Remarks by Executive Vice-President Dombrovskis at the ECOFIN press conference

European Union, 2022European Union, 2022

Merci Bruno, dear colleagues,

Russia’s latest atrocities and its callous attitude to non-combatants – innocent civilians – have shocked the world.

We will not forget. We stand ready to send Joint Investigation Teams to document war crimes, in coordination with Ukraine’s Prosecutor General.

We are now finalising a fifth package of sanctions against Russia. And we will continue to ramp them up as long as Russia continues its aggression.

It is also vital that EU countries coordinate and work together – with our global partners too – to make sure that sanctions are properly and quickly enforced. Not circumvented.

Any loophole should be closed off, quickly and firmly.

Sanctions that exist only on paper are just that – paper.

We want sanctions to continue biting Putin’s regime hard in the real world.

It was a privilege to be joined today by Ukraine’s Finance Minister Serhiy Marchenko.

He presented to us the multiple shocks to the Ukrainian economy. An economy at war: not something we ever expected to see in Europe during our lifetime.

The European Union remains firmly committed to support Ukraine – economically, politically, militarily, humanitarian.

That also applies to rebuilding a democratic Ukraine once Russia’s aggression is stopped

We have started developing the Ukraine Solidarity Trust Fund. It will be discussed later this month in the IMF’s annual meeting in Washington DC as well.

The Commission has also started work on a longer-term Macro-Financial Assistance programme for Ukraine.

We are also doing everything we can to support refugees from Ukraine, and to help neighbouring Member States to take care of them.

We have activated the temporary protection directive to allow those eligible to stay in the EU for at least one year and be given a residence permit, access to education, access to healthcare systems and the labour market.

And, yesterday, the Council adopted our CARE proposal to help Member States reallocate cohesion funding as emergency support for people fleeing from Ukraine.

Last week, we also proposed coordinating national approaches to help displaced Ukrainians exchange their hryvnia banknotes into the currency of their host country.

These moves complement and reinforce all the other support that the EU is giving to refugees.

Turning now to the economy: Russia’s invasion is still sending shockwaves through global markets. Commodity prices, both energy and non-energy, are volatile and stand at record highs.

Together with extreme uncertainty, these developments are holding back the EU’s economic activity through multiple channels. Market and consumer sentiment have taken a hit.

Inflation is being driven up much higher. This raises concerns about the cost of living across the EU, with households and businesses facing higher bills, especially for energy.

Just for the euro area, Eurostat announced that annual inflation had risen to an all-time high in March: 7.5%, up from 5.9% in February, and still largely driven by energy prices.

We can expect further disruptions to global supply chains, especially since Russia has restricted exports of some goods and raw materials.

Even though several institutions are issuing forecasts, the economic impact is still very hard to quantify.

But we can already expect, however, is that our 4% projection of real GDP growth this year is no longer within reach. The Commission intends to publish its spring forecast on 16 May.

The crisis will also weigh on our public finances.

Weaker economic growth will lead to higher budget deficits, mainly through lower tax revenues. Many Member States have also taken measures to offset the impact of higher energy prices and broader economic implications.

There is also the cost of the economic and material support that the EU is providing to Ukraine, as well as assistance to the large number of refugees.

The combination of higher inflation and lower growth is not one we expected at the start of 2022 – because then, everything pointed to a good recovery from the pandemic.

But we entered this latest crisis with the economy on a good footing. Its underlying strength will be a valuable asset to help us get through this crisis.

The EU has other tools available to help to offset the economic impact of the war, such as a new state aid temporary framework.

We have also presented a strategy to safeguard global food security and reinforce the resilience of food systems. It aims to support farmers and consumers in the EU given rising food prices and costs of vital inputs such as energy and fertilisers.

Since this crisis threatens food shortages in many countries, we will step up humanitarian assistance for low-income food-importing countries and also for others affected by this war.

Final observations as regards the discussions on the implementation of the OECD agreement concerning the Pillar 2 of global taxation:

We also regret that agreement was not possible in today’s ECOFIN and would like to commend the French Presidency’s outstanding work and commitment to make sure that there is consensus and agreement on this important file.

We do hope that this agreement will be possible at the next ECOFIN.

Thank you.