MNI BRIEF: EZ Ministers To Call For More Targeted Spending

Euro area finance ministers are set to issue a statement at their meeting next week calling for a pivot to more “temporary and targeted” fiscal measures and away from the broader-based support implemented by many EU states in response to the energy crisis, officials in Brussels told MNI, adding that ministers would also discuss exchange rates.

“From here on we need to think more about long-term debt sustainability and effect on inflation,” an EU official said. (See MNI: Inflation Strengthens Hawks' Resolve In EU Debt Talks)

The official said that the focus should now be on inflation, although ministers would be keeping a close watch on any signs of developing recession risk.

“This is about fiscal – monetary policy coordination. It is of the utmost importance that fiscal policy does not make the job of the central bank more difficult and doesn’t force it to take more drastic action than it otherwise would,” the official said.

The official said that ministers were also likely to discuss exchange rates ahead of the IMF and World Bank meetings next month, as a depreciating euro adds to inflation pressures.

While the exchange rate was not a “policy target”, he said, “it has consequences for inflation and growth, so we need to be attentive to it as well.”