The war launched by Vladimir Putin against Ukraine will have significant economic consequences in the European Union. There are no figures or estimates yet. They will not arrive until mid-May, when Brussels presents its spring economic forecasts, but both the European Commission and the Eurogroup have warned that the invasion has added a more element of “uncertainty & rdquor;which adds one more risk to ongoing supply chain issues, rising energy prices and inflation that will remain elevated longer than anticipated.
“The impact will not be insignificant. There will be an impact but I am convinced that if we react energetically and united we can cushion the impact of the war on our economies and avoid a total derailment of the recovery & rdquor ;, has valued the commissioner for economic affairs, Paolo Gentiloni, asking to react as quickly as with the covid crisis. “It is clear that it is going to have economic consequences for the EU and we have to mitigate them, but it is the price to pay to defend democracy and peace,” added the Vice President of the Commission, Valdis Domvrovskis.
The Eurogroup’s response to this uncertainty is to maintain “agile and flexible fiscal policies” and adjust them if the situation requires it. “They have to remain agile and flexible and we are ready to adjust them to changing circumstances as necessary & rdquor ;, say the ministers of the euro zone in a statement on fiscal orientations for 2023 in which they commit to study “urgently & rdquor; the options that the European Commission will present “to deal with the impact of the increase in energy prices” on citizens and companies, and particularly on the most vulnerable and on SMEs.
solid fundamentals
Despite the risks from the war in Ukraine, the countries of the Eurozone also maintain that the fundamentals of the economy “they are solid”, that the support measures have been well calibrated, that the monetary and budgetary policies have facilitated a rapid recovery and that all the countries of the euro zone will have recovered their level of GDP before the crisis by the end of the year. For this reason, they consider that the time has come to move from an expansive fiscal position to a neutral one in 2023, although with differentiated budgetary strategies.
For example, and with a view to preserving debt sustainability, countries with high public debt -as is the case with Italy, Spain or Greece– They will have to start next year “a gradual fiscal adjustment to reduce indebtedness, if conditions allow it”, says the Eurogroup about an adjustment that must be integrated into a credible medium-term strategy that continues to promote investment and the necessary reforms to make the double transition a reality and improve the composition of public finances. On the contrary, countries with low and medium debt levels they should give priority to expanding public investment when necessary.
Impact in Spain
Everything will depend on how the war evolves and the final impact on the economic evolution of the Eurozone. Although she also considers it premature to make estimates, the first vice president and economy minister Nadia Calviño has highlighted that Spain is one of the less exposed and It will be “one of the countries for which the least economic impact is expected & rdquor ;. Even so, it has also warned of the impact in terms of rising energy prices, raw materials and disruption in the important supply chains for the agri-food sector and has once again called for the decoupling of gas prices from electricity.