We have just finished a lengthy and important Eurogroup meeting, and I will do my best to briefly summarise the key points that have emerged from our long and good meeting.
Our meeting began by a moment of recognition and celebration as we formally welcomed our Croatian friends into the euro area and congratulated them on the very successful changeover from the kuna to the euro that happened on 1 January this year.
We are now a Euro family that has 20 family members, which is a sign not only of the continued resilience and strength of the euro – both now and in the years to come – but it is also a recognition of the exceptional work that has been carried out by Croatian authorities and the government of Croatia to implement this very complex transition so successfully.
We were also delighted to welcome Marko Primorac as a full member of our group and we all look forward to working closely with him. While on the topic of welcomes, I also want to note that we welcomed my close colleague Michael McGrath as the new Finance Minister of Ireland, and Arvils Ašeradens who presented the new priorities of the Latvian government.
With that said, a quick update on the agenda. The first substantial topic was the digital euro. After 18 months of very detailed discussions in relation to different strands of this project, we took some time to reflect on the work that has happened, on where we are now, and on the views of the Eurogroup on key areas of this project.
The President of the ECB informed us of the progress that has been made in narrowing down design choices regarding the digital euro. We were informed that the Governing Council of the ECB is expected to decide by the autumn of this year whether to move to a realisation phase in this process, where technical solutions would actually be developed and then tested. This phase would take around three years and does not in itself represent or imply a decision on the possible issuance of the digital euro. The Vice-President of the Commission updated us on the preparatory work that is underway towards the publication of a legislative proposal that would give the digital euro a proper legal basis.
Following on from this, we adopted a Eurogroup statement that summarised the main discussions that we have had on this topic over six different Eurogroup meetings and drew some intermediate conclusions regarding what we believe to be the most important political dimensions of this project. What we plan to do is continue with our political engagement with the ECB and with the Commission as they move forward in their processes, because what the Eurogroup recognised today is that many decisions that await are inherently political. We believe it is vital that we make our views known on many areas and I want to acknowledge the recognition by the Commission and the ECB of our mandate in this area. I won’t go into our particular policy views on this because it has been summarised in the statement that we issued earlier in the day.
From this, we moved on to a very broad discussion regarding where we stand economically. This was introduced first by the IMF, who gave their perspective on the performance of the euro area and also some global observations. Positively, the euro area again has demonstrated its resilience in 2022. Despite everything, we had a growth performance of the year that exceeded expectations, staying above 3%. We also saw an employment performance for last year that was exceptionally positive in the context of the economic consequences of the terrible war.
All of that being said, we recognised again the real challenge that high energy prices and inflation are posing for all economies. We are focussed on the policies that will bring down inflation and make the slowdown as mild and as short as possible, while of course protecting the most vulnerable. But I think it’s fair at this point to conclude that our tone regarding the actual economic events of last year has improved as the year drew to a close. We face into this year conscious again of how deep the economic foundations of the euro are; and despite our challenges, we are confident that we will navigate our way through them.
We continued with a lengthy discussion regarding fiscal policy choices for 2023. At the beginning of this meeting, I gave a presentation regarding the different scenarios that could develop in 2023 with regard to borrowing, inflation, and design choices that will be made by ministers regarding policy measures that are in place at the moment to support households and businesses with the cost of energy. We agreed again that we need to deepen our cooperation in this area. Conscious that as we move into the second quarter of this year, finance ministers and governments will be making decisions on the extension of measures and or their design. We are grateful to the Dutch and French ministers for the work that they presented to us regarding their thinking on how they are going to lead this transition across this year. We are going to continue with this work and we are hoping as we approach our meeting in March, that we will be in a position to discuss fiscal guidance for 2024, and also see what opportunities there are for better coordination of decisions that will be made as we approach the summer.
We then moved on to a discussion on the Economic governance review. This evening’s discussion really only focussed on the euro area aspects of the economic governance review. But it did afford an opportunity for all governments to offer a view regarding where the process stands at the moment and on the work they believe needs to take place in the coming months. Much of this discussion will happen in ECOFIN and I will give a brief update in the morning regarding what happened this afternoon.
Finally we closed the meeting with an update on where we are with the revised ESM treaty. Germany has successfully ratified the revised treaty. Croatia is making very speedy progress to deliver this and from visiting Rome last week, I want to recognise the work that is underway on this important topic in the government of Italy.