The European Economic and Social Committee (EESC) held a conference on the prospects for the European economy in times of crisis. The event gathered high-level policy-makers, civil society representatives and economic researchers to see how the EU can tackle new dilemmas posed by low-growth prospects and record-high levels of inflation. All agreed that the war in Ukraine has only aggravated trends that have been going on for years. The main takeaways of the event were that fiscal policies need to be revised, that supporting productive investment amidst difficulties is key, and that vulnerable businesses and households need more public support.
Europe has not yet recovered from the COVID-19 pandemic and is now facing a dramatic economic and social fallout from the Russian invasion of Ukraine. These crises have revealed significant vulnerabilities and structural differences between the Member States. The war has not only highlighted an unsustainable energy dependence and an unbalanced energy mix in the bloc, but also aggravated pre-existing headwinds to growth in the EU.
In such a situation, finding the right policy mix is most challenging, opened Stefano Palmieri, President of the EESC's ECO (Economy and Economic and Monetary Union and Economic and Social Cohesion) section.
We want to have an open and inclusive debate to inform and influence the economic policy debates at EU and national level. We have to find out how the EU can both tackle broad structural challenges and ensure prosperity for its citizens.
The Committee believes that the aims of the green transition must now be pursued even more vividly, and estimates that a revision of the EU's economic governance framework will have an important role in supporting the EU growth agenda.
Reinhard Felke, Director for policy coordination, economic forecasts and communication at the European Commission's Directorate‑General for Economic and Financial Affairs (DG ECFIN), said that the war in Ukraine was an accelerator of many trends that have been going on for years now, both negative and positive. Priorities should be taming inflation, finetuning fiscal policies in the Member States to support a balanced policy mix, and addressing supply-side shocks (especially in energy markets) by accelerating the diversification of energy supplies and the transition to a green EU.
Debora Revoltella, Director of the Economics Department at the European Investment Bank (EIB), explained how the European macroeconomic context had changed dramatically since the previous financial crisis. She underscored that the short-term energy security challenge combined with the long-term need for an energy transformation required substantial investment.
The challenge is that the EU needs to refocus on investing, in an economic environment where it is not easy to do so, she stressed.
Fabian Zuleeg, Chief Executive and Chief Economist at the European Policy Centre (EPC), insisted that systemic policy responses need to be different from those of the financial crisis. He also cited his three current major risks for the European economy: another financial crisis, a fiscal policy under pressure leading to a sovereign debt crisis, and political turmoil. To address these, he stressed the need to continue to support Ukraine's defence efforts, the need to communicate better with citizens, and the need for unity and better cooperation at EU level.
Marcello Messori, professor of economics and Director of the School of European Political Economy at LUISS University, explained how the European Central Bank could bring inflation under control without increasing the risk of stagflation. He advocated for a central European fiscal capacity that could support the supply side of the economy.
James Watson, Director of Economics at Business Europe, compared the financial crisis with the current situation.
A few years ago, we had a lot of space to improve. Now, it's different, there's fewer tools available and the context is much more challenging. He asked for coordinated action around energy policies and for much more support for vulnerable households and businesses, targeted in a way so as not to further fuel inflation.
Liina Carr, Confederal Secretary at the European Trade Union Confederation (ETUC), followed:
The economy is still growing, but the gaps in our societies are getting bigger. We observe a profit/price spiral, not a wage/price spiral. She insisted on the need for more social cohesion and on the need for fair taxation and for fiscal rules appropriate for the new circumstances, which can enable the investments needed for the green transition.
Monique Goyens, Director General of the European Consumer's Organisation (BEUC) and last to intervene in the debate, commented on the weight put on the shoulders of the European consumers.
Consumers are struggling to pay their bills, in particular their energy bills. It is key to provide public support, in a targeted manner, to avoid energy poverty. She called for targeting aid towards lower-income households specifically, as the value of a euro is not the same for them.