BRUSSELS (Reuters) – Eurozone governments should continue spending next year to support post-pandemic recovery, albeit to varying degrees depending on debt levels, and using cash from the EU Recovery Fund to boost investment, the said European Commission on Wednesday.
“For the euro area we are calling for a moderately supportive fiscal policy course for 2022 with a focus on investments, equipping workers with new skills and securing the solvency of profitable companies,” said EU Economic Commissioner Paolo Gentiloni.
The Commission said 2022 will be the year European countries move from crisis response to support reconstruction, in particular with money from the EU Recovery Fund, which will fund 24% of all reconstruction support operations.
The Commission expects governments to spend 40% of the grant component for a total of € 338 billion over the next year.
“The Reconstruction and Resilience Facility is currently being implemented in 22 EU countries that have set themselves the goal of spending around 40% of their total allocations in 2022 alone,” Gentiloni said at a press conference.
However, the Commission noted that fiscal support should take into account each country’s public debt and that some countries, such as Italy with its 160% of GDP, should limit the government’s current expenditure.
The Commission said 12 euro area countries had macroeconomic imbalances that needed in-depth investigation, three of which – Cyprus, Greece and Italy – were excessive.
Aside from high indebtedness in all three countries, Italy suffered from weak productivity growth, Greece had high unemployment, bad credit and low potential growth, and Cyprus had bad credit and a large current account deficit.
(Reporting by Jan Strupczewski)