Eurozone finance ministers have discussed how to protect vulnerable households from higher energy prices while keeping public finances on track.
Energy prices have returned to “elevated levels” since the end of August, affecting fuels including diesel and jet fuel, Eurogroup President Kyriakos Pierrakakis said after the Eurogroup meeting on 8 October.
Developments in the Middle East and Russia’s war against Ukraine were cited as external risks to Europe’s energy supply and prices, he added.
Ministers reviewed national measures intended to shield those most affected and agreed such support should be “triple T” — temporary, targeted and tailored — to limit pressure on government budgets, according to his remarks.
Pierrakakis stated that Europe faced a “balancing act” of supporting citizens and economic activity without undermining fiscal credibility, as borrowing costs rise and investors pay closer attention to countries’ budget positions.
Deficits and borrowing costs in focus
The Eurogroup also discussed the efficiency of public finances, with Pierrakakis comparing current conditions with those a decade ago.
The EU’s public deficit was 1.7% of GDP in 2016 and is projected to reach 3.5% in 2026.
Average yields on 10-year government bonds have risen from 1.1% to 4% over the same period.
Defence spending is increasing, with investment needs rising from 1.3% of GDP to 2.4%, Pierrakakis said, alongside higher energy costs and public debt that remains high and is rising in some member states.
He noted that recent moves in sovereign bond markets suggested investors were demanding greater compensation for uncertainty about the credibility and pace of budget tightening, particularly in countries with weaker fiscal positions.
Later this year, the Eurogroup will assess member states’ draft budgetary plans and the overall fiscal outlook for the euro area.
The Eurogroup ministers also carried out the second annual review of a 2024 statement on the capital markets union, a project aimed at making it easier for savings to be invested across EU countries.
Discussions covered supplementary pensions, savings and investment accounts, pension tracking systems and equity investment accounts, with retail investor participation increasing in some countries and several member states taking steps such as automatic enrolment or incentives to boost supplementary pension saving.
The meeting also began the process of selecting a successor to European Central Bank executive board member Isabel Schnabel, who is due to leave on 3 January 2027 after announcing her departure in September. The deadline for submitting candidates has been set for 28 October.
