The eurozone will recover half of what it spends on repercussions of the war -ECB

The eurozone will recover half of what it spends on repercussions of the war -ECB

Euro zone countries are spending more than they will recover to cushion the economic impact of the Ukraine war through fuel subsidies and other support measures, it said on Tuesday. the European Central Bank, which called on states to use their money more efficiently.

The 19 countries that share the euro approved support measures worth 0.9% of their gross domestic product, mainly in interventions to compensate for the increase in energy prices.

However, this should only lift euro area GDP growth by about 0.4 percentage point this year and reduce inflation by somewhat less than that figure, mainly through lower energy prices, the ECB said. .

In the study, which was used for the ECB’s economic projections for 2022-24, the bank estimated that the impact on growth would fade next year and that the impact on inflation would reverse.

In 2022-24, stimulus measures passed in response to the war are estimated to add just under 0.4 percentage point to growth and curb inflation by just over 0.1 percentage point, the ECB said.

It also found that half of the fiscal stimulus was used to support the consumption of fossil fuels in the short term, while only a small part contributed directly to the ecological transition.

“Going forward… efforts should be made to increasingly target energy-related compensatory measures at the most vulnerable households,” the ECB said.

“In addition, incentives should be aimed at reducing the use of fossil fuels and dependence on Russian energy, while maintaining sound public finances.”

Melissa Galbraith
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