15 May 2023

Remarks by Paschal Donohoe following the Eurogroup meeting of 15 May 2023

We kicked off today with a presentation of the Commission's spring economic forecast that came out earlier today, Paolo may say another word about it. Overall, the picture is still one of economic resilience within the euro area. However, also one where our growth is continuing to hold up at a level that is better than we would have expected. At the same time, inflation is still too high and it needs to come down. We acknowledged that what continues to be so important to our societies is the level of employment, which is a real bright spot where you see a record number of people at work.

We moved on to a discussion on the corporate sector, particularly with regard to firms that are potentially vulnerable to higher energy prices. It is overall a mixed picture, we saw some sectors that have been hit by the surge in energy prices. But we also saw other sectors that have actually seen a growth in their profitability. Unlike households, companies that are receiving support will have to look at how they can support their own long-term viability, as the support measures that we have in place will have to come to an end at some point and can't undermine the ability of our economies and our governments to efficiently allocate resources.

We also underscored the need for support measures that avoid the fragmentation of the single market and maintain consistency with the longer-term policy goals that are there, such as the green transition and a greater degree of energy independence. We're going to keep on coming back to this topic, particularly with an eye to our July statement on the fiscal policy stance of the euro area. This is an area that ministers have emphasised that we need to continue to monitor. We can't end up in a situation where we are seeing a surge in corporate profitability exactly at a time in which inflation is also too high for too many.

I then debriefed my colleagues on the recent international meetings, including the G7 meeting that took place in Japan last week. I updated them on the points that I made on their behalf regarding budget policy coordination and also the discussions that are underway regarding how we can deepen our Banking Union and our Capital Markets Union.

This nicely then set the scene for the second half of the meeting. We began by getting an update from the chair of the Supervisory Board, Andrea, and the Single Resolution Board, Dominique, on their recent efforts with regard to the regulation of the banking sector. We've had so many events over the last number of months that have continued to sharpen our focus on the financial sector. We believe the European banking system has demonstrated its resilience in no small part due to the decisions that we have taken in recent years.

But there are risks that do lie ahead. There are risks that we can't ignore, and we have more work that we need to do. In terms of what that work will look like, it's to continue to look at how we can deepen the ability of the Single Resolution Fund to act as a liquidity backstop. And it is also the steps that we need to take now in acting on the initiatives that have been brought forward by the Commission with regard to Banking Union that followed on from the Eurogroup discussions on this over the last number of years. These are two really important steps that we can take to continue to strengthen our Banking Union and our banking systems.

Council

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