (for the second semester) look better than expected so ministers will certainly welcome this positive development along with the broader positive picture in terms of growth productivity and employment," the source said.

The ministers are also likely to play down inflation risks, despite signs that supply setbacks in specific sectors are driving up prices of raw materials and other key strategic industrial components.

"We have concerns on inflation, but inflation is relative to the fact that consumption is going better and some bottlenecks … the talks will focus on the economy, where we stand now and the main factors for recovery," the source added.

MNI Brussels Bureau | david.thomas.ext@marketnews.com
MNI Brussels Bureau | david.thomas.ext@marketnews.com

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