Households and businesses must be protected from the energy shock without undermining fiscal credibility, Eurogroup President Kyriakos Pierrakakis said. Speaking to reporters on Thursday ahead of a meeting of eurozone finance ministers in Luxembourg, he described the challenge as “a difficult equation with two sides.”
As he explained, rising energy prices and inflation are on one side, while pressure on bond markets is on the other. The two objectives are not competing, he said. “We have to do both at the same time. The two key words are protect and preserve,” he said, referring both to protecting European citizens from the cost of the energy shock and to preserving the credibility of the fiscal framework.
Fiscal pressures
Asked whether fiscal rules should be changed following requests from Greece and Italy for an exemption, Pierrakakis said there was an awareness that both objectives had to be achieved “within the rules and the framework that we have in front of us.” He added that pressure on bond markets was a global phenomenon and was being monitored closely.
On the differing approaches among member states, he said that “some countries are experiencing the impact of the energy shock more, while others are more sensitive to fiscal pressures and spreads.” However, he said, “the priority is European at its core,” and expressed confidence that the right balance could be found, as had happened many times in the past.
German Finance Minister Lars Klingbeil called for proposals to address the sharp increases in energy prices and reiterated his proposal for windfall profits to be taxed at the European level. “I have repeatedly asked the Commission to put forward proposals,” he said, adding that the issue would be discussed again at the finance ministers’ meeting of the 27 member states the following day.
'Time to act'
“The Commission must not lose sight of what concerns citizens in Europe, and that is high energy prices,” he said, adding that it was time to act. He said Germany was taking measures at national level, but also expressed the clear expectation that the Commission would now put forward proposals on how to hold accountable those currently benefiting from the crisis: oil companies. “Refineries and oil companies are making profits from this crisis, while in the end consumers are the ones who bear the consequences,” he added.
Ministers declined to comment on the situation in France’s bond market. The German minister said he did not comment on the actions of other countries and would not speculate about the bond market. He added that he was watching “very closely what is happening” and was in regular contact with his French counterpart. He also confirmed that the Eurogroup provided an opportunity for ministers to discuss the situation.
On pressure on bonds and the situation in France, Belgian Finance Minister Vincent Van Peteghem said he would not give advice to his French counterpart. “We are seeing rising yields, rising interest rates. It is something happening globally, but markets are also looking at countries with high debt such as ours and France,” he said. He described a credible budget, a long-term vision and structural reforms as the best response, adding that his own government would also have to take such action in the coming days and weeks.
Van Peteghem opposed changing the fiscal rules. “I am not among those who are in favour of changing the rules, especially for the current price of energy, knowing that this is a supply shock,” he said. He added that he did not think it was a good idea to create national escape clauses for prices such as these. On the energy crisis, he stressed the need for electricity and for moving away from fossil fuels, while leaving open the possibility of initial measures on the condition that they were “proportionate and temporary.”
Source: CNA
