By Jan Strupczewski
SANTIAGO DE COMPOSTELA, Spain (Reuters) – Euro zone finance ministers will discuss how to shape fiscal policy next year as they seek to help the European Central Bank curb inflation, while at the same time addressing the problem of slowing growth, euro zone officials said on Friday.
Ministers in charge of public finances in the 20 euro zone countries meet in the Spanish city of Santiago de Compostela on Friday to discuss the European Commission’s latest economic forecasts that sharply revised down economic growth forecasts for this year and next.
At the same time inflation is set to stay well above the ECB’s target of 2 percent, forcing the bank to raise interest rates to reduce demand in the economy.
“It will be the role of budgetary policy to look how we can play our part in getting inflation down, while supporting our societies when the cost of living continues to be such a big challenge,” chairman of the meeting Paschal Donohoe told reporters as he arrived for the meeting.
“It is in the interest of everybody that we get inflation down,” he said. “Inflation that stays too high for too long will have households and businesses poorer for longer. Fiscal policy and monetary policy needs to play its part. This is a complicated challenge.”
The discussion is timely because all euro zone countries have to submit their draft budgets for 2024 to the European Commission for checks if they are compatible with EU rules, which are now under review.
“Our policies should avoid undermining what the central bank has decided,” EU Economics Commissioner Paolo Gentiloni, who will be assessing the draft budgets, said on entering the meeting.
“It is a difficult balance to find, but we also have to preserve fiscal space for investment,” he said.
French Finance Minister Bruno le Maire stressed France was committed to sound public finances and the reduction of debt but that Europe also needed faster growth.
“We should devote all our time and energy to think about measures we need to take to have more growth in Europe. It means … we need a sound balance between sound public finances and lower debt and innovation, investment and fighting against climate change,” he said.
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