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 the challenges facing the European economy.
The recovery throughout this year has been robust, with the European economy essentially having regained its pre-pandemic level of output in the third quarter. This momentum reflects the success of our coordinated policy support, the vaccine rollout, the introduction of structural reforms and the recovery funding that is now flowing across Europe.
The European Commission’s Autumn Forecast remains positive about EU growth momentum, though growing headwinds to the economic outlook are signalled. The Commission projects growth of 5.0 per cent this year and 4.3 per cent next year in both the EU and euro area. While the pace of recovery is varying, it is positive to note from the Forecasts that the Commission expects the EU to return to its path of economic convergence.
That said, the recent uptick in cases and the emergence of the Omicron variant present significant downside risks to the outlook. It is imperative that we continue work to understand this variant and respond as quickly as we can to mitigate its impact. However, our vaccination programmes have managed to substantially reduce the link between infections and hospitalisations. This means that any new wave of cases will have a smaller impact on economic activity than during previous waves.
Beyond the evolution of the virus, the economic landscape is also facing other challenges, such as inflation, rising energy prices and supply constraints. We will continue to monitor these issues closely and take action where necessary – as we have done with measures to tackle energy price inflation.
Throughout the pandemic, strong coordinated policy actions at EU and national levels have helped to limit the economic impact of Covid-19 and to support those most affected. We acted to protect incomes, support businesses and invest in our healthcare capacity and vaccination programmes. The stronger than anticipated recovery seen in many European countries this year is testament to the success of these policies.