Remarks by Executive Vice-President Valdis Dombrovskis at the ECOFIN press conference

Thank you minister - good afternoon, everyone.

Let me start with the economic outlook.

There are several promising signs, but we are not out of the woods yet. We still face multiple challenges.

As you know, yesterday the European Commission updated its economic forecast, and we presented it today to ministers.

The EU economy showed remarkable strength last year.

The outlook for 2023 is somewhat brighter. It has led to slight upward revisions to our growth forecasts.

We project 2023 growth at 0.8% for the EU as a whole.

Inflation is starting to cool off after hitting record highs last autumn.

Energy prices are falling. Wholesale gas prices, for example, are now well below pre-war levels.

This reflects lower gas consumption as well as an impressive diversification of supply away from Russian pipeline gas.

We forecast a fall in inflation from 9.2% in 2022 to 6.4% this year, and 2.8% in 2024 in the EU.

This more encouraging picture reflects the resilience that we managed to build and reinforce over the last few years.

But that said, the updated outlook remains subject to great uncertainty due to Russia's continued war against Ukraine.

Across the EU, people and companies are still going through a demanding period.

So it is important that we steer through this difficult period with the right policies and in a coordinated way.

Our economies also need a credible system of economic governance in order to thrive, to:

  • underpin advantageous financing conditions for companies and households, and to
  • create space for the massive investments needed for the green and digital transitions and to boost our resilience.

We need credible rules that ensure public debt sustainability across the EU.

Our aim is for all Member States to have sustainable fiscal positions, using a tailor-made combination of fiscal adjustment, reforms and investments.

These are among the objectives of the Commission's orientations for reviewing the EU's system of economic governance, which ministers discussed today.

It was a substantive and constructive debate. There appears to be broad agreement on some key principles and objectives.

These include, for example:

  • ensuring sustainable public finances by combining gradual fiscal adjustments with reforms and investments
  • a greater medium-term focus, based on Member States' own fiscal-structural plans
  • a better reflection of country-specific public finance challenges in the design of these plans
  • more dynamic surveillance of macroeconomic imbalances, allowing for earlier detection of emerging imbalances.

At the same time, there are also some elements where further discussions and further work will be needed.

For example: achieving the right balance between ownership and country-specificity on one hand, and equal treatment of Member States and predictability and transparency on the other.

There are also many technical details still to be ironed out and agreed, but one can say that we have laid a strong foundation for the Council to provide a clear view in March.

Ministers should now aim to agree on the most pressing issues – and to reach the largest possible consensus – in time for the European Council next month.

The Commission will continue to fully support the discussions in the weeks ahead. This should allow us to present legislative proposals shortly after the March European Council.

We believe that it is important to reach this agreement, given the multiple challenges that the EU is facing - high inflation and rising interest rates, for example. There is a need for strong budgetary and economic policy coordination and surveillance.

Today, ministers also debated ways to raise the EU's long-term competitiveness and productivity.

This was focused around the Commission's proposed Green Deal Industrial Plan.

It aims to enhance the competitiveness of Europe's net-zero industry, support the fast transition to climate neutrality and make Europe a hub of clean tech and industrial innovation.

Lastly, we also discussed the effect of EU sanctions on Russia and its economy.

The sanctions are biting hard and contributing to a severe and sustained economic recession in Russia, despite record-high energy prices last year.

In common with many other forecasters, we expect Russian real GDP to still contract in 2023. Economic headwinds are likely to persist for years to come.

But the effectiveness of sanctions also depends on how well they are enforced.

We are monitoring this closely and are prepared to act against those who deliberately circumvent sanctions, because this is important to ensure the success of this effort.

We also discussed how to improve reporting and coordination of the implementation of the sanctions.

Thank you.