MNI: Ukraine Prompts Slightly Easier EU Fiscal Stance- Source

The European Commission is likely to give a slightly dovish tweak to fiscal guidance for EU states’ 2023 budgets compared with recent comments on the topic from senior EU officials, but will hold firm to plans to deactivate the escape clause from the Stability and Growth Pact, an EU source said.

The Commission is due to present its guidance on 2023 budgets to EU states next week and it had been expected that it would at the same time confirm that the Pact’s escape clause, enacted due to the Covid pandemic, would be deactivated as of the start of next year, reinstating tougher budget rules.

While the Russian invasion of Ukraine may not affect the escape clause plan, it may nevertheless shift the terms of the debate on the topic.

“I think the discussion was more about recommending a broadly neutral or moderately restrictive aggregate stance from the moderately supportive stance of 2022 and the all-out supportive stance of 2021,” the source said. “With the war, I think the chances are that it will either stay moderately supportive or become broadly neutral, but not moderately restrictive.”

The issue is likely to be debated by EU finance ministers in Paris Friday as they meet to discuss the economic and financial impact of the crisis in Ukraine.

Economy Commissioner Paolo Gentiloni said the guidance would “need to take into account the increased uncertainty clouding the economic outlook as a result of Russia’s attack on Ukraine,” according to the text of a speech to be delivered on Thursday.