Euro zone finance ministers will agree on Thursday to withdraw energy support measures to their economies and use the savings to cut budget deficits and help the European Central Bank curb inflation, a draft statement by the ministers showed, according to Reuters.
The ministers will also say that gradual, determined and realistic fiscal consolidation is warranted to rebuild fiscal buffers after high public spending during the pandemic and the energy price crisis. They will also say that structural reforms were needed.
“Absent renewed energy price shocks, we will in the euro area strive to wind down energy support measures, using the related savings to reduce government deficits, as soon as possible in 2023 and 2024,” the draft statement said.
“We will achieve the necessary overall restrictive fiscal stance in the euro area for 2024 by the implementation of the fiscal recommendations by all euro area Member States,” said the statement, to be adopted by the ministers on Thursday.
The statement is in line with the recommendations of the European Fiscal Board, an independent advisory body to the European Commission, which said in late June that the euro zone should tighten fiscal policy next year by more than currently planned to help the ECB fight inflation and prevent interest rates rising too high.
While consolidation has already started, the effect of persistent inflation and higher borrowing costs will need to be addressed to reduce deficits and debt ratios over time, the draft statement said.
“A strategy of determined, gradual, and realistic fiscal consolidation is warranted to strengthen sustainability, to rebuild fiscal buffers to deliver higher sustainable growth,” the statement said.
“At the same time implementing structural reforms … remains an essential goal,” it said.