Dáil Éireann Debate, Tuesday - 9 November 2021
130. Deputy Bernard J. Durkan asked the Minister for Finance the discussions he has had with his EU colleagues in the context of addressing the issue of inflation throughout the European Union; if corrective measures are required or are likely to be required in the short to medium-term; and if he will make a statement on the matter. [54351/21]
View answer268. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he expects the Eurozone countries to address the issues such as inflation now emerging throughout the EU; and if he will make a statement on the matter. [54718/21]
View answer279. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he and his EU colleagues continue to monitor issues likely to impact on this and other European economies with particular reference to price hikes which appear to have emerged with increasing frequency; the extent to which he and his colleagues monitor their origins; and if he will make a statement on the matter. [54730/21]
View answerI propose to take Questions Nos. 130, 268 and 279 together.
At both the ECOFIN and Eurogroup meetings, my fellow Ministers and I work alongside the European Commission and the European Central Bank to take stock of the latest economic situation, including inflation developments throughout the EU.
The economic recovery throughout this year has been robust, with recent indicators pointing to strong growth. This momentum reflects our coordinated policy support, successful vaccine rollout and the boost to reforms and investment now that recovery funding has started to flow. Indeed, growth figures for the third quarter show that the euro area is nearly back to pre-pandemic levels of output.
However, the sharp rebound in global demand and persisting production and transport disruptions has brought elevated rates of inflation. The latest Eurostat estimates point to euro area annual inflation of 4.1 per cent in October. This was largely driven by energy inflation, which increased to an estimated 23.5 per cent. Pandemic-related effects, such as the impact of temporary VAT reductions, and technical factors, such as measurement issues, added further volatility.
The latest figures point to inflation, including energy prices, remaining high over the course of the year, before gradually easing next year. The ECB projects inflation to average 2.2 per cent this year and decline to rates of 1.7 and 1.5 per cent in 2022 and 2023, respectively. Both the Commission and the ECB are confident that elevated rates of inflation are linked to temporary factors, supply-side constraints and the recovery in demand as our economies reopen.
As the Deputy is aware, the ECB has an independent mandate to maintain price stability, and uses the range of monetary policy instruments to target an inflation rate of 2 per cent over the medium-term. The ECB has stated that the outlook for inflation over the medium-term remains subdued. Core inflation – which strips out energy and non-processed food inflation – was 2.1 per cent in October.
That said, energy prices can entail wide-ranging consequences for inflation and raise costs for businesses and families. In recognition of the social impacts, many Member States have introduced targeted measures to protect vulnerable households from energy poverty. In framing Budget 2022, I was conscious of these cost of living pressures and announced a range of measures including targeted social welfare initiatives.
In addition, at an EU level, the Commission has issued a Communication on Tackling Rising Energy Prices, and the matter was discussed at various Council configurations. The Communication emphasises the broad nature of the impact and policy response.
In short, my fellow Finance Ministers and I all agree that this is an important issue and that we need to continue monitoring inflation and energy price developments and the potential implications of these for our economies.
