A stagflationary shock from the crisis in the Middle East was cited by the Commissioner for Economic Affairs, Productivity, Implementation and Simplification, Valdis Dombrovskis, from the 11th Delphi Economic Forum, where he participated in a panel with the Minister of Economy and Finance and Eurogroup President Kyriakos Pierrakakis.
The commissioner said that according to one scenario there would be an adverse impact on the European economy, depending on how long the crisis lasts and how severe the shock is, from 0.2 to 0.6 points, while according to another scenario it would be more than 1 point.
According to him, there are plans in Europe to release oil stocks, and there is a risk for aircraft fuel, given that 70% is produced in Europe and 30% is from imports.
According to him, there are plans in Europe to release oil stocks, and there is a risk for aircraft fuel, given that 70% is produced in Europe and 30% is from imports.
However, he said, this is not the time for the escape clause, as we are not in the scenario of a severe economic downturn. So, the message should be temporary and targeted, considering the fiscal constraints on debt and deficit. Fiscal space, he said, is limited and therefore fiscal measures should be temporary and targeted. He set out two main priorities, strengthening competitiveness and enhancing security and defence. At the same time, he pointed out that this is not the time to ease sanctions against Russia.
For his part, Pierrakakis called it the biggest energy crisis in history, as in addition to the decline in fuel there is the impact on assets in the region, with 30 out of about 80 in total affected. However, he added that Europe is more stable and resilient from 2022 and we need to be calm. He said a concerted effort is needed on the fiscal side, but not in opposition to monetary policy. Measures, he said, need to be temporary and targeted, while a long-term investment in networks and interconnections is needed. Adding that challenges are still ahead.
According to the minister, we need to know what worked in 2022 and what did not, and act accordingly. He said we need to plan for defence capability and develop the single market. And he reiterated the need for the Savings and Investment Association, which will include banks. As he said, I prefer the word “sovereignty” to “autonomy” for Europe. And he used a quote from Frank Sinatra that “if you can do it there, you can do it anywhere.”
Asked about additional support measures for Greece, he replied that a package was announced two days ago targeting the most vulnerable and those in need of assistance, and “we do not intend to announce another package of measures at this time.” And he referred to the situation in the Greek economy, with its high primary surpluses and rapidly declining debt.
