UPDATE 1-Euro zone ministers agree fiscal policy must aid ECB inflation fight

Reuters · 09/15/2023 11:52
UPDATE 1-Euro zone ministers agree fiscal policy must aid ECB inflation fight

Recasts with quotes from final conference

By Jan Strupczewski

- Euro zone finance ministers agreed on Friday that fiscal policy should be restrictive year to help the European Central Bank curb inflation, while balancing the for investment.

Ministers in charge of public finances in the 20 euro zone countries met in the Spanish city of Santiago de Compostela to discuss the European Commission's latest economic forecasts that sharply revised down 2023 and 2024 economic growth forecasts.

Meanwhile, inflation is set to stay well above the ECB's 2% target, forcing it to raise interest rates to reduce demand.

"It is clear that the euro area economy has lost some growth momentum as a of past shocks and, of course, recent policy decisions are feeding through," the chairman of the meeting Paschal Donohoe told a conference.

"Fiscal policy should be prudent, it should be careful, it should pursue a restrictive stance and it to work in alignment with changes that have been made at the level of monetary policy," he said.

The meeting is timely because all euro zone countries have submitted draft budgets for 2024 to the EU executive to check if they are compatible with EU rules, which are under review.

European Economic Commissioner Paolo Gentiloni said supporting the ECB's efforts to tame inflation was one of the key policy messages of the meeting.

"To do so, fiscal policy to be restrictive as we recommend in the spring. This does mean cutting back on investment, but it does mean in particular phasing out remaining energy support measures and ensuring that any measures, should they prove , are much better targeted," 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 faster growth.

"We should devote all our time and energy to think about measures we to take to have more growth in Europe. It means ... we a sound balance between sound public finances and lower debt and innovation, investment and fighting against climate change," he said.

(Reporting by Jan Strupczewski; Additional reportng by Maria Martinez and Belen Carreno; Editing by David Holmes and Alexander Smith)

((jan.strupczewski@thomsonreuters.com; +32 2 585 28 64; Reuters Messaging: jan.strupczewski.reuters.com@reuters.))