European Commissioner Paolo Gentiloni: ‘Our growth last year was higher than that in the US or China’

The specter of recession is over and the European economy is in a much better shape than recently predicted. The message from Brussels, where the European Commission presented its quarterly economic outlook, was positive, at the end of a winter that the EU managed well even without Russian gas.

European Commissioner Paolo Gentiloni (Economy) sees plenty of reasons to be optimistic, he says Monday morning in conversation with four European newspapers, including NRC. The European economy had to endure two “black swans,” says Gentiloni: the corona pandemic and the Russian invasion of Ukraine. “But if you look at the numbers now,” says the Italian, “you can see that our growth last year was higher than that in the United States or China.” Economic growth in the EU was 3.5 percent in 2022, compared to 3 percent in China and 2.6 percent in the US.

On Monday, the Commission raised its growth forecast for this year from 0.8 percent to 1 percent. Expectations for the Dutch economy are even more positive: it will grow by 1.8 percent this year, compared to the previously predicted 0.8 percent. Next year, at 1.2 percent, the Netherlands will be somewhat below the eurozone average of 1.6 percent, partly due to high inflation.

After all, Brussels also concludes that inflation will remain stubbornly high and will decline much less quickly than previously predicted. In order to keep inflation down, the Commission is now calling on Member States to phase out support measures for citizens and businesses and not to pursue an ‘expansive fiscal policy’. After all, pumping a lot of public money into the economy can drive prices up even further, which further complicates the European Central Bank’s mission to curb inflation by raising interest rates.

Invest heavily

That message of ‘moderation’ conflicts with another one that Brussels recently sent out, namely the call on member states to invest heavily in green companies. In response to a US green stimulus package and growing competition with China, the European Commission recently relaxed state aid rules to allow more green subsidies in Europe as well.

That contradiction, Gentiloni acknowledges, is “the biggest budget dilemma we now face. Of course, we cannot undermine monetary policy with expansionary fiscal policies. But at the same time, we cannot deny the need not only to support the green transition, but also to strengthen our role in the ‘clean technology race’ that is going on in the world.”

This dilemma is not easy to solve. The private sector will have to play its part in Europe, says Gentiloni. In addition, he emphasizes the importance of joint European subsidies, which continue to make investments possible while EU member states moderate their budgetary policies at the same time. The billions from the existing corona recovery fund, from which weak member states can draw more than strong ones, can contribute to this, among other things.

But according to the Italian, a new ‘sovereignty fund’ is also needed – something that European Commission President Ursula von der Leyen also announced earlier. Such a fund should stimulate clean technology throughout Europe. The Commission wants to announce later how such a new fund should be financed. But the Netherlands, among others, already fears that the idea of ​​common EU loans, so-called Eurobonds for which the Commission is allowed to borrow money on the capital markets on behalf of the EU, will also be put back on the table.

Gentiloni does not comment on the financing of the fund. He does, however, defend its necessity. “Winning the race for clean technology is a common European interest. And yes: we need common regulation and private investment. But we also need European money for projects that have a European scale.” Gentiloni knows that the discussion about this is getting complicated. But as if he wants to avoid any criticism, he emphasizes that the structure of the fund may be different from that of the corona recovery fund. “Then it was about a form of solidarity, about redistribution from stronger member states to weaker ones. But when we talk about a common goal, about our common competitiveness, it doesn’t necessarily mean that we have to redistribute again. So we must be able to agree.”

Optimistic man

Gentiloni himself admits: he is an optimistic person. Also when it comes to another discussion in Europe that also seems to be heating up: the one about reforming the budget rules. The Commission recently presented a proposal. In it, she wants to give member states more flexibility to meet the European standards of a budget deficit of no more than 3 percent and a maximum government debt of 60 percent of gross domestic product.

Criticism of the proposal has been harsh. German Finance Minister Christian Lindner is particularly fierce and demands that Member States with excessive debt reduce it by at least 1 percentage point annually. When there is so much criticism, says Gentiloni, “two conclusions are possible. In other words, the proposal was not good. In other words, the proposal was correctly balanced, so that you receive criticism from all sides, but you can reach an agreement through a joint effort. “Personally, I am fully convinced of this second approach.” Not least, says the Italian, because the alternative is for the EU to go back to enforcing the old rules. “That was not a good situation. In the end, there was broad consensus among member states that they needed to be adapted.”