MNI BRIEF: EU Urges States To Trim Spending As Recession Looms
A eurozone contraction looks increasingly likely at the end of 2022, EU officials say.
EU officials will make another bid to persuade member states to trim and better target their energy spending packages at Monday’s meeting of eurozone finance ministers despite what they said was a growing risk of economic contraction.
“The economic situation is not looking that good,” said one senior EU official. “There is an increased likelihood of a recession around the turn of the year.” (See MNI INTERVIEW: Deeper German Recession Despite Rescue Package)
That said, monetary not fiscal policy would be “the most efficient” way of responding to a “significant worsening of the economic outlook”, the official said, although he conceded that fiscal policy would need to remain “agile” in the period ahead.
Ministers will renew their efforts to get states’ spending on the energy crisis on to a more targeted basis, noting a proposal from ECB President Christine Lagarde that governments should provide a fixed amount of energy at a subsidised price and the rest at market rates.
“That is not an optimal solution, but we are looking for something workable, as well as sustainable economically and politically,” the source said.