The European Union knows that its economic growth forecasts for 2022 are no longer valid. But he also assumes that “it is impossible to know the impact of the Russian invasion on Ukraine.” This was expressed by the Commissioner for the Economy, Paolo Gentiloni, at the exit of the Eurogroup, this Monday in Brussels.
And what is hitting European GDP? Brussels lists the following points: “Significantly higher prices of raw materials, in particular gas and oil, but also wheat prices; aggravation of supply interruptions and the breaking of commercial ties; significantly greater uncertainty, which affects the confidence of both the economic and financial sectors”.
In this sense, Gentiloni highlights “the economic and material support to Ukraine; defense spending; the decoupling of Russian energy; assistance for a large number of refugees; continued support to deal with high commodity prices; and interruptions in production.
All this, acknowledges Gentiloni, affects the budgets of the countries of the euro zone.
“If we react strongly and unitedly, we can cushion the impact of the war on our economies and prevent a complete derailment of the recovery that was underway, but we have to act together and strongly,” said Gentiloni.
The Eurogroup has also approved conclusions in which they state: “With a view to preserving debt sustainability, in Member States with high public debt it is appropriate to start a gradual fiscal adjustment to reduce its public debtif the conditions allow it”.
“This adjustment must be integrated into a credible medium-term strategy to continue promoting the investment and reforms necessary for the digital and green transitions, and improving the composition of public finances.”
On the contrary, less indebted States, such as the Netherlands and Germany “should prioritize the expansion of public investment when necessary”, says the Eurogroup.
“There is a lot of talk of stagflation. My opinion is that if we act forcefully, we can avoid it. We entered this crisis with a high-speed recovery in Europe. Some of this recovery will fizzle out quickly, but we can reduce the impact if we react quickly like we did with the Covid crisis,” Gentiloni said.
“Both the pandemic, which by the way is not over yet, and the war in Ukraine are large external shocks with potentially different results across the EU”, said the Commissioner for the Economy: “These results will depend on the exposure of individual countries to Russian energy, its economic structures, its geographical location and its fiscal space. Thus, a common response is also to address divergence risk.”
In this regard, the Spanish economic vice-president, Nadia Calviño, stated: “What all the organizations agree on is that Spain is one of the countries least exposed to Ukraine’s aggression and therefore it is one of the countries for which expects less economic impact. We are acting both at a national and European level to try to minimize the impact in terms of growth and inflation”.