Tag: European Commission

The press release issued by the European Commission on 14 November 2022.

Women in the European Union still continue to earn less than men for equal job, with the average gender pay gap in the EU standing at 13%. This means that for every €1 a man earns, a women will make €0.87. Progress is steady, however still too slow, with a 2.8 percentage point gap reduction in 10 years. This year, European Equal Pay Day falls on 15 November.

Ahead of this symbolic day, Věra Jourová, Vice-President for Values and Transparency and Helena Dalli, Commissioner for Equality, said:

“Equal work deserves equal pay: this is a founding principle of the European Union. Solving the injustice of the gender pay gap cannot come without change to the structural imbalances in society. That is why this Commission doubled down efforts on gender equality and the root causes of pay inequality.

We are now in the final steps to see gender balance on corporate boards becoming a reality across the EU. We have already put new rights in place for women and men to have more choice and to better share caring responsibilities and work. And we count on the Member States to up their game on accessible, affordable, and high-quality early childhood education and long-term care – a prerequisite to support women’s participation in the labour market.

We need to empower women so that they can fulfill their potential.

However, an important piece of the puzzle is missing: pay transparency. Transparency contributes towards ending gender bias in pay from the outset and empowers workers to enforce their right to equal pay for the same work or work of equal value. We call on the European Parliament and the Council to adopt our proposed Pay Transparency Directive without undue delay.

Everyone benefits, when all are equal.”

Background

Nine out of ten Europeans – women and men – think that it is unacceptable that women are paid less than men for the same work or work of equal value. Majority of European workers is in favour of the publication of average wages by job type and gender at their company.

The gender pay gap is a symptom of more structural imbalances between men and women in economic representations, access to education, and household care responsibilities. Women are still underrepresented, and undervalued in positions of economic decision-making.  A large majority of scientists, engineers, and skilled technical workers are men. Women disproportionately bear the duties of household and childcare with 90% of the formal care workforce made up of women, and 7.7 million women out of employment because of care responsibilities.

In March 2020, the Commission published its Gender Equality Strategy 2020-2025 setting out actions to close the gender pay gap. In November 2020, the Commission adopted its 2021-2025 Action Plan on Gender Equality and Women’s Empowerment in External Action.

The Commission’s proposal on pay transparency, adopted on 4 March 2021, introduces to measures to ensure that women and men in the EU get equal pay for equal work.

In June 2022, the European Parliament and the Council approved the Commission’s proposal to improve the gender balance on corporate boards. It will soon become EU law.

The Commission’s proposal on adequate minimum wages for workers, adopted on 28 October 2020, supports gender equality by helping to close the gender pay gap and to lift women out of poverty, as more women than men earn minimum wages in Europe.

The Commission also addresses women’s underrepresentation in the labour market by improving the work-life balance of working parents and carers. The new Directive on work-life balance entered into force on 2 August 2022.

In September 2022, the Commission presented the European Care Strategy to ensure quality, affordable and accessible care services across the European Union. The Strategy is accompanied by two Recommendations for Member States on the revision of the Barcelona targets on early childhood education and care, and on access to affordable high-quality long-term care.

The press release issued by the European Commission on 14 November 2022.

Today, the European Parliament and the Council of the European Union, on a proposal from the European Commission, have reached an agreement on the EU budget for 2023. The agreement is for commitments of €186.6 billion, and payments of €168.7 billion. Once adopted, the budget would allow the EU to mobilise significant funds to help mitigate the severe consequences of Russia’s war of aggression against Ukraine in the country but also in the southern neighbourhood and Member States. It would also support the ongoing sustainable recovery from the coronavirus pandemic, and protect and create jobs. It would trigger further investments into a greener, more digital and more resilient Europe, while protecting the most vulnerable in its neighbourhood and around the world.

The budget agreed today will direct funds to where they can make the greatest difference, in line with the most crucial needs of the EU Member States and the EU’s partners around the world.

More concretely, it has been agreed to direct:

• 14.7 billion to support our neighbours and international development and cooperation. The agreement includes targeted increases for the Neighbourhood, Development and International Cooperation Instrument (NDICI) – Global Europe (€12.3 billion), focusing on Ukraine and Moldova, migration in the southern neighbourhood as well as for the Humanitarian Aid programme (€1.8 billion) to address crisis situations across the globe;
• €1.5 billion for the Asylum, Migration and Integration Fund and €956.8 million for the Integrated Border Management Fund to step up cooperation on external border management, as well as migration and asylum policy, including support to Member States receiving refugees from Ukraine;
• €3.0 billion for the Connecting Europe Facility for an up-to-date, high-performance transport infrastructure to facilitate cross-border connections, [with particular emphasis on strengthening the EU-Ukraine solidarity lanes, and the energy strand in response to the energy crisis, complementing the €20 billion euro REPowerEU proposal];
• €295.2 million for Military Mobility to improve civilian and military mobility;
• €3.7 billion for Erasmus+ to invest in young people, including pupils and students fleeing Ukraine, as well as €332.8 million for the cultural and creative sectors through the Creative Europe programme;
• €62.9 billion in commitments to support the ongoing recovery by boosting investments in economic, social and territorial cohesion;
• €53.6 billion for the Common Agricultural Policy and €1.1 billion for the European Maritime, Fisheries, and Aquaculture Fund, for Europe’s farmers and fishermen, but also to strengthen the resilience of the agri-food and fisheries sectors and to provide the necessary scope for crisis management;
• €12.4 billion for Horizon Europe, to support the EU’s research in areas like health, digital, industry, space, climate, energy, and mobility;
• €602.8 million for the Single Market Programme to support small- and medium-sized enterprises across the Union;
• €739.3 million for the EU4Health programme to support the EU Health Union and to deliver a comprehensive response to the health needs of European citizens;
• €1.5 billion under the Just Transition Fund to make sure the transition to climate neutrality works for all and €755.5 million under the LIFE programme to support environment and climate action;
• €309.9 million for the Internal Security Fund, €945.7 million for the European Defence Fund to support European strategic autonomy and security, and €157.0 million for European Defence Industry Reinforcement through Common Procurement Act.

The full breakdown per heading is available here:

EU budget 2023 (in million euro):
APPROPRIATIONS BY HEADING	Budget 2023
	Commitments	Payments
1. Single Market, Innovation and Digital	21,548.4	20,901.4
2. Cohesion, Resilience and Values	70,586.7	58,058.7
— Economic, social and territorial cohesion	62,926.5	50,875.0
— Resilience and Values	7,660.2	7,183.7
3. Natural Resources and Environment	57,259.3	57,455.7
Market related expenditure and direct payments	40,692.2	40,698.2
4. Migration and Border management	3,727.3	3,038.4
5. Security and Defence	2,116.6	1,208.4
6. Neighbourhood and the World	17,211.9	13,994.9
7. European Public Administration	11,311.3	11,311.3
Thematic special instruments	2,855.2	2,679.8
Total appropriations	186,616.7	168,648.7

Source: European Commission: Figures expressed in €million, in current prices

Together with the budget for 2023, the EU institutions agreed to endorse the proposed amendments to the 2022 budget as tabled by the Commission earlier this year. Once the approval process is finalised, the Commission will be able to continue supporting and assisting Ukraine, help Member States more affected from the inflow of migrants and Ukraine refugees, strengthen the Union’s preparedness for forest fires, respond to the currents outbreaks of avian influenza and swine fever, and address further challenges stemming from the overall macroeconomic context.

In parallel to the annual budget for 2023, EU countries will continue to rely on support from the NextGenerationEU recovery instrument and the Recovery and Resilience Facility at its heart.

On top of the budget reinforcement the Commission proposed on 9 November an unprecedented support package for Ukraine of up to €18 billion for 2023. This will come in the form of highly concessional loans, disbursed in regular instalments as of 2023.

What happens next?

The annual budget for 2023 will now be formally adopted by the Council of the European Union and by the European Parliament. The vote in plenary, which will mark the end of the process, is currently scheduled for 23 November 2022.

The press release issued by the European Commission on 13 November 2022.

Tomorrow, 14 November is World Diabetes Day. On this occasion, Commissioner for Health and Food Safety, Stella Kyriakides, made the following statement:

“Diabetes can affect everyone, irrespective of background, age, and gender. Today, one in ten adults, or more than 32 million people, have diabetes in the EU. This is twice as many as a decade ago.

Diabetes takes a heavy toll on our societies and our healthcare systems. It increases the risk of developing potentially dangerous cardiovascular diseases. We also know that it increases the risk of serious disease for persons suffering from COVID-19. And it puts a heavy strain on our health budgets, with diabetes accounting for an estimated 9% of EU health expenditure in 2019.

As a result, we can and must do more to tackle diabetes. The burden of type 2 diabetes can for example be reduced by interventions that support a healthier lifestyle, such as a healthy diet, physical activity and not smoking.

As with our work on cancer, when it comes to non-communicable diseases, prevention is always better than the cure. This is why the Commission is already working on actions to better prevent, detect and treat non-communicable diseases, including diabetes, in a more comprehensive way.

To achieve this, under the ‘Healthier Together – EU Non-communicable diseases initiative’, we have already launched actions worth €156 million in our 2022 EU4Health programme, with Member States having expressed interest in improving early detection of diabetes and other cardiovascular diseases through screening, for example. Children and young people are specifically targeted in initiatives focusing on health promotion and disease prevention.

In addition, under our joint action on health determinants, €75 million has been allocated to address risk factors related to diabetes and other non-communicable diseases to better understand them and support actions to mitigate them.

Furthermore, Member States’ joint action on diabetes and cardiovascular diseases has €53 million, still available for application until January 2023, to take further actions at national level to tackle diabetes.

We are also working with Member States and stakeholders to find the best way to share best practices on health promotion and non-communicable disease prevention, including on physical activity, nutrition, and other risk factors such as tobacco consumption. I invite everyone to use EU tools, such as the Best Practice Portal to upload best practices, and the EU Health Policy Platform to disseminate information.

Taken together, these actions are about people. We know that diabetes has a significant impact on daily life for so many. This must change. On this World Diabetes Day, I call on Member States and stakeholders to continue working with us to help improve the lives of the 32 million Europeans living with diabetes. This is our responsibility.”

The press release issued by the European Commission on 11 November 2022.

The United States, European Union, Japan, Canada, Norway, Singapore, and the United Kingdom are committed to taking rapid action to address the dual climate and energy security crises that the world faces.

We affirm the need to accelerate global transitions to clean energy, recognizing that reliance on unabated fossil fuels leaves us vulnerable to market volatility and geopolitical challenges.

We also recognize that under IPCC 1.5°C-aligned scenarios, fossil fuel consumption will persist, at rapidly declining levels, as the global energy transition unfolds. As such, we emphasize that dramatically reducing methane, CO2, and other greenhouse gas emissions across the fossil fuel energy value chain is a necessary complement to global energy decarbonization in order to limit warming to 1.5°C.

We commit to taking immediate action to reduce the greenhouse gas emissions associated with fossil energy production and consumption, particularly to reduce methane emissions. We emphasize that reducing methane and other greenhouse gas emissions from the fossil energy sector enhances energy security by reducing avoidable routine flaring, venting, and leakage that wastes natural gas. We also note that these measures will also improve health outcomes by eliminating black carbon and other associated air pollutants.

We call on fossil energy importers to take steps to reduce the methane emissions associated with their energy consumption, which can spur emissions reductions across the value chain. We also call on fossil energy producers to implement projects and supporting policies and measures to achieve emissions reductions across fossil energy operations.

We call for global action to reduce methane emissions in the fossil energy sector to the fullest extent practicable, with the aim to reduce warming by 0.1°C by midcentury, consistent with International Energy Agency findings of the near-term warming reduction effects of fully deploying technically feasible mitigation in this sector.

We reaffirm the call to action under the Global Methane Pledge to reduce collective anthropogenic methane emissions by at least 30 percent from 2020 levels by 2030 as an essential strategy to reduce warming in the near term and keep a 1.5°C limit on temperature rise within reach. We recognize that the fossil energy sector must lead in rapid methane mitigation given the abundance of technically feasible and cost-effective mitigation measures available in the fossil energy sector, as called for in the Global Methane Pledge Energy Pathway.

Recognizing the urgency of reducing emissions from fossil energy value chains, we commit to working towards the creation of an international market for fossil energy that minimizes flaring, methane, and CO2 emissions across the value chain to the fullest extent practicable, as we also work to phase down fossil fuel consumption. We support the development of frameworks or standards for fossil energy suppliers to provide accurate, transparent, and reliable information to purchasers about the methane and CO2 emissions associated with their value chains.

We will support domestic and international action to achieve emissions reductions across the fossil energy value chain, such as:

• Adopting policies and measures to achieve rapid and sustained reductions in methane and CO2 emissions across the fossil energy value chain:
  • Adopting policies and measures to eliminate routine venting and flaring and to conduct regular leak detection and repair campaigns in upstream, midstream, and downstream oil and gas operations.
  • Adopting policies and measures to capture, utilize, or destroy methane in the coal sector to the fullest extent practicable, including through pre-mine drainage, coal mine methane destruction, and ventilation air methane destruction.
  • Putting in place measures to require or strongly incentivize reductions in greenhouse gas emissions associated with fossil energy imports.
• Adopting policies and measures to support robust measurement; monitoring, reporting, and verification; and transparency for methane emissions data in the fossil energy sector:
  • Adopting policies and measures to improve the accuracy of methane emissions data, and affirming the need to enhance greenhouse gas inventories, including through improving data availability and through direct measurements at source level for gas and oil, in view of moving towards highest tier IPCC methods for emissions quantification based on direct measurement, stochastic sampling, emissions factors, and other IPCC-approved approaches, and improving monitoring, reporting, and verification mechanisms as new data becomes available.
  • Supporting frameworks or standards to improve the accuracy, availability, and transparency of fossil energy methane emissions and emissions intensity data at the cargo, portfolio, jurisdiction, and country level, including consideration of accepted protocols such as the Oil and Gas Methane Partnership 2.0 (OGMP2.0) standard and tools such as independent verification that can support robust data collection and reporting.
  • Supporting international efforts to improve methane emissions measurement; monitoring, reporting, and verification; and transparency, including through partnership with the UNEP International Methane Emissions Observatory and other multilateral partners.
  • Improving data quality on fossil energy methane, including for abandoned wells and mines, non-commercial operations, or retired infrastructure.
• Strengthening coalitions to reduce methane and CO2 emissions in value chains of internationally traded fossil fuels:
  • Engaging public, municipal, and private sector fossil energy producers and purchasers to leverage contracts and other instruments, as appropriate, to improve methane and CO2 emissions performance from traded fossil energy resources, including efforts to decrease the methane and other greenhouse gas intensity per unit of energy delivered.
  • Encouraging companies’ participation in the Oil and Gas Methane Partnership 2.0 (OGMP2.0) standard.
• Mobilizing technical assistance and financing for methane and CO2 mitigation in the fossil energy sector:
  • Enhancing the provision of technical assistance and investment for methane and CO2 mitigation along the fossil energy value chain.
  • Developing financial tools and aligning financial standards to support methane and CO2 mitigation in the fossil energy sector.

The press release issued by the European Commission on 11 November 2022.

On behalf of the European Commission, Czechia, Poland, Romania, Slovakia, Republic of Moldova, Ukraine, the European Investment Bank, the European Bank for Reconstruction and Development, and the World Bank Group

As part of the European Union’s response to the Russian aggression against Ukraine, the European Commission and bordering EU Member States established on 12 May 2022 the EU-Ukraine Solidarity Lanes. The Solidarity Lanes are essential corridors for Ukraine’s agricultural exports, as well as the export and import of other goods.

As one of the world’s largest grain producers, Ukraine normally supplied around 45 million tonnes of grain to the global market every year. However, in its brutal war against Ukraine, Russia deliberately targets agricultural production and exports, blocking safe passage to and from Ukrainian Black Sea ports and building up stocks in grain silos. This has driven up world cereals prices, created food insecurity globally and put at risk the livelihoods of millions of people who rely on those grains.

Since the inception of the Solidarity Lanes, more than 15 million tonnes of Ukrainian agricultural goods (grain, oilseeds and related products) have been exported, by road, rail and through Black Sea and Danube ports. In addition, since August, the Black Sea Grain Initiative has helped relaunch grain shipments from Ukraine’s Black Sea ports, thereby further reducing food prices globally.

Together these initiatives have allowed the export of about 25 million tonnes of Ukrainian grain, oilseeds and related products between May and end of October to world markets, including to the countries most in need.

The Solidarity Lanes are currently the only option for the export of all other, non-agricultural Ukrainian goods to the rest of the world and for importing all the goods it needs, such as fuel and humanitarian assistance. As such, the Solidarity Lanes have become the lifeline of Ukraine’s economy, bringing back more than EUR 15 billion of much-needed income to Ukrainian farmers and businesses.

The EU has been working with Member States, Ukraine and the Republic of Moldova, international partners and companies, as well as transport operators, to improve the functioning of the Solidarity Lanes. As bordering EU Member States, Poland, Romania, Slovakia and Hungary, have made tremendous efforts and investments to facilitate these trade routes.

The Solidarity Lanes have become an indispensable link for deepened relations with Ukraine and the Republic of Moldova, and are essential to establish a more stable connectivity with the EU in view of future accession. They bring Ukraine and the Republic of Moldova closer to the EU single market, while keeping both countries connected to the rest of the world.

However, the Solidarity Lanes are reaching their capacity limits, bottlenecks persist and logistics costs are high. To sustain and further increase the capacity of the Solidarity Lanes, we have been mobilising significant investments through various existing EU and national programmes. Administrative and operational facilitation needs to continue, including on streamlining border crossing procedures, and more funding is needed.

The European Commission will urgently dedicate EUR 250 million of grants to boost the Solidarity Lanes. For the short-term, we will support quick improvements, in particular with mobile equipment, to reduce waiting times and improve movement through the border crossing points and their access routes. For the medium-term, we are mobilising the Connecting Europe Facility (CEF) and EUR 50 million to support the infrastructure developments needed to increase further the capacity of the Solidarity Lanes.

Working with partner Financial Institutions such as the European Investment Bank, the European Bank for Reconstruction and Development, and the World Bank we want to ensure liquidity for operators, and funding of repairs and capacity increases. Notably:

• The European Investment Bank plans to invest up to EUR 300 million by end-2023 on projects that respond to the Solidarity Lanes objectives. This is on top of the activity already announced and financed [1] in Ukraine, a significant part of which is dedicated to road and railway upgrades. In addition, the European Investment Bank and the European Commission are making available the technical expertise of Jaspers (Joint Assistance to Support Projects in European Regions) for the identification and preparation of cross-border transport projects to be financed under the CEF, which can attract potential EIB co-financing.

• On the basis of the work undertaken for several months on the ground with the European Commission and all relevant stakeholders, the European Bank for Reconstruction and Development intends to invest EUR 300 million in favour of Solidarity Lanes over 2022-2023 – part of which will go to projects already identified and in the process of being approved.

• The World Bank Group, in addition to its regional transport modelling, rapid damage assessment to identify priority repairs and recovery investments as well as ongoing work on trade and logistics, is preparing an emergency project to undertake repairs of the railway and road infrastructure damaged by the war with up to USD 100 million targeted for disbursement in 2023. Rehabilitation of railway infrastructure and multi-modal logistics in Romania and the Republic of Moldova to Ukraine’s borders is under discussion to support Ukrainian critical exports and imports, and lay foundations for reconstruction.

We also call on our international partners to provide further financial support to these actions, which are essential for Ukraine, the Republic of Moldova and for global food security.

The press release issued by the European Commission on 11 November 2022.

Let me begin with the key messages that we are giving through this forecast:

First, the EU economy is at a turning point.

After a surprisingly strong first half of the year, the EU economy lost momentum in the third quarter and recent survey data point to a contraction for the winter.

The outlook for next year has weakened significantly. We now forecast the EU economy to grow by only 0.3% in 2023 before a progressive recovery to 1.6% in 2024.

Second, inflation has continued to rise faster than expected, but we believe that the peak is near, most likely at the end of this year. We project headline inflation to reach 9.3% in the EU and 8.5% in the euro area and to decelerate only mildly next year, to 7.0% and 6.1%, before coming down more forcefully in 2024.

Third, the EU labour market remains the bright spot of the EU economy and is expected to show again resilience. The increase in unemployment next year is projected to be moderate before falling again in 2024.

Fourth, we project government deficits to remain above 3% but debt ratios to continue declining.

From in 4.6% – that was the deficit in 2021, the deficit should reach 3.4% this year, 3.6% next year and 3.2% in 2024.

The aggregate debt-to-GDP ratio is projected to fall from  89.4%, which was the figure in 2021 to 84.1% in 2024.

Fifth, uncertainty remains exceptionally high, with predominantly downside risksS. Our forecast baseline is yet again underpinned by some crucial working assumptions that I want to stress. In particular:

It is assumed that geopolitical tensions will neither normalise nor escalate before the end of the forecast horizon and all adopted sanctions against Russia will remain in place. This is an assumption of the forecast.

Second assumption: Continuation of demand reduction and supply diversification will ensure that the EU economy avoids major gas shortages over the forecast horizon.

Final assumption is that monetary policy tightening is assumed to continue without inducing disorderly adjustments in financial markets.

As far as growth is concerned, real GDP growth in the first half of the year surprised on the upside. GDP increased at a quarterly rate of 0.7% in both the first and the second quarter. The expansion continued at a weaker pace of 0.2% in the third quarter.

But the forces driving the post-pandemic expansion have now largely faded away, and the shocks unleashed by the war and a broad-based slowdown in external demand are taking the upper hand.

As inflation has continued to surpise on the upside, the sharp erosion of purchasing power has shifted consumer sentiment dramatically. Confidence plunged also in the business sector, amid high production costs, remaining supply bottlenecks, tighter financing conditions and heightened uncertainty.

We expect the EU economy to contract in both the current quarter and the first quarter of 2023. This technical recession is set to be broad-based across demand components but also across countries, with a majority of Member States experiencing two consecutive quarters of contraction.

Energy prices: after soaring to unprecedented levels in late summer, wholesale prices of gas and electricity in the EU have come down significantly in recent weeks. This reflects the successful filling of storage tanks and possibly the recent mild temperatures. Futures prices for 2023 and 2024 have declined as well.

Current gas storage levels appear sufficient to allow our economies to through this winter, but the near absence of Russian gas and difficulty in further expanding LNG imports, also considering infrastructure bottlenecks, will make refilling storages ahead of the winter of 2023/2024 more challenging.

Electricity prices remain highly correlated with gas.

Inflation has kept outpacing wage growth. High inflation is eroding the purchasing power of disposable incomes of households, but also the real value of their wealth.

Growth in the volume of private consumption is thus projected to decelerate sharply from 3.7% in 2022 to 0.1% in 2023, before picking up to 1.5% in 2024.

Investment is also projected to continue to grow, albeit at a more subdued pace next year, under the impact of higher input and labour costs, coupled with rising borrowing costs. These adverse developments are partially mitigated by continued implementation of the Recovery and Resilience Facility, which is set to sustain public investment, markedly so in some countries.

Finally, weakness in the EU’s external environment is expected to persist, providing little support over the forecast horizon.

All in all EU GDP growth is expected at 3.3% this year thanks to a significant carry-over from 2021 and, as I said before, a strong first half of the year.

The upward revision from the Summer Forecast should not distract from the main message: The economic situation has deteriorated markedly and we are heading into two quarters of contraction. And by the way, this shows that our decision to extend the general escape clause to 2023 was warranted.

Economic activity is expected to stabilise in spring next year, before starting to regain some strength, on the back of progressively easing inflation, increasing households’ disposable income and abating supply disruptions. But the rebound is set to be subdued, as uncertainty remains high, the negative shock from energy market developments lingers, monetary policy tightens, and external demand recovers only mildly.

For 2023 as a whole, this forecast projects real GDP growth in both the EU and euro area at 0.3%.

In 2024, growth is set to progressively regain traction, averaging respectively 1.6% and 1.5% in the EU and the euro area.

What is the map of this growth for 2022 and 2023? All the EU economies are expected to continue growing in 2022, then experience a marked slowdown of activity in 2023, before seeing a pick-up in 2024. This is for all Member States.

Preliminary data indicate that some Member States already registered a contraction in GDP in the third quarter of this year, and most EU economies are set to see one contraction in the current quarter.

The main economies:

In Germany, soaring energy costs are a major drag on income and output growth. Together with costlier borrowing, this is likely to weigh on investment. Further losses in purchasing power amid high inflation are expected to curtail private consumption, despite partial relief from policy support. GDP is forecast to grow by 1.6% this year but decline by 0.6% in 2023 before recovering by 1.4% in 2024.

In France, economic activity is expected to remain subdued over the first half of 2023. In the second half of next year, the projected moderation of inflation is set to allow for a gradual recovery, with private consumption gaining momentum and investment growing again. Real GDP in France is forecast to grow by 2.6% this year, by 0.4% in 2023, and by 1.5% in 2024.

In Italy, the energy price shock and the worsening external outlook are taking their toll. Thanks to solid growth in the first three quarters of the year, real GDP growth is forecast at 3.8% this year. In 2023, consumer spending is likely to stagnate, while high input costs, tightening financing conditions and slowing demand are projected to dampen corporate investment. Accordingly, GDP growth is set to slow down from the 3.8% of 2022 to 0.3% in 2023, before picking up to 1.1% in 2024.

Spain is forecast to see a deceleration of growth next year. Pressures stemming from high energy prices are expected to partially ease from mid-2023, enabling a gradual pick-up in activity on the back of the moderate revival of private consumption and a further normalisation of tourism. This expansion is projected to be more robust in 2024 also on the back of invigorated domestic and external demand. Real GDP is projected to grow by 4.5% this year before easing to 1.0% in 2023, and edging up to 2.0% in 2024.

Lastly, in Poland, economic growth is set to decelerate visibly in 2023 and 2024 and become negative at the beginning of 2023. After strong growth in 2022, the weakening is due to increased uncertainty, a tightening of financing conditions, and the economy’s adjustment to higher commodity prices. Overall, the economy is forecast to grow by 4.0% in 2022, 0.7% in 2023 and 2.6% in 2023.

Energy inflation is expected to keep increasing until year end, before starting to decline next year. Headline inflation for this year is now projected at a rate of 9.3% in the EU and 8.5% in the euro area.

It is expected to gradually decelerate next year to 7.0% in the EU and 6.1% in the euro area. Only in 2024, inflation is expected to moderate more significantly, to 3.0% in the EU and 2.6% in the euro area.

The broadening of inflationary pressures suggests that core inflation is set to peak only in the first quarter of 2023 and abate very slowly thereafter. Core inflation is thus projected to settle above headline inflation for most of 2024.

The impact of adopted or planned fiscal energy measures adds uncertainty to the forecast for energy inflation.

The inflation map shows a lot of differences among Member States. In 2022 inflation is expected to range from 5.8% in France to 19.1% in Estonia. Next year, from 3.7% in Denmark to 15.7% in Hungary.

As is evident from the map, there is a strong geopolitical pattern to intra-EU inflation differentials. Namely, Central and Eastern Europe ranks visibly higher than the rest of the EU, both in 2022 and 2023.

The labour market is still very strong, the strongest labour market in decades. Unemployment rates are at record low and participation and employment rates at record high. What is more, vacancy rates and reported labour shortages remain extremely elevated, though they have started declining. Our analysis suggests that as demand weakens and even contracts, the number of vacancies and labour shortages will abate significantly, before unemployment starts increasing again.

Labour markets are therefore expected to remain strong as employment growth is likely to react to the slowing of economic activity with a lag. The unemployment rate is projected to increase only marginally from 6.2% in 2022, to 6.5% in 2023, before falling again to 6.4% in 2024.

Wage growth increased to above-average rates in 2022 and is expected to remain strong, but to compensate for lost purchasing power only partially. In other words, we do not yet see significant feedback loops between wages and inflation.

The trade balance: the current account surplus is projected to shrink from 3.1% of GDP in 2021 to 2.1% in 2022, recovering somewhat in the next years.

Despite a faily good performance in goods exports, the strong surge in import prices dominates, turning the EU’s large surplus of the trade balance into a small deficit in 2022. Next year, the balance is projected to be less negative, while in 2024 it would turn mildly positive.

In contrast to goods, the balance of services is projected to increase this year thanks to the substantial rebound of the tourism industry. And here a weaker euro is of help of course. 

Deficits: The economic expansion in the first nine months of the year and the phasing out of pandemic-related measures is driving a further reduction in deficits this year, despite new measures to mitigate the impact of energy prices on households and firms. The general government deficit is forecast to fall from 4.6% of GDP in 2021 to 3.4% in 2022.

As the economy weakens, the deficit is expected to increase again to 3.6% of GDP in 2023.

But in line with the Commission’s ‘no-policy-change assumption’, these projections take into account only measures credibly announced and specified in sufficient detail by the cut-off date. Importantly, at the cut-off date, which was at the end of October, some Member States had not yet announced which energy measures they plan for 2023. Moreover, while several energy measures are planned to expire in the course of 2023, with energy prices set to remain high, Member States may of course prolong existing measures or implement new ones. As such, the budgetary cost of energy measures in 2023 may be higher than expected and the budgetary deficit in consequence underestimated.

The additional costs related to measures to mitigate the impact of high energy prices are currently estimated to have a net impact of 1.2% of GDP this year and 0.9% next year. In a stylised exercise, Commission services estimated that if energy measures had to be kept in place for the full year 2023, their total net cost could increase by an additional 1% of GDP in both the EU and the euro area, reaching close to 2% of GDP in 2023. So we are now forecasting 0.9%, but in this stylised scenario, it could reach 2% – the additional spending related to GDP for energy measures – if they become permanent, or if you have new unannounced measures.

In 2024, the aggregate deficit in the euro area is forecast to fall again, to 3.2% of GDP, thanks to the projected resumption of economic activity and in the assumed absence of energy-related measures in 2024.

The number of countries with a deficit exceeding 3% of GDP is set to remain at 15 this year. This number is expected to increase to 16 in 2023, before falling again to 11 in 2024 based on unchanged policies.

Overall, these developments imply a supportive stance in 2022 and in 2023, followed by normalisation in 2024.

Inflation should mechanically support a further reduction of the debt throughout the forecast horizon through the denominator effect. The debt-to-GDP ratio for the EU as a whole is set to decline to 84.1%in 2024. Yet, over the longer term high inflation (especially if imported) is bound to negatively affect public finances as well.

Risks, which is always the last part, and not always the best part of our forecast.

And you may not be surprised that risk is titled to the downside.

Because of the extraordinary uncertainty, the potential for further economic disruptions due to  Russia’s war is far from exhausted.

The largest threat comes from adverse developments on the gas market and the risk of shortages, especially not this winter but next winter.

Beyond our baseline scenario, the Commission provided an additional estimate on the economic costs of a complete stop of gas flows from Russia compounded by insufficient gas consumption savings and cold winters. These costs would be sizeable. These costs could be mitigated if we continue to increase gas imports from other (non-Russia) suppliers to prepare for the next winter. However, if we fail to prepare for a high-demand season in advance, economic costs could be somewhat higher in 2023 and markedly higher in 2024. Inflation could increase by an additional 2 percentage points in 2024 compared to our baseline, if this scenario of complete cut from Russian gas will materialise.

Finally, rising borrowing costs compounded by strongly rising production costs at a time when demand cools, amplify pre-existing financial vulnerabilities in the corporate sector. Renewed stress in financial markets may also emerge in response to a worsened profit outlook for firms and a general context of higher interest rates.

We are approaching the end of a year marked by the return of war in our continent: a brutal war of aggression for which Russia alone is responsible.

In spite of this major shock in the first months of the year, growth was markedly stronger than analysts expected in the both first and second quarters, and even in the third quarter.

So our economies have shown great resilience – thanks in no small part to the bold decisions taken over the past couple of years in a spirit of unity and solidarity. These decisions have supported both the labour market and investment.

But inevitably, the impact of soaring energy prices and rampant inflation are nonetheless taking their toll. We have some difficult months ahead of us. I have highlighted the many risks surrounding this forecast.

So let me conclude by telling you that if we as Europeans can remain united, we will be able to successfully navigate also this challenging period, making it short, and emerge stronger from it.

In sum, I want to say that the economic prospects are not only subject to huge uncertainty, but are crucially policy-dependent. If we are able to show, based also on the experience of the pandemic, that we are able to agree on a common policy strategy, this will have confidence effects on markets and investors and may change the outlook for the better. In this sense, I believe that also a rapid convergence on the new proposals by the Commission on the reform of our economic governance could be key in giving this positive contribution.

And now I am here for your questions.

The press release issued by the European Commission on 11 November 2022.

After a strong first half of the year, the EU economy has now entered a much more challenging phase. The shocks unleashed by Russia’s war of aggression against Ukraine are denting global demand and reinforcing global inflationary pressures. The EU is among the most exposed advanced economies, due to its geographical proximity to the war and heavy reliance on gas imports from Russia. The energy crisis is eroding households’ purchasing power and weighing on production. Economic sentiment has fallen markedly. As a result, although growth in 2022 is set to be better than previously forecast, the outlook for 2023 is significantly weaker for growth and higher for inflation compared to the European Commission’s Summer interim Forecast.

Growth set to significantly contract at the turn of the year

Real GDP growth in the EU surprised on the upside in the first half of 2022, as consumers vigorously resumed spending, particularly on services, following the easing of COVID-19 containment measures. The expansion continued in the third quarter, though at a considerably weaker pace.

Amid elevated uncertainty, high energy price pressures, erosion of households’ purchasing power, a weaker external environment and tighter financing conditions are expected to tip the EU, the euro area and most Member States into recession in the last quarter of the year. Still, the potent momentum from 2021 and strong growth in the first half of the year are set to lift real GDP growth in 2022 as a whole to 3.3% in the EU (3.2% in the euro area) – well above the 2.7% projected in the Summer Interim Forecast.

As inflation keeps cutting into households’ disposable incomes, the contraction of economic activity is set to continue in the first quarter of 2023. Growth is expected to return to Europe in spring, as inflation gradually relaxes its grip on the economy. However, with powerful headwinds still holding back demand, economic activity is set to be subdued, with GDP growth reaching 0.3% in 2023 as a whole in both the EU and the euro area.

By 2024, economic growth is forecast to progressively regain traction, averaging 1.6% in the EU and 1.5% in the euro area.

Inflation yet to peak before gradually easing

Higher-than-expected inflation readings throughout the first ten months of 2022 and broadening price pressures are expected to have moved the inflation peak to year-end and to have lifted the yearly inflation rate projection to 9.3% in the EU and 8.5% in the euro area. Inflation is expected to decline in 2023, but to remain high at 7.0% in the EU and 6.1% in the euro area, before moderating in 2024 to 3.0% and 2.6% respectively.

Compared to the Summer Interim Forecast, this represents an upward revision of nearly one percentage point for 2022 and more than two points in 2023. The revisions mostly reflect significantly higher wholesale gas and electricity prices, which exert pressure on retail energy prices as well as on most goods and services in the consumption basket.

Strongest labour market in decades to remain resilient

Despite the challenging environment, the labour market has continued performing strongly, with employment and participation at their highest and unemployment at its lowest in decades. The forceful economic expansion pulled a net additional two million people into employment in the first half of 2022, raising the number of employed persons in the EU to an all-time high of 213.4 million. The unemployment rate remained at a record-low of 6.0% in September.

Labour markets are expected to react to the slowing of economic activity with a lag, but to remain resilient. Employment growth in the EU is forecast at 1.8% in 2022, before coming to a standstill in 2023 and moderately edging up to 0.4% in 2024.

Unemployment rates in the EU are projected at 6.2% in 2022, 6.5% in 2023, and 6.4% in 2024.

Low growth, high inflation and energy-support measures weigh on deficits

Strong nominal growth in the first three quarters of the year and the phasing out of pandemic-related support have been driving a further reduction of government deficits in 2022, despite new measures adopted to mitigate the impact of surging energy prices on households and firms. After falling to 4.6% of GDP in 2021 (5.1% in the euro area), the deficit in the EU is forecast to decline further to 3.4% of GDP this year (3.5% in the euro area).

In 2023, the aggregate government deficit is, however, set to slightly increase again (to 3.6% in the EU and 3.7% in the euro area) as economic activity weakens, interest expenditure increases, and governments extend or introduce new discretionary measures to mitigate the impact of high energy prices. Their planned withdrawal in the course of 2023 and the resumption of growth should reduce the pressure on public purses thereafter. As a result, the deficit is projected at 3.2% of GDP in the EU and 3.3% in the euro area in 2024.

Over the forecast horizon, a further reduction in the debt-to-GDP ratio is projected in the EU, from 89.4% of GDP in 2021 to 84.1% of GDP in 2024 (and from 97.1% to 91.4% in the euro area).

Exceptional degree of uncertainty

The economic outlook remains surrounded by an exceptional degree of uncertainty as Russia’s war of aggression against Ukraine continues and the potential for further economic disruptions is far from exhausted.

The largest threat comes from adverse developments on the gas market and the risk of shortages, especially in the winter of 2023-24. Beyond gas supply, the EU remains directly and indirectly exposed to further shocks to other commodity markets reverberating from geopolitical tensions.

Longer-lasting inflation and potential disorderly adjustments on global financial markets to the new high interest rate environment also remain important risk factors. Both are amplified by the potential for inconsistency between fiscal and monetary policy objectives.

The press release issued by the European Commission on 11 November 2022.

As Burkina Faso risks a major humanitarian disaster, the EU is stepping up emergency support to deliver aid to vulnerable populations where access is severely limited. Today Commissioner for Crisis Management Janez Lenarčič is in Burkina Faso, to express EU solidarity and launch an EU Humanitarian Air Bridge operation to deliver between up to 800 tons of essential supplies over 3 months.

Currently up to 1 million people live in areas under blockade according to the United Nations. Some areas have not received any food supplies for several months. Stocks of food and other items are completely exhausted, leading to market closures.

Meeting with Prime Minister Appolinaire Joachim Kyelem de Tambela, Commissioner Lenarčič reiterated the EU’s call for full humanitarian access to all populations in need across the country.

In 2022, the Commission allocated €49.9 million in humanitarian aid to Burkina Faso, including via the recent Air Bridge flight and €6.5 million from the European Development Fund to address the global food crisis. With the additional funding of €2.5 million announced today, the total humanitarian aid for Burkina Faso for 2022 will reach more than €52 million in total. Combined with the contributions of the EU Member States in a Team Europe approach, this amounts to a total of more than €140 million for 2022.

Background

Burkina Faso’s complex and volatile crisis continues to deteriorate quickly and severely. The country is among the 10 poorest in the world.

In many parts of the country, agricultural food production is nonexistent due to lack of access to fields. In those areas the population is therefore now at high risk of starvation.

In addition, the country is suffering a worsening and unprecedented food insecurity crisis and significant deterioration in access to water and basic social services. During the lean season, it is estimated that 3.45 million will need emergency food assistance, including 630,000 in a pre-famine state.

The internal conflict has intensified, spreading across ever more regions of the country. Armed violence has caused massive population displacements and is increasingly targeting civilians. The first months of 2022 have been marked by a substantial increase in the number of internally displaced persons, with 805,000 new displacements recorded by CONASUR (National Committee for Emergency response and Rehabilitation) since the beginning of the year.

EU humanitarian aid focuses mainly on providing food assistance, health, nutrition, emergency shelter, access to water and sanitation, as well as protection to people in need. EU humanitarian aid also provides support to vulnerable internally displaced people and host populations affected by the ongoing armed conflict, and disaster response preparedness and education in emergencies to those who most need it.

Since March 2022, the Humanitarian Air Bridge operations, which have initially started due to the COVID-19 pandemic, are part of the European Humanitarian Response Capacity, a set of operational and logistical tools managed by the European Commission that supports humanitarian partners in delivering humanitarian aid.

The press release issued by the European Commission on 9 November 2022.

The European Commission has today adopted a Communication setting out orientations for a reformed EU economic governance framework. Taking into account the key concerns over the current framework, these aim to strengthen debt sustainability and enhance sustainable and inclusive growth through investment and reforms.

The orientations seek to ensure that the framework is simpler, more transparent and effective, with greater national ownership and better enforcement, while allowing for reform and investment and reducing high public debt ratios in a realistic, gradual and sustained manner. In this way, the reformed framework should help build the green, digital and resilient economy of the future, while ensuring the sustainability of public finances in all Member States, in line with President von der Leyen‘s 2022 State of the Union address. Today’s Communication follows extensive outreach to stakeholders and Member States.

National plans to ensure debt sustainability and enhance sustainable growth, anchored in a common EU framework

It is proposed to move to a transparent risk-based EU surveillance framework that differentiates between countries by taking into account their public debt challenges. National medium-term fiscal-structural plans are the cornerstone of the Commission’s proposed framework. They would integrate fiscal, reform and investment objectives, including those to address macroeconomic imbalances where necessary, into a single holistic medium-term plan, thus creating a coherent and streamlined process. Member States would have greater leeway in setting their fiscal adjustment path, strengthening the national ownership of their fiscal trajectories.

A single operational indicator – net primary expenditure, i.e. the expenditure which is in a government’s control – would serve as a basis for setting the fiscal adjustment path and carrying out annual fiscal surveillance, thereby significantly simplifying the framework.

How it would work:

• As part of the common EU framework, the Commission would present a reference fiscal adjustment path, covering a period of four years, based on its debt sustainability analysis methodology. This reference adjustment path should ensure that debt of Member States with substantial or medium debt challenges would be put on a plausible downward path, and that the deficit would remain credibly below the 3% of GDP reference value set out in the Treaty.
• Member States would then submit plans setting out their medium-term fiscal path, and priority reform and public investment commitments. Member States could propose a longer adjustment period, extending the fiscal adjustment path by up to three years when the path is underpinned by a set of reform and investment commitments that support debt sustainability and respond to common EU priorities and targets.
• As a third step, the Commission would assess the plans, providing a positive assessment if debt is placed on a downward path or stays at prudent levels, and the budget deficit remains credibly below the 3% of GDP reference value over the medium term. The Council would endorse the plans following a positive assessment from the Commission.
• Finally, the Commission would continuously monitor the implementation of the plans. Member States would submit annual progress reports on the implementation of the plans to facilitate effective monitoring and ensure transparency.

More scope would be given to Member States for the design of their fiscal trajectories. At the same time, we are also putting in place more stringent EU enforcement tools to ensure delivery. The deficit-based excessive deficit procedure (EDP) would be maintained, while the debt-based EDP would be reinforced. It would be activated when a Member State with debt above 60% of GDP deviates from the agreed expenditure path.

Enforcement mechanisms would be reinforced: the use of financial sanctions would be made more effective by lowering their amounts. There would also be stronger reputational sanctions. The macroeconomic conditionality for structural funds and for the Recovery and Resilience Facility would be applied in a similar spirit, i.e. EU financing could also be suspended when Member States have not taken effective action to correct their excessive deficit.

In addition, a new tool would ensure the implementation of reform and investment commitments underpinning a longer adjustment path. A failure to implement reform and investment commitments could result in a more restrictive adjustment path and, for euro area Member States, the imposition of financial sanctions.

More effectively preventing and correcting harmful imbalances

The Macroeconomic Imbalance Procedure (MIP) aims to identify potential macroeconomic risks early on, prevent the emergence of harmful macroeconomic imbalances and correct the imbalances that already exist. The reform proposals for the MIP centre on an enhanced dialogue between the Commission and Member States to create a better common understanding of the challenges identified under the MIP and the policies needed to address them. This would, in turn, lead to a commitment from Member States to include the reforms and investments needed to prevent or correct imbalances in their national medium-term fiscal-structural plan.

The preventive role of the MIP would be strengthened in a macroeconomic environment characterised by new and evolving risks. The assessment of whether imbalances exist would be made more forward-looking with a view to detecting and addressing emerging imbalances early on. More weight would be placed on trend developments and on whether policies have been implemented to address imbalances, when assessing whether imbalances have been corrected.

A more focused and streamlined post-programme surveillance framework

Post-programme surveillance assesses the repayment capacity of Member States that have benefited from financial assistance programmes. As part of the new framework, and while keeping the legislative text unchanged, the Commission proposes to apply it differently by setting clearer objectives, with the intensity of the framework linked to these objectives. In particular, post-programme surveillance would focus on assessing repayment capacity, monitoring the implementation of unfinished reforms, and assessing whether corrective measures are needed in the context of concerns for repayment capacity or continued market access.

The intensity of post-programme surveillance would evolve over time, along with the evolving risk assessment.

Next steps

Swift agreement on revising the EU fiscal rules and other elements of the economic governance framework is a pressing priority at the current critical juncture for the EU economy. Member States and the Commission should reach a consensus on the reform of the economic governance framework ahead of Member States’ budgetary processes for 2024.

The Commission will consider tabling legislative proposals on the basis of today’s Communication and the ensuing discussions. It will again provide guidance for fiscal policy for the period ahead in the first quarter of 2023. This guidance will facilitate the coordination of fiscal policies and the preparation of Member States’ stability and convergence programmes for 2024 and beyond.

Background

Since the Treaty of Maastricht of 1992, the EU’s economic governance framework has helped to create conditions for economic stability, sustainable economic growth and higher employment. This framework consists of the EU fiscal policy framework (the Stability and Growth Pact, the European Semester, and requirements for national fiscal frameworks), the Macroeconomic Imbalances Procedure, and the framework for macroeconomic financial assistance programmes.

However, while the framework has evolved over time to address certain weaknesses, it has also grown increasingly complex and not all instruments and procedures have stood the test of time.

The reform proposals set out in the Communication follow a review of the effectiveness of the economic surveillance framework first launched in February 2020 (and relaunched in October 2021). The review was carried out in line with the so-called six-pack and two-pack legislative reforms, which require the Commission to review and report on the application of the legislation every five years. Today’s orientations take into account the extensive public debate and consultation process where a wide range of stakeholders expressed their views on the key objectives of the framework, its functioning, and new challenges to be addressed.

The lessons learned from the policy responses to recent economic shocks, including the interaction between reforms and investment under the Recovery and Resilience Facility, have informed the Commission’s proposal for a reformed framework. The reform proposals are also shaped by the higher and more diverse public debt levels and the need to facilitate investments for common EU priorities, notably to ensure the green and digital transitions, and energy security in the years to come.