Eurogroup chief Pierrakakis warns fiscal policy must not contradict ECB on inflation
Eurogroup chief Kyriakos Pierrakakis said fiscal policy must not contradict the European Central Bank's effort to tame inflation as the central bank prepares to raise interest rates. Rome is pressing for flexibility tied to rising energy costs from the war.
Euronews reported that Eurogroup chief Kyriakos Pierrakakis said member state finance ministers must maintain discipline aligned with European Central Bank policy. In an interview before the Council of Ministers, Pierrakakis said exemptions requested for energy and defence spending must stay within the rules framework. At the Brussels meeting, Italy, Greece and Romania raised flexibility requests.
The report noted that markets are pricing a 25 basis point rate hike at the ECB Governing Council meeting next week. The Eurogroup said the Commission should reassess the new fiscal rules framework. EU Commissioner Valdis Dombrovskis said that without a sustainable fiscal trajectory, the ECB will find it harder to meet its medium-term inflation target.
According to Reuters, the euro closed at 1.082 against the dollar following the comments. The Italian BTP-Bund 10-year spread tightened to 195 basis points. Citi European macro economist Christian Schulz said Pierrakakis's message amounts to a warning to member states on policy coordination. This is not investment advice.
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