29 September 2021

Eurogroup's Paschal Donohoe at the Inter-parliamentary Conference on Stability, Economic Coordination and Governance in the

First of all, I would like to thank the National Assembly of Slovenia for organising this Inter-parliamentary Conference, and for inviting me. I want to thank President Igor Zorčič for the introduction and my colleague, Finance Minister Andrej Šircelj for the excellent cooperation. It is an honour to join you this morning in this important forum.

The topics on today’s agenda are highly relevant for our citizens, who expect us to pursue sound national policies. Policies that generate higher, sustainable and inclusive growth to secure jobs and income for everyone. We have to deliver on this. And experience shows that we are more successful when we work on it together.

I will take the liberty of addressing the topics on the agenda in reverse order, starting with the second one, as it is most related to the work of the Eurogroup.

Economic situation - scene setting

Our discussion today comes at the right time. The health situation is improving, our economies are reopening, and growth prospects have improved.

This is the picture emerging from the latest economic data and from recent economic forecasts.

This positive outlook is a testament to the resilience of our economies, but also to the success of our efforts in fighting the pandemic. The monetary policy decisions by the European Central Bank combined with the extraordinary supports that member states, individually and collectively, have deployed are paying off and feeding into the growth prospects of the euro area as a whole.

At the beginning of this crisis and in record time, we put in place a series of safety nets. The SURE programme, Next Generation EU, the continued work of our Central Bank and our efforts to coordinate our work within the euro area not only caught us when we were on the verge of falling but are now playing an important role in the economic rebound.

However, there is no room for complacency. For example, we are cognisant of the current rise in energy prices as well as broader supply chain issues and the impact that these are having on both inflation and competitiveness.

We must be alert to these risks in pursuing policies that will deliver a solid and lasting economic recovery as opposed to a temporary rebound.

This is not something that will happen automatically. The recovery will require continued hard work, and decisive and ambitious action at both national and EU level.

We need to get this right.

Already before the pandemic, convergence across the Economic and Monetary Union was uneven - some countries were doing better than others. This trend might continue, as member states met the pandemic with different degrees of fiscal space and different growth dynamics. In addition, the pandemic had a disproportionate impact on different sectors and, inevitably, economies.

Recovery and Resilience Facility

The historic agreement on the Recovery and Resilience Facility (RRF), the heart of the NextGenerationEU (NGEU), was a recognition of this risk. It is a strong signal of our determination to let no one fall behind and instead to emerge stronger together.

The unprecedented solidarity shown by the RRF requires us to use its funds responsibly and efficiently. They need to be channelled to future-oriented investment with a high growth dividend.

It goes without saying that the transition towards green and digital is a priority.

In addition, to maximize the diffusion of investment and hence the return on investment, we need to support it by ambitious growth-enhancing reforms.  

This includes making product and labour markets more efficient, introducing the necessary reforms in our administrations, which in turn will improve the business environment, spur innovation and ultimately create growth and jobs.

Well-functioning domestic institutions in particular play a key role in ensuring an effective use of the RRF funds.

I am encouraged that most member states have submitted their high-quality recovery and resilience plans, of which many were already endorsed by the Council – thus paving the way for the first disbursements of RRF funds.

Now, it is important that we, as member states, deliver on their effective implementation.

In this respect, the first review moment in April will be key.

I am confident that the Commission will provide thorough and fair assessments, as it did with the RRPs. I am also confident that the member states will take the peer review process very seriously.

The RRF governance presents a unique opportunity for improving our model of economic policy coordination.

My colleagues and I at the Eurogroup will be contributing to ensuring effective implementation of the RRPs primarily through our discussions on the euro area economic policy recommendations. We will be looking closely at how member states implement the commitments made in their national recovery and resilience plans. We all have a shared interest in making the RRF a success.

RRF financing

A successful RRF requires not only on an effective use of its funds, but also a sound and credible financing structure. I very much welcome the fact that the Commission has already raised over 50 billion euro of NGEU funds, and that it has attracted great interest among international investors. The Commission also announced that it intends to issue its first green bonds in October. This will set the EU on course to become the largest issuer of green bonds in the world.

This is very important from the perspective of strengthening the international role of the euro, and thereby enhancing Europe's strategic autonomy.

Own resources

I will not elaborate much on the issue of own resources - this is outside the remit of the Eurogroup - but I will nevertheless say a few words on it, since, as a national minister of finance, I am involved in this debate.

I believe that we are making good progress on a range of related issues.

First of all, let me recall the successful ratification by all national parliaments of the Own Resources Decision back in June. This ratification was an essential element of the Next Generation EU scheme as it allowed the Commission to borrow funds on the markets on behalf of the European Union, using the EU budget as a guarantee. This, in itself, was a historic decision and achievement.

In parallel, we are considering different options for additional sources of EU funding addition. We have notably agreed on a new plastics own resource. As of 1 January 2021, each member state pays a contribution to the EU budget, based on the amount of their non-recycled plastic packaging waste.

Furthermore, the Council is already working on the proposals that are part of the "Fit-for-55 package". They include the Carbon Border Adjustment Mechanism (CBAM) and the revision of the Emissions Trading System (ETS).

Once the new package of Own Resources is proposed by the Commission, the Council will start working on the various proposals, in line with the Roadmap for the introduction of New Own Resources, as agreed with the European Parliament and the Commission.

In considering new own resources, national parliaments will have an essential role to play.

Tax policy

This discussion is inevitably related to the future EU tax policy.

There is a political agreement among the member states that the future Carbon Boarder Adjustment Mechanism (CBAM) and digital levy would become sources of revenue for the EU. We are of course dependent on the global developments, and have to consider the international dimension.

Negotiations on CBAM have already begun in the Council. As mentioned earlier, this measure is part of the overall debate on designing a wider framework to tackle climate change.

As regards corporate taxation, I am confident that the ongoing global negotiations will enable us to make further progress.

The global agreement will also pave the way for further discussions in the EU as set out in the Commission’s May 2021 Communication on Business Taxation for the 21st Century.

This brings me to the conclusions of my remarks.

The Covid-19 crisis has been an extremely challenging period in the European Union's history. Its social and economic costs are undeniably profound. So far, we, as a union, have managed to find swift and effective solutions to mitigate its immediate impact. I am therefore confident that we, as a union, will be able to continue the good work that we already started in rebuilding our economy and in finding the solutions that work for all.

It is therefore essential that we maintain initiatives like this Conference, which brings together elected representatives of our citizens and policymakers from across Europe to discuss and find those solutions.

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