Eurozone ministers today insist on fiscal prudence following further interest rate rises

Eurozone finance ministers will discuss the macroeconomic context in the single currency area this Friday and should press for commitments to fiscal prudence following further interest rate hikes by the European Central Bank (ECB).

The Eurogroup meeting, held in the Spanish city of Santiago de Compostela as part of the Spanish Presidency of the EU, is taking place at a time of timid economic growth, weak consumption amid tight monetary policy and still high inflation, which is why “The main message will be that Fiscal policy must remain prudent,” community sources say.

“Two months have passed since the last meeting of the Eurogroup, and since then data has emerged indicating a loss of growth dynamism and still high inflation, although declining, and a decline in consumption,” they noted, recalling “significant uncertainty.” “macroeconomic context.

This Friday’s discussion comes a day after the ECB announced a new hike of three key interest rates by 25 basis points, the same as at the previous meeting, placing the deposit rate at the highest level in the euro zone’s history.

It was the 10th straight rate hike by the central bank, which has raised interest rates by 450 basis points since July last year, the fastest growth cycle in euro zone history.

In its summer macroeconomic forecasts published last Monday, the European Commission revised down its forecast for eurozone inflation this year to 5.6%, saying tight monetary policy was “working” but warned of revenue losses and downgraded its forecast for 2024 year. .

Also on the same day, the institution announced that the “very weak” economic activity of recent months in the eurozone and EU, which is expected to persist, has led to downward revisions to economic growth forecasts in 2024 to 1.3% and 1.1 %. .4%.

Inflation has been falling in recent months after reaching historic levels due to the economic reopening from the Covid-19 pandemic, the energy crisis and the economic fallout from the war in Ukraine, but is still above the 2% target. ECB for price stability.

To achieve this, the ECB has tightened monetary policy, consistently raising interest rates, but now at a slower pace.

Also this Friday, eurozone ministers will discuss the succession of Fabio Panetta, a member of the ECB executive committee who ends his post on November 1, for which only Bank of Italy deputy governor Piero Cipollone stood.

The Eurogroup must discuss the nomination and make a recommendation to the European Council, which will make a final decision after hearing the ECB and the European Parliament.