MNI: EU Commission Rejects Call For Restrictive Fiscal Stance

The European Commission rejects advice from the independent European Fiscal Board for eurozone fiscal policy to adopt a “moderately restrictive” stance next year, a spokesperson said, defending the Commission’s decision to extend the suspension EU fiscal rules until the end of the next year.

“Unlike the Board, the Commission considers that uncertainty and risks to the economic outlook warrant the extension of the general escape clause of the Stability and Growth Pact through 2023. In line with this assessment, the Commission, contrary to the Board, does not call for a restrictive fiscal stance in 2023,” the spokesperson told MNI.

The EFB’s assessment of the fiscal stance for 2023, published on Wednesday said that a more restrictive stance is needed next year to support European Central Bank efforts to control inflation.

“We agree that a broad-based fiscal impulse to the economy does not appear warranted at the current juncture and that fiscal policy should focus on temporary and targeted measures and fiscal prudence required to ensure medium-term sustainability,” the Commission spokesperson said.

The comments come ahead of a meeting of eurozone finance ministers in July, which is expected to discuss the fiscal stance for 2023 in light of the recent changes in the outlook for monetary policy, as well as the more fragile situation in the financial markets. (See MNI: Euro Ministers To Signal Tighter Fiscal Stance- Officials)

ECB officials are currently working to develop an anti-fragmentation tool to try and control widening spreads on peripheral eurozone government bonds as the central bank starts to normalise interest rates in the coming month.