Remarks by Paschal Donohoe following the Eurogroup meeting

F.P. Report

BRUSSELS: It’s great to be here in Prague. And I want to begin by thanking our Czech hosts, Minister Zbynek Stanjura for his hospitality and for the efficiency of our meeting today.

This meeting is taking place at a very important time in the economic prospects of the euro area and the European Union. Today’s Eurogroup meeting reflected this. The finance ministers of the euro area are very much aware of the increasing concern that so many households and businesses face as energy bills are rising. How we can respond to this in an effective and coherent way is an important area of focus for all of us.I want to brief you on the key areas of agreement between all ministers.

We are all aware of the fact that we are now confronting a further economic challenge. The cause of this economic challenge is an energy price change that is caused by a war. We are all aware that we are responding to the economic consequences of an immoral war on the people of Ukraine. This is why we are all absolutely determined to overcome this challenge, and we remain committed to the efforts that are needed to overcome the moments ahead.

We are confident in our resilience and in the ability of the euro area to have the right policies in place to maintain that strength. We face this challenge with very high levels of employment, indeed record levels of employment, and we face it with a foundation of public finances that were recovering in a strong way after the pandemic. This is our foundation that we will continue to coordinate. It is what makes us confident in our ability to recover in the time ahead.

The finance ministers of the euro area will and are intervening to support vulnerable households and businesses as we face a price shock and an unprecedented change. We are determined to respond back, and we also agreed on the nature of this response.

We acknowledge and we agree that we must reduce inflation. Failure to do so will make our citizens, the people of Europe, poorer for longer. The finance ministers of the Eurogroup are united in putting in place a level of response that will be successful in reducing inflation. This is why our interventions will be coordinated with the monetary policy of the ECB. We will make every effort to avoid adding to the inflationary pressure which the ECB and we as finance ministers are fighting against.

Today we prioritised two policy themes in achieving this balance.

First, the policy interventions should focus on income transfers that are exceptional emergency measures by nature and – where possible – targeted. And we are aware of the need in the time ahead to coordinate our response, and how we support businesses within the euro area.

Second, we recommitted to our efforts to avoid a wage-price spiral. Similarly, as we ask businesses and workers to come together and play their role in this, we are also clear that super levels of profitability should not be experienced by some, while so many are suffering the economic consequences of a war. We stand ready to coordinate closely in this area and welcome and acknowledge the work that the Commission is doing with regard to this, which is now being discussed by energy ministers in Brussels today.

We also looked to the future. We looked at the resilience of our currency and the work that is underway regarding whether and how it could have a digital future. We were joined in that discussion by our non-euro area colleagues to take stock of the ongoing work on digital currencies. This included a comprehensive update from the President of the ECB and from Commissioner Gentiloni regarding the extensive work that is underway in the euro area. And we also received an update on the e-krona project in Sweden.

The Eurogroup believes that the digital euro project is of strategic importance and has the potential to strengthen our financial and monetary sovereignty and to improve the functioning of the euro area. That is why, despite the many pressing matters that we have on our agenda today, we felt it was important to continue our engagement in this project and to work with our colleagues, the ECB and the Commission.

The third area on the agenda for the Eurogroup today was our effort to appoint a new managing director of the European Stability Mechanism. To continue the exceptional job that was done by Klaus. Consultations with regard to this are continuing and I will be convening a Board of Governors meeting of the ESM shortly in order to progress that work. The work that has gone into it reflects the importance of this role.

We recognise that the prospects and the challenges within the euro area are changing as we see the challenges that are created by the war in Ukraine. But we approach this with economic foundations that are strong and we, the finance ministers of the euro area, will take all the steps that we can to coordinate with the ECB to bring down inflation, and to put in place measures which help households and businesses.