Europe’s economy is having to navigate an environment of higher capital costs, energy pressures and greater investment needs, according to the Minister of National Economy and Finance and president of the Eurogroup, Kyriakos Pierrakakis. In an interview with Stefan Grobe on Euronews’ programme «Europe Today», he noted that «the era of cheap money is over», as average 10-year bond yields have risen from 1.1% in 2016 to around 4% today.
He explained that this shift is linked to a range of factors, including budget deficits, higher energy and social spending, and greater investment needs. He also stressed that European finance ministers are in constant contact to coordinate their responses to developments.
Speaking about the Greek crisis and the lessons Europe can learn from it, Mr Pierrakakis focused on the fiscal adjustment achieved by countries that took part in bailout programmes. He noted that five European countries now have a budget surplus in nominal terms: Denmark and the four countries that implemented bailout programmes in the previous decade.
Support for citizens
«We managed to take difficult decisions. Some late, others as quickly as we could. And today we are in a position of fiscal strength», Mr Pierrakakis said, adding that resilience is crucial to addressing major challenges.
He placed particular emphasis on the impact of the energy crisis and inflation, noting that the 4% figure recorded, according to Eurostat data, was largely due to rising energy prices.
The Eurogroup president said governments were seeking to coordinate their responses in line with each country’s fiscal capacity. «Our shared goal is to support citizens as they face the challenges of a particularly difficult winter», he stressed.
He said the most sustainable response lies in investment in energy infrastructure, while recognising the need for temporary, targeted measures. These, he said, should be tailored to citizens’ needs, with particular emphasis on the most vulnerable.
Defence spending
On defence spending, Mr Pierrakakis stressed that the challenge is not only the amount of funding allocated, but also how it is used. «We must make the best possible use of every euro we spend. We must ensure that every euro delivers the greatest possible value and has the greatest possible impact», he said.
Explaining the significance of NATO Secretary-General Mark Rutte’s participation in the meeting of finance ministers, he said that greater investment in defence also requires coordination among finance ministers, who are responsible for funding the related spending.
He also noted that Europe lags behind in joint defence procurement and investment in research and development, and needs greater interoperability between defence systems. The national escape clause for defence spending, he said, reflects the new reality that has emerged since the Russian invasion of Ukraine.
European reforms
Asked about the structural reforms needed in Germany, the Eurogroup president was careful not to present himself as someone who would advise the German government, noting that the country has considerable productive capacity. «Europe needs Germany, and Germany needs Europe», he said, linking the growth prospects of member states to progress on the Capital Markets Union, the Banking Union and energy cooperation.
Finally, speaking about the succession at the European Central Bank (ECB), Mr Pierrakakis said the timetable envisages a formal decision by December, with leaders taking the decision.
He explained that the process concerns three positions: the president, the chief economist and one seat on the Executive Board. Christine Lagarde has announced that she will remain in her post until 7 February, while the Eurogroup will help facilitate the process.