The war in Ukraine and the sanctions imposed on both Russia and its counter-sanctions will slow down the economic growth of the European Union (EU), but will not stop it, says Valdis Dombrovskis (JV), Executive Vice President of the European Commission.
“We have made the first assessments. If the winter forecast was that economic growth in the EU would be 4% this year, it is now clear that growth will be lower but not complete. Therefore, it can be said that the current situation will slow down, but completely will not stop, “said Dombrovskis.
He emphasized, however, that this was a quick assessment of a very uncertain situation that was continuing to develop. A more detailed assessment is expected in the EC Spring Economic Forecast.
The EC has also not yet assessed the impact on different EU Member States, but it is already clear that the impact will be very uneven across countries and sectors of the economy.
“Of course, it will be necessary to assess the possible solutions both in the Member States and at the EU level. Work on these issues is already underway and there will be new EC proposals on the energy situation on Tuesday,” Dombrovskis said.
He recalled that the so-called opt-out clause continues to apply this year, when EU Member States are not set quantitative deficit targets, which allows room for maneuver from a fiscal policy perspective. “Covid-19 was also a temporary state aid framework during the crisis, giving countries more flexibility with regard to state aid measures. We are now preparing a similar temporary state aid framework for the Russia-Ukraine war and all its consequences. So we see how can the effects on the European economy be mitigated, “said Dombrovskis.
The EC is also currently assessing how the Recovery and Sustainability Mechanism can be used to address this crisis. Dombrovskis also pointed out that the restrictions imposed by Covid-19 have already been lifted or reduced in the EU for the most part. This means that they no longer have an impact on the economy, and Member States can use the money to deal with a pandemic to mitigate the effects of the war crisis.
“Of course, we will have to assess the resources available to the EU. It is clear that several years ago a decision was taken on the EU’s multiannual budget for 2021-2027. We are making extensive use of them when deciding on various additional aid packages However, the situation is such that we will have used up all the available margins in the first two years, so it will be necessary to decide what the next steps are. “It is clear that these issues will have to be taken seriously in the near future,” Dombrovskis said.
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