Eurozone to phase out energy support measures

Eurozone finance ministers decided to gradually phase out energy support measures in 2024 in favour of fiscal prudence, aimed at reducing government deficits.
The gradual abolition of energy support measures was emphatically stressed at Monday’s Eurogroup meeting of finance ministers, who said in a statement that “we will continue to phase out the remaining energy support measures as soon as possible in 2024 and use the related savings to reduce government deficits.”
The Cyprus government is expected to terminate the reduced consumer tax on car fuel at the end of this month and the subsidy of electricity bills at the end of April, although it is under pressure from interest groups to extend them.
Eurogroup also welcomed the political agreement reached in February 2024 on a comprehensive reform of the EU’s economic governance framework, expressing optimism for its early adoption.
Ministers provided a cautiously optimistic outlook, stating, “while the economy entered 2024 with a weak base, the conditions for an acceleration of economic activity in the euro area in 2025 appear to be in place based on the Commission’s winter forecast.” They pointed to a robust labour market and the downward path of inflation, which would allow the eurozone meet the ECB’s target by 2025.

Nonetheless, they also acknowledged, that “risks to the economic outlook are tilted to the downside as global uncertainty weighs on the economic outlook.”

The eurozone’s challenge was the balancing of multiple fiscal demands with the need to rebuild fiscal buffers. The reformed framework, as ministers noted, was aimed at “strengthening debt sustainability and promoting sustainable and inclusive growth through structural reforms and investment,” which is the EU’s long-term economic strategy.

A commitment to “ensuring its consistent and rapid implementation throughout this year” was expressed, emphasising the importance of draft fiscal plans and fiscal stance guidelines for cohesive fiscal policy coordination among member states.

Looking ahead to 2025, the revised economic governance framework is expected to result in “an overall slightly contractionary fiscal stance in the euro area,” but the approach is deemed appropriate given the current macroeconomic conditions, the ongoing need for fiscal sustainability, and support for the deflationary process.

Furthermore, the ministers conveyed their intention to “continue to pursue ambitious structural reforms and maintain and, where necessary, increase the level of investment,” focusing on priority areas like the green and digital transition and defence capabilities.
The commitment to “strengthening our efforts to improve the efficiency, quality, and composition of public spending” was also repeated.