Key facts
- Eurogroup President Kyriakos Pierrakakis stated that fiscal policy must complement the European Central Bank's (ECB) efforts to control inflation.
- The ECB is widely expected to raise its key interest rate by 25 basis points to 2.25%.
- Pierrakakis urged finance ministers to implement targeted measures that do not exacerbate inflation.
- Italy has requested greater fiscal flexibility from the EU, particularly concerning energy costs.
- The EU has so far resisted calls to relax fiscal rules for energy spending.
- Pierrakakis emphasized the importance of investing in Europe's energy infrastructure for long-term economic independence.
Eurogroup President Kyriakos Pierrakakis has stated that fiscal policies across the euro area must complement the European Central Bank's (ECB) efforts to tame inflation, particularly as the central bank prepares to raise interest rates. Speaking to Euronews, Pierrakakis emphasized that finance ministers should implement measures that do not fuel broader inflationary pressures, striking a balance between providing fiscal support and maintaining targeted aid.
The ECB is widely anticipated to increase its key interest rate by 25 basis points to 2.25% on Thursday, under the monetary policy overseen by ECB President Christine Lagarde. Pierrakakis noted that while the Eurogroup does not comment on monetary policy, they trust the ECB to anchor inflation expectations. He stressed that government policies should not run counter to monetary policy, especially as nations consider ways to cushion the impact of rising energy costs without resorting to broad-based subsidies.
Both the European Commission and the International Monetary Fund have advised governments to adopt support measures that are "targeted and tailored" to those most affected. However, Italy's government, led by Giorgia Meloni, has called for more flexibility. Meloni sent a letter to the Commission suggesting that the energy crisis, exacerbated by the closure of the Strait of Hormuz, should be treated as an emergency on par with defense. Italy's finance minister, Giancarlo Giorgetti, has also urged the Commission to relax fiscal rules for energy expenditures, exempting them from deficit and debt calculations. Currently, EU rules require member states to keep their deficit below 3% of GDP, and Brussels has so far resisted calls to activate the general escape clause.
Pierrakakis acknowledged divisions among member states, stating that "there are different viewpoints around the table" and his role is to help forge a consensus. Italy is expected to reiterate its demand for greater fiscal flexibility at the upcoming Eurogroup meeting and an EU leaders' summit. The summit will address developments in the Middle East, including the conflict in Iran and its implications for energy prices. The Strait of Hormuz, through which one-fifth of global supply passes, remains closed amid military exchanges between Iran and the US, with President Donald Trump vowing consequences for Iran's actions.
Pierrakakis also highlighted the need for Europe to invest more in its own energy infrastructure and projects, arguing this is crucial for the continent's "economic independence," akin to defense investments safeguarding "Europe's freedom." He believes that lowering energy prices in the long term is the most effective social policy, rather than relying on short-term fixes. The Commission's proposal for additional flexibility to support investment in energy projects was described by Pierrakakis as a "targeted and fair approach" that will be discussed.