Sun. Nov 27th, 2022

Luxembourg, 4 April 2022

Euro area macro-economic situation and outlook

The euro area impact from the war in Ukraine in the short- and medium-term

Ministers discussed economic developments resulting from the Russian military aggression in Ukraine.

Monitoring and assessing these fast-moving developments is crucial for Eurogroup’s coordination of economic policies and promotion of the conditions for stronger economic growth.

This war is having an impact in terms of energy price increases and consequences on standards of living. In other areas such as food and raw materials, the war has led to price increases. We have highlighted the numerous policies in place to soften these impacts, particularly for the most vulnerable. The Eurogroup acknowledged these significant costs to standing against the abhorrent actions that are now being inflicted on the people of Ukraine. The euro area has the strength to absorb these costs. Support is being provided by states to their citizens. The discussion today emphasised the value of building on the unity and coordinated action that we developed in response to the pandemic in order to effectively tackle the consequences of this war and maintain cohesion within the euro area. – Paschal Donohoe, President of the Eurogroup

Preparation of the international meetings

In preparation for the upcoming spring meetings of the World Bank Group and the International Monetary Fund, ministers looked into the global economic developments, risks and policy challenges, and took stock of exchange rate developments over the past months.

The threat Russia represents to regional security and prosperity and for global economic cooperation is also taken into account in the preparation of upcoming international meetings.

Trade-offs in the design of a digital euro between privacy and other policy objectives

Based on input from the ECB and the Commission, ministers discussed privacy considerations related to a digital euro and how they relate to other policy objectives, such as preventing money laundering, illicit financing and tax evasion.

This discussion followed the work plan on the digital euro, agreed by the Eurogroup in July 2021.

We had a very constructive exchange of views on the digital euro, in particular on issues related to privacy, and other policy objectives such as anti-money laundering. The ECB presented options for building appropriate privacy safeguards. The Eurogroup agreed that the design of a digital euro should accommodate privacy concerns while complying with the broader policy objectives and counteracting the use of digital euros for unwarranted purposes. A risk based approach could be followed to allow for more privacy in the case of less risky and smaller transactions. I also heard some support to explore a limitation of offline functionality to low value payments in close proximity. This could improve the financial inclusion objectives of the digital euro and of its convenience, potentially enhancing its overall success. – Paschal Donohoe, President of the Eurogroup

Thematic discussion – Housing market developments in the euro area and policy implications

Ministers held a thematic discussion on housing market developments, focused on housing affordability issues.

The discussion took place in the context of rising housing prices over the last years in the euro area.

It is the first time we have discussed housing market developments and related policy implications in Eurogroup format. The picture today was varied. In many economies the issue of affordability was raised with the knock-on effects on our citizens. We had a good discussion today on these challenges based on input from the Commission. We shared the different measures that are being taken at national level to respond to these challenges, while also recognising that the national specifics of housing markets vary a lot. – Paschal Donohoe, President of the Eurogroup

Banking Union Update: including reporting on operational aspects

Fifteenth hearing of the Chair of the Supervisory Board

The Eurogroup was informed about the supervisory tasks carried out by ECB Banking Supervision, notably on the banking sector outlook and supervisory activity in the euro area in the context of the invasion of Ukraine by Russia, on European banking supervision priorities, and on the broader financial regulation agenda.

Reporting on recent activities of the Single Resolution Board

The Eurogroup was updated on the recent activities undertaken by the Single Resolution Board (SRB), focusing particularly on recent resolution cases, SRB priorities for 2022, and the state of play on the Single Resolution Fund and the common backstop.

Meeting information
  • Luxembourg
  • 4 April 2022
  • 15:00
Preparatory documents
Outcome documents

 


Remarks by Paschal Donohoe following the Eurogroup meeting of 4 April 2022

We are all appalled by the horrifying images of the attacks committed by the Russian army against civilians in Ukraine. We stand ready to step up sanctions and support for the people of Ukraine. It is important that we maintain our unity, that is why tomorrow at the Ecofin meeting we will discuss further actions.

Today at the Eurogroup we focused on the consequences of the war on the euro area economy. We can see these clearly in energy and increasingly in food prices and the disruption of supply chains. For governments, citizens and businesses this creates uncertainty. We acknowledged that economic growth will slow down this year, but let me emphasise two points.

Firstly, it is because of the risk of uncertainty that the Eurogroup stressed the need for our future trade policy to be agile and to respond to changing developments.

Secondly, we entered this latest economic crisis with a strong recovery taking place within the euro area. This means that for many economies we are still looking at positive growth figures for 2022.

This war is having an impact in terms of energy price increases and consequences on standards of living. We recognise the impacts on our society and cost of living in the short and in the longer term. We have highlighted the numerous policies in place to soften these impacts, particularly for the most vulnerable. In the medium term, our transition to alternative energy sources will happen much faster than we originally thought, which emphasises the pressing need to foster investments in the public and private sectors.

In other areas such as food and raw materials, the war has led to price increases. The spike in prices of commodities on world markets is currently generating inflation in the euro area. As of yet, neither the Commission nor the ECB have detected signs of an inflationary spiral in the euro area. But this is something that we will be monitoring very closely.

The Eurogroup acknowledged these significant costs to standing against the abhorrent actions that are now being inflicted on the people of Ukraine. The euro area has the strength to absorb these costs. Support is being provided by states to their citizens. The discussion today emphasised the value of building on the unity and coordinated action that we developed in response to the pandemic in order to effectively tackle the consequences of this war and maintain cohesion within the euro area.

Our next discussion today was a very constructive exchange of views on the digital euro, in particular on issues related to privacy, and other policy objectives such as anti-money laundering. The ECB presented options for building appropriate privacy safeguards. The Eurogroup agreed that the design of a digital euro should accommodate privacy concerns while complying with the broader policy objectives and counteracting the use of digital euros for unwarranted purposes.

A risk-based approach could be followed to allow for more privacy in the case of less risky and smaller transactions. I also heard some support to explore a limitation of offline functionality to low value payments in close proximity. This could improve the financial inclusion objectives of the digital euro and of its convenience, potentially enhancing its overall success. We encourage the ECB and the Commission to continue with their work in this area. We’ll be discussing the digital euro again in June, focusing on financial stability issues.

Our third agenda item was a discussion on housing market developments and related policy implications. It is the first time we have discussed this issue in Eurogroup format, and it is part of our series of thematic discussions on issues in the euro area that are relevant to our work as finance ministers.

The picture today was varied. In many economies the issue of affordability was raised with the knock-on effects on our citizens. We had a good discussion today on these challenges based on input from the Commission. We shared the different measures that are being taken at national level to respond to these challenges, while also recognising that the national specifics of housing markets vary a lot.

It was also my pleasure today to welcome our new Portuguese colleague, Fernando Medina, to the Eurogroup meeting.

Finally, together with our colleagues from Croatia and Bulgaria we invited the chair of the Supervisory Board of the ECB and the chair of the Single Resolution Board for the regular update on their recent activities and their assessment of the challenges facing the financial sector. They touched upon important topics such as the state of our banking system in the current geopolitical context and the recent resolution cases.

These discussions showed that efforts to reduce risks in our banking systems are paying off, despite many challenges. The resilience of our banks has become an asset to our economies, as we respond back to a new test.

I also took the opportunity to announce that I would be holding an extra Eurogroup meeting in inclusive format in early May. We will discuss my proposal for a work plan on banking union. We need a strong banking union to improve our competitiveness, strengthen our role in the world, and to fund the transition to a greener and more digital economy. We also need it to improve our resilience, stability, and the protection of taxpayers and depositors. I look forward to working with all the members of the Eurogroup in anticipation of that meeting

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