A symphony of light consisting of bars, lines and circles in blue and yellow, the colours of the European Union, illuminates the south facade of the European Central Bank (ECB) headquarters in Frankfurt, Germany, December 30, 2021.
A symphony of light consisting of bars, lines and circles in blue and yellow, the colours of the European Union, illuminates the south facade of the European Central Bank (ECB) headquarters in Frankfurt, Germany, December 30, 2021. Reuters / WOLFGANG RATTAY

Euro zone finance ministers said on Monday the fight against inflation was the current priority despite dwindling growth in the bloc, as they were informed of a deteriorating economic outlook by the European Commission.

At a regular monthly meeting of the so-called Eurogroup, the EU executive gave an update of its economic forecasts, showing slower growth and higher inflation, the commission's vice-president Valdis Dombrovskis said on the sidelines of the meeting.

"One can expect some downwards revisions, even more so for next year," Dombrovskis said, adding that growth remained resilient.

He said "inflation is going to be revised upwards", anticipating the substance of the Commission's forecasts, due to be unveiled on Thursday.

Economics commissioner Paolo Gentiloni warned that risks to the economy were increasing as Russia could cut its gas supplies to Europe. He added Brussels could adopt a number of measures to reduce inflationary pressure from gas imports, including price caps, although no decision had been made on that yet.

In May, the Commission had cut its growth forecasts for the 19 countries sharing the euro to 2.7% this year from 4.0% predicted in February, and to 2.3% next year from 2.7%, in its first assessment of the impact of the war in Ukraine on the bloc's economy.

Inflation was estimated in May to be 6.1% for this year, which was in itself a major rise from the previously estimated 3.5%.

TAMING PRICE HIKES

Despite the expected further drop in economic growth, ministers focused on fighting inflation, indicating a will to shift further away from the massive economic stimulus offered during the acute phase of the COVID-19 pandemic.

"The priority is to contain inflation," Spain's Economic Minister Nadia Calvino told reporters before the meeting.

Inflation is a major concern and is there to stay at high levels also next year, Dutch Finance Minister Sigrid Kaag said.

To fight skyrocketting prices, estimated by Eurostat at 8.6% on the year in June, ministers pushed for fiscal prudence.

The fiscal advice should recognize that "we have moved away from the need to help the economy," one official said

"Fiscal policies in all countries should aim at preserving debt sustainability," the 19 ministers said in a joint statement after they discussed the matter at the meeting, in a warning to high-debt countries such as Greece, Italy and France.

The statement added that this would facilitate the task of the European Central Bank's monetary policy "to ensure price stability by not adding inflationary pressures".

The discussion on the 2023 fiscal stance comes before governments prepare their national budgets for next year.

Fiscal prudence should mean cutting budgets and also embarking on structural reforms, said Belgium's Finance Minister Vincent Van Peteghem.