Economic and Financial Affairs

On 26 November 2021, France submitted to the Commission a payment request based on the achievement of the 38 milestones and targets selected in the Council Implementing Decision for the first instalment. They cover reforms in the areas of public finance, housing, mobility, unemployment insurance, skills, and health, as well as France's audit and control system for the implementation of the RRF. Several targets also concern major investments in the fields of energy renovation of buildings, decarbonisation of industry, clean vehicles, research, youth employment, and education. With their request, the French authorities provided detailed and comprehensive evidence demonstrating the fulfilment of the 38 milestones and targets. The Commission has thoroughly assessed this information before presenting its positive preliminary assessment of the payment request. The French recovery and resilience plan includes a wide range of investment and reform measures in nine thematic components. The plan will be supported by €39.4 billion in grants, 13% of which (€5.1 billion) was disbursed to France in pre-financing on 19 August 2021. Payments under the RRF are performance-based and contingent on Member States implementing the investments and reforms outlined in their respective recovery and resilience plans.

The payment made on 21 January is equivalent to 13% of the country’s financial allocation under the RRF. This pre-financing payment will help kick-start the implementation of the crucial investment and reform measures outlined in Finland's recovery and resilience plan. The Commission will authorise further disbursements based on the implementation of those measures. The country is set to receive €2.1 billion in total, consisting exclusively of grants, over the lifetime of its plan. The latest disbursement follows the recent successful implementation of the first borrowing operations under NextGenerationEU. Since June 2021, the Commission has raised €71 billion for NextGenerationEU via long-term EU-Bonds – €12 billion of which through the first-ever NextGenerationEU green bond issuance. The RRF is at the heart of NextGenerationEU, which will provide €800 billion, in current prices, to support investments and reforms across Member States. The Finnish plan is part of the unprecedented EU response to emerge stronger from the COVID-19 crisis, fostering the green and digital transitions while strengthening resilience and cohesion in our societies.

The discussion was based on input from the European Commission. Laurence Boone, Chief Economist of the OECD, participated in this exchange of views with ministers. Participants discussed the solvency situation of the corporate sector and potential measures to facilitate corporate restructuring and economic adjustment in the euro area during the recovery after the global COVID-19 pandemic. Ministers also discussed the draft recommendation on the economic policy of the euro area for 2022. The draft recommendation will be approved at the ECOFIN meeting on 18 January 2022 and endorsed by the March European Council. Its final adoption is expected at a subsequent ECOFIN meeting. Basing their discussion on the Eurogroup work plan, ministers also examined the euro area fiscal framework and arrangements for financial assistance and post-programme surveillance. Meeting in inclusive format, ministers discussed the state of play on strengthening of the banking union, focusing on how to finalise a consensual, stepwise, and time-bound work plan on all outstanding elements. Ministers also took stock of the ratification of the revised European Stability Mechanism (ESM) treaty.

Ministers held a policy debate on the proposed Council directive on ensuring a global minimum level of taxation for multinational groups in the Union. They agreed on the need to transpose the new rules of international corporate taxation into EU law as soon as possible. Ministers also discussed the state of play regarding implementation of the Recovery and Resilience Facility (RRF). At this stage, Commission assessments of Recovery and Resilience Plans (RRPs) for five Member States are still pending while the Council has approved the assessments of 22 plans within the tight timeframe set forth in the regulation. So far, 21 Member States have received pre-financing (13% of the amounts requested) for a total of €56.6 billion. The Council discussed the annual European Semester process and adopted conclusions on the 2022 alert mechanism report and the 2022 annual sustainable growth survey. It approved the 2022 recommendation on the economic policy of the euro area (EAR). In addition, ministers gave guidance for further work on the G20 EU Terms of Reference in preparation for the upcoming meeting of G20 finance ministers and central bank governors. Lastly, ministers received updates on legislative proposals in the field of financial services, the priorities of the G7 Presidency, and the latest EIB investment report.

A year earlier, the rate was -0.3%. EU annual inflation was 5.3% in December 2021, up from 5.2% in November. A year earlier, the rate was 0.3%. These figures were published by Eurostat, the EU statistical office. The lowest annual rates were registered in Malta (2.6%), Portugal (2.8%) and Finland (3.2%). The highest annual rates were recorded in Estonia (12.0%), Lithuania (10.7%) and Poland (8.0%). Compared with November, annual inflation fell in seven Member States, remained stable in two and rose in eighteen. In December, the highest contribution to the annual euro area inflation rate came from energy (+2.46 percentage points, pp), followed by services (+1.02 pp), non-energy industrial goods (+0.78 pp) and food, alcohol & tobacco (+0.71 pp).

In the EU, the ratio also decreased from 90.9% to 90.1%. Both for the euro area and the EU, the decrease in the government debt to GDP ratio at the end of the third quarter was due to an increase in GDP, while debt continued to increase due to financing of measures adopted to mitigate the economic and social impact of the coronavirus pandemic. Compared with the third quarter of 2020, the government debt to GDP ratio rose in both the euro area (from 96.6% to 97.7%) and the EU (from 89.2% to 90.1%). The highest ratios of government debt to GDP at the end of the third quarter of 2021 were recorded in Greece (200.7%), Italy (155.3%), Portugal (130.5%), Spain (121.8%), France (116.0%), Belgium (111.4%) and Cyprus (109.6%), and the lowest in Estonia (19.6%), Bulgaria (24.2%) and Luxembourg (25.3%).

The data released on 21 January by Eurostat, the EU statistical office, show significant decreases in the deficits compared to the second quarter of 2021, even as the deficits remained at a high level compared to the pre-pandemic period. The deficit to GDP ratio decreased due to increases in total revenue, decreases in total expenditure as well as due to a higher GDP in comparison with the second quarter of 2021. Total revenue and total expenditure continued to be influenced by policy responses to the COVID-19 pandemic. In the third quarter of 2021, most Member States continued to record a government deficit. Total euro area government revenue in the third quarter of 2021 amounted to 47.0% of GDP, an increase compared with 46.8% in the second quarter of 2021. Seasonally adjusted total revenue in the euro area increased by around €53 billion compared with the second quarter of 2021. Total government expenditure in the euro area stood at 51.0% of GDP, a decrease in the ratio compared with 53.2% in the previous quarter. Seasonally adjusted total government expenditure decreased by around €14 billion compared with the second quarter of 2021. In the EU, total government revenue was 46.5% of GDP in the third quarter of 2021, stable compared with the second quarter of 2021. Total government expenditure in the EU was 50.2% of GDP, a decrease compared with 52.3% of GDP in the previous quarter.