Euro Area to Maintain Fiscal Expansion in 2022 Despite Risks
Euro Area to Maintain Fiscal Expansion in 2022 Despite the Risks
(Bloomberg) -- Euro-area governments will prioritize public spending next year as they look to cement the recovery from the Covid-19 pandemic amid increasing prices and supply chain challenges.
The euro-area fiscal stance is projected to remain expansionary through the end of 2022 as recommended by the European Commission, according to the institution’s assessment of member states’ draft budgetary plans released Wednesday and reported earlier by Bloomberg.
The European Union’s executive arm is calling on euro-area governments to be ready to ramp up spending again if there is a resurgence in infections. It is also encouraging them to start reining in their budget deficits once the economic conditions allow, while taking care not to reduce investment, according to the draft document published Wednesday.
In a separate draft report, the commission concluded that 12 member states (Croatia, Cyprus, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal, Romania, Spain, and Sweden) should be subject to an in-depth review of their macroeconomic imbalances.
Those countries were already subject to close monitoring before the pandemic and Cyprus, Greece and Italy had been highlighted as a particular source of concern.
On Italy, the commission said the government should take steps to limit its current expenditure given the high level of its public debt.
“We have to ensure a debt reduction path that is not in contradiction with growth,” EU economy commissioner Paolo Gentiloni told reporters Wednesday. “Without growth, our economies are not available to reduce their debt. This is not an easy balance.”
He added, “We need a realistic reduction.”
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