Donahue-Gentiloni: Growth slows due to war, not recession

LAST UPDATE 21:40

The growth rate of European economies will slow down this year due to the war in Ukraine, warned the President of the Eurogroup, Pascal Donahue, although he noted that “we continue to see positive growth rates in 2022 for many economies.”

“Economic growth will slow this year – this is due to the enormous uncertainty caused by the war in Ukraine. In this context, there is a need for fiscal policy to respond to developments in the field,” Donahue told a news conference after the meeting. finance ministers.

He also mentioned that the Ministry of Finance will discuss new measures at EU level. against Moscow at the Ecofin meeting on Tuesday. “The finance ministers will present their views on how further action can be taken in the field of sanctions from now on – the decisions will follow,” he said.

He also announced that he would convene an extraordinary meeting of the Eurogroup in early May on the banking union.

For his part, the European Commissioner for the Economy, Paolo Gentiloni, stressed that Europe must strengthen its unity and accelerate its response to Russia’s aggression.

Referring to the development of inflation, the Commissioner stressed that the key factor is energy and this has now led to more widespread inflationary pressures.

“We are waiting for the possibility of secondary effects, although at the moment we do not see such a thing. At the same time, there are significant pressures on the supply chains, intensifying the inflationary pressures,” he said.

At the same time, he stressed that “we need to reduce our dependence on Russia, but it will take time to strengthen our trade ties with other partners.”

He assessed that the Eurozone is not in danger of slipping into recession, although he admitted that the forecast for 4% growth no longer seems to be confirmed. “We will not end up in a negative area due to our good position at the beginning of the crisis,” he said.

Asked about Moscow’s demands for payments to be made in rubles, the Commissioner noted that the EU will move on the basis of what is provided in the contracts it has signed with Moscow.

Sanctions on gas remain on the table

The European Commissioner said sanctions on Russian gas remained on the table.

“All sanctions have an impact on the economy – if we want to respond to military action with financial tools we have to accept the cost,” he said, warning that if there is an “expansion [των κυρώσεων] and in gas this impact will increase. ”

“We will not take new measures today, but in the future [το φυσικό αέριο] will be on the table and will depend on developments there [στην Ουκρανία] and not from the costs it may have for the EU. “We are not planning it now, but we are not taking it off the table,” he added.

The President of the European Stability Mechanism (ESM) Klaus Regling added that the war and the humanitarian catastrophe in Ukraine are affecting the world and European economies, increasing uncertainty and leading to a rise in energy and food prices.

The head of the ESM left open the possibility of a contraction in GDP in the second quarter, without this meaning that overall 2022 will be negative, as he pointed out.

He made particular reference to the process of completion of the banking union, noting that progress has been made.