BRUSSELS (Reuters) – Euro zone finance ministers agreed that the single currency area needed a “determined, gradual and realistic” reduction of government spending to boost economic growth and prepare for future challenges.
In a statement agreed at the Eurogroup meeting in Brussels, the ministers said economic growth in 2024 was expected to improve as inflation receded, albeit with downside risks.
However, the impact of inflation on the economy remained a concern. Euro zone governments increased spending from 2020 to 2022 to deal with the COVID-19 pandemic and an energy price crisis sparked by Russia’s invasion of Ukraine last year.
The policies placed an extra burden on public finances. The statement said persistent inflation and higher borrowing costs would need to be addressed to reduce deficit and debt ratios over time.
“In light of this, a strategy of determined, gradual and realistic fiscal consolidation is warranted,” said the statement, which was in line with a draft Reuters saw earlier.
It added that structural reforms remain an essential goal, given common priorities of the green and digital transitions and increased defence requirements.
“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 Eurogroup statement read. For most euro zone members, this would be enough to meet country-specific fiscal recommendations.
The Eurogroup will review euro zone members’ budgetary policies in December, based on the European Commission’s opinions on their draft budgetary plans for 2024.