Remarks by Paschal Donohoe following the Eurogroup meeting of 4 October 2021

(Source: Council of the EU and European Council)

We had a very full agenda here today in Luxembourg and many important topics were discussed. It’s great to be able to do it in present with all of our colleagues. The euro area economy continues to be bouncing back strongly. Recent data releases show that the euro area is doing well. The Delta variant has been and does remain a health challenge for our health systems, but thankfully we have managed to keep hospitalisation and death rates down. But of course, every life lost, every single person in hospital is still one too many. But we have seen really important health progress and the economic recovery has stayed on track.

The growth that we are now seeing, the continued policy support we have in place and the recovery funding that is now flowing is the best medicine there is to help firms and households to recover from this economic crisis. But of course, economic policy is never straightforward, and in these extraordinary times, we now have to monitor many different issues. Over recent months the highest priority issues were virus variants, vaccination progress and finding safe ways to reopen our economy. These are still key concerns, but they are also accompanied now by other issues.

One of those is energy prices, which have increased recently and which entail wide-ranging economic and social consequences. And we would, in the Eurogroup, appreciate the issues that these higher costs create for businesses and for citizens. So to help us get a shared understanding of these developments, I invited Christian Zinglersen, the director of the EU Agency for the Cooperation of Energy Regulators, to make a presentation and to inform us on recent developments and prospects.

The issue of rising energy prices is broad and it is multifaceted. Our exchange of views today focussed on the consequences for inflation and for budgetary policy within the euro area. There are also many other viewpoints, such as energy security, which belongs to other ministers and to other Council configurations.

So to give you a sense of today’s discussions, we all concur with the Commission and with the ECB that a significant part of current developments are likely to be temporary and that inflation should start to fall again next year. However, of course, there is the human angle and today’s discussion showed a shared awareness of the need to address the social impact of the current price spike and the need to protect the most vulnerable households from energy poverty through targeted measures.

But the most vulnerable are not the only ones affected. This is an issue that is indeed touching all Europeans, citizens and businesses and in particular, small and medium-sized businesses. So that’s why we agreed on the need to monitor the evolution of energy prices and to factor this into our budgetary policy-making to ensure it doesn’t compromise the recovery that is now taking hold.

We were in full agreement today that the current situation does not undermine our ambitious climate objectives. The green transition is not the problem, it is part of the solution. We need to maintain and find opportunities to speed up our efforts to improve energy efficiency, develop renewables and low carbon sources of energy so as to reduce our reliance on imported energy.

So overall, we had a good discussion on a relevant but very complex issue. This is clearly not the end of a process. Given the complexity of the issue and the role of other Councils, further work and discussion is required and our exchange of views will feed into the important work the Commission is currently carrying out in identifying areas for further common action in tackling further rising energy prices. And of course, this is an issue that is not limited to the euro area, which is why I am coordinating closely with my Slovenian colleague and current holder of the presidency of the Council of the European Union, Andrej Šircelj.

Our second item was also on the economic situation in particular with regard to exchange rates. It’s standard practice for the Eurogroup to get a shared understanding of exchange rate developments ahead of the IMF annual meetings, which will start in about a week’s time.

Our third item looked at the implementation of euro area priorities in the recovery and resilience plans. We’ve already acknowledged the importance of recovery funding for healing our economies after COVID-19, but it’s also critical for addressing long-standing reform and investment priorities identified in country-specific recommendations and in the euro area recommendations and thereby promoting the convergence and long term growth of our economies. Our discussion today highlighted that Next Generation EU is providing a real boost to investment and reforms, but we have much work to do individually and collectively to move forward but Banking Union and Capital Markets Union.

We also discussed the 11th enhanced surveillance report in Greece. We’re very much aware that the pandemic has had a large impact on the Greek economy. This has affected the implementation of some reforms, but we remain positive with the progress that has been made.

Finally, together with our colleagues from Croatia and Bulgaria, we invited the chair of the Supervisory Board of the European Central Bank and the chair of the Single Resolution Board for their regular updates on their recent activities and their assessment of progress regarding the financial sector. They touched upon important topics such as the structural transformation of the banking sector, the adjustment of business models driven, for example, by digitalisation, as well as progress made on the resolvability of banks in the Banking Union.

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