In 2025, EU leaders will back a more stringent fiscal strategy for the eurozone

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In 2025, EU leaders will back a more stringent fiscal strategy for the eurozone

According to Reuters, leaders of the European Union will show their support on Friday for a somewhat stricter fiscal policy in the eurozone in 2025, with the goal of assisting in the reduction of inflation and stabilizing public finances following the energy crisis and the pandemic spending binge.

The endorsement of the EU leaders follows the agreement reached on March 11 by the finance ministers of the 20 member states of the eurozone that new fiscal rules, which extend the period for debt reduction provided investments are maintained, should be considered in their fiscal policy recommendations for 2025.

The statement that will be released following the conference of EU leaders will say, „The European Council supports the economic policy recommendations for the eurozone.”

According to the endorsed proposals by EU leaders, the new fiscal regulations will necessitate a marginally tougher fiscal posture in the eurozone by 2025.

„This would be appropriate given the current macroeconomic outlook, regarding the need to continue fiscal sustainability and support the disinflationary process, although policies should remain flexible given the persistent uncertainty,” the proposals backed by leaders of the EU state.

According to the European Commission’s prediction, the aggregate budget deficit of the eurozone is expected to decline from 3.2% of GDP in 2023 to 2.8% of GDP in 2024, with a subsequent modest decrease to 2.7% of GDP in 2025. It is anticipated that this will assist in lowering inflation from 5.4% in 2023 to 2.3% of GDP in 2024, 2% in 2025, and 1.9% in 2026, based on the European Central Bank’s projections.

In addition, while competing with China and the US for cutting-edge technologies and raw materials, EU leaders are anticipated to declare their support for a plan reached upon by European finance ministers on how to draw private capital into Europe to finance the continent’s expensive transition to a greener and more digital economy.

By lowering obstacles to cross-border private investment, the plan seeks to establish a Capital Markets Union among the 27 EU member states. This will be the responsibility of the incoming European Parliament and European Commission.

Photo source: REUTERS

 

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