Debate: Keep the bills down: social and economic consequences of the war in Ukraine and the introduction of a windfall tax
Date: TUESDAY, 18 OCTOBER 2022
Speaker: Paolo Gentiloni
Language: EN

This global external shock is asymmetric in terms of its consequences. First of all, for low—income countries that have huge, huge debt and food—insecurity problems, but also among advanced countries, the EU is the most affected, by a large margin. We have risks for our competitiveness and risks of fragmentation, and social risks, of course, which we are discussing today. So we will assess the evolution of this crisis – I will present our economic forecast on 11 November, but for sure, the economy is slowing down and this multiple crisis has to be addressed. As you know, the Commission will adopt later today a new energy package. I have to say, it is a huge package. Gradually, we are finding common ways among Member States. Of course, it will not be the last. I have three key words for the coming weeks and months on my side and the Commission side. The first key word is coordination because of course all the national measures are facing the social consequences of this crisis. We know that the European family is spending 20% of their income on food and 15% of their income on energy, so 35%, but this is an average. Of course, we have several countries and several low—income households where food and energy are near to 50% of family expenditure. And the increase that we are looking at is putting these households in a very dangerous situation, and the same is happening for, especially, small and medium companies. So we need to react to support, but also to ensure that this support does not undermine monetary policy efforts because reducing inflation is in the common interest and it is especially in the common interest of the most vulnerable households. So it’s an interplay that’s not easy because we need, of course, a monetary policy. We don’t need exactly the same monetary policy in all areas of the world because Europe has particular roots for its own inflation and needs a particular reaction, but this is for the ECB to decide, and our fiscal coordination should complete monetary policy and not compete with it. My second key word is solidarity. From a social point of view, many things were raised in this discussion and I think that our solidarity contribution on windfall profits is a first step. It is connected to energy for the legal reasons that you know very well, but this doesn’t mean that Member States could not go further to address these issues. Solidarity also means looking at the risks of fragmentation, and we have the same concern that we had during the pandemic because, of course, we have different fiscal space in different countries and we should discuss the possibility of looking to further possible common financial tools based on loans to address these risks of fragmentation. Finally, competitiveness – because the risk that there is in the asymmetric consequences of this crisis is for Europe to lose competitiveness. So our two main commitments, first, on the clean energy transition, and second, on implementing reforms and investments of Next Generation EU are not only important because we have to implement what we decide, but they are also important if we want to avoid a difficult situation for the Union in terms of global competitiveness.