Eurozone governments have committed to reducing expenditure next year to bring down borrowing after years of higher spending to support businesses and households through the Covid pandemic and energy crisis.
The currency bloc’s finance ministers agreed that “a gradual and sustained fiscal consolidation in the euro area continues to be necessary” given the need to “reduce the high levels of deficit and debt,” according to a Eurogroup statement.
This comes as the EU is bringing in new fiscal rules that will oblige states to cut spending or raise taxes in their draft budgetary plans in order to balance public accounts from next year.
Eurogroup president Paschal Donohoe said the fiscal effort needed will be more demanding than governments had initially anticipated but said capitals could slim their budgets by phasing out support.
“If the energy measures and the broader economic measures that were brought in when inflation was so high were to be removed, that would be a key driver of moving toward a contractionary stance for next year,” he said.
“We are all making huge efforts to try to at least maintain the value of capital investments within our economies but to find ways of trying to increase it further.”
