The eurozone and the recession, a story that risks repeating itself. After that of 2008, after the economic shutdown caused by the health crisis generated by the Coronavirus, there is the Russian-Ukrainian war and everything that this brings with it to bring Europe back into the quagmire of the slowdown in productivity and the reduction of consumption and credit access. A scenario that no one feels to exclude or hide anymore, starting with Paolo Gentiloni. “Uncertainty remains exceptionally high and the risk of a recession is increasing,” admits the Economy Commissioner. Almost everything depends on the performance of the energy markets. “The outlook would worsen considerably compared to our baseline if we were to see a complete cut of Russian gas”, which has been preparing for some time now and which, after Gazprom’s stop, is now a reality to be reckoned with.
The call for the States is to implement the recovery plan. “It is fundamental”, clarifies once more the Italian component of the college of commissioners, for what sounds like an invitation to his country, where the electoral campaign and, even more so, the new structure that will provide the vote on 25 September, risks in the best of cases to slow down the work if not even to call them into question. “But there is not only the implementation of the recovery plan”. We need prudence, and we must not give in to the temptation to spend without criteria. The Stability and Growth Pact is still suspended, but “we must ensure that fiscal policies do not increase inflationary pressure”, otherwise the risk of recession could automatically translate into stagflation.
Gentiloni breaks down a veil that Brussels had not hitherto taken the trouble to eliminate. “Yes, I think it is pretty obvious that there is a risk of a recession,” acknowledges a senior European official who, however, asks to remain anonymous. “What is happening, especially on the energy front, has an impact on the economy, and the risk of a recession cannot be ruled out.” A widespread concern that Gentiloni understands can no longer be ignored.
The economic situation and its deterioration will be the subject of confrontation by economic ministers this Friday. Prague hosts informal Eurogroup and Ecofin meetings which will primarily serve to try to keep the tiller to starboard. The watchword is coordination. We need a common response, we must avoid that the States each proceed on their own. Gentiloni, on the other hand, insists on “debt sustainability”, and anticipates that in the reasoning underway for the reform of the stability pact, “reform and investment commitments are envisaged to allow for a longer period of budget adjustment”. One way to prevent changes in majorities and governments from putting their foot down and rewriting agendas. Another message for Italian politics. “This would also be a way to ensure that fiscal sustainability and growth can reinforce each other,” in times of recession upon us.