MNI:Gas Surge Weighs On 2022 Eurozone Fiscal Outlook-Officials

The unprecedented global surge in natural gas prices will be a key element in discussions between eurozone finance ministers on how to return fiscal policy to normality and in their upcoming talks on EU fiscal rules, EU officials told MNI.

But national budgets rather than EU-level support will be expected to handle the budgetary spillover from the gas crisis, with ministers focussed on how long the price explosion will last.

"This is an issue that will come up at the next Eurogroup, definitely," one official in Brussels said. "Right now, in terms of the Eurogroup discussions, it is really going to be about national budget plans and what is being done at national level."

Eurozone finance ministers, who will meet again on Oct. 4, are in the process of finalising fiscal policies for 2022 and are likely to need to make provision for spending to mitigate the impact of the surge on key industrial sectors and households.

SUSPENDED RULES

"From the budgetary point of view, we are in the comfortable situation of the Stability and Growth Pact not applying next year," said the source. The suspension of EU fiscal rules in 2022 will give "full flexibility" to member states to provide additional support to those hit by the rise in energy costs.

"It will be one of the factors that will inform the discussion on going back to normality and how it can be phased in, definitely. It is a discussion that will continue in coming months (and) also, in view of what the Commission is supposed to come up with in terms of the reimplementation of fiscal rules and how and what margins of flexibility might apply," the official said.

MEMBER STATE COMPETENCE

The official remarked that it is too soon to be talking about possible EU-level fiscal support through "Next Generation - Energy Chapter or anything like that."

Spain has already written to the Commission to propose a new EU-led Energy Policy, involving strategic reserves and restrictions on speculation in carbon ETS markets. But differences in the energy mix in different member states will mean varied levels of fiscal support across the eurozone.

"Some countries have already taken measures, while many others think they will need to put in place new measures - that will be an angle that will be handled in the Eurogroup and that will inform discussions in coming months on what kind support is needed and how coordinated we can be on this," another official said.

"Everybody is agreed on the temporary nature of this thing – but then the question is what does temporary mean, and that is the more difficult question."