Luxembourg Supports EU Commission's €5bn Aid to Ukraine

On Friday 9 and Saturday 10 September 2022, Luxembourg's Minister of Finance, Yuriko Backes, participated in the meetings of the Eurogroup and the informal Economic and Financial Affairs Council (ECOFIN) in Prague, Czech Republic.

During the Eurogroup meeting, the nineteen finance ministers from the euro zone first discussed the latest economic developments, the consequences of rising energy prices and the best way forward in budgetary policy in an increasingly difficult context.

Minister Backes commented: “The macroeconomic situation is marked by immense uncertainty and the risk of a slowdown in growth is very real. To meet the current challenges, close coordination of our budgetary policies at Euroepan Union (EU) level and joint action are essential. The financial implications of the support measures that prove necessary for citizens and businesses must be well controlled so as not to harm the health of our public finances in the long term".

Subsequently, the finance ministers took stock of the digital euro project. Currently, the Eurozone is in the second year of the European Central Bank's investigation phase, and in a relatively advanced state of digital euro design compared to other jurisdictions pursuing comparable projects.

Ministerial consultations continued in Prague on the appointment of the next Director General of the European Stability Mechanism (ESM) for which former Minister Pierre Gramegna is a candidate, although they have not yet reached a definitive result pending a broader consensus among Member States can be achieved.

The war in Ukraine and its consequences were at the forefront of discussions at the informal ECOFIN Council. The 27 ministers had an exchange of views on the economic and financial repercussions more generally and, more specifically, on the financing needs of Ukraine itself. It is in this context that the finance ministers adopted a declaration in which they pledged to support the European Commission's proposal to grant new financial aid of up to €5 billion to Ukraine.

The ministers also exchanged views on the avenues to follow in the context of the future reform of the Stability and Growth Pact for which the European Commission should soon present guidelines.

In this context Minisnter Backes said: “Sustainably sound public finances are crucial to be able to react to crisis situations. A realistic and credible Stability and Growth Pact will play a key role in guiding Member States in formulating such fiscal policies. Given the generational challenges we face in tackling the double ecological and digital transition, it is however important to ensure through budgetary rules that public investments of a sustainable nature are preserved. Luxembourg will be involved constructively in the upcoming discussions on the reform of the Pact, while insisting that the future budgetary framework ensures equal and fair treatment between all Member States".

Finally, the Czech Presidency invited the Ministers of Finance to discuss possible developments in the area of ​​direct taxation within the EU and more particularly on the question of the possible need for harmonisation in this area. Minister Backes underlined in this context: “In recent years a lot of progress has been made in the field of taxation with the support of Luxembourg. At this stage, it is important that we make rapid progress in the implementation of pillar 2 of the OECD's inclusive framework concerning minimum effective taxation. As for harmonisation in the area of ​​direct taxation, it should not be seen as an end in itself. While taking into consideration the existing rules, it is necessary to assess the impact of any new measure for the Member States and to determine its relevance for the internal market according to the principles of subsidiarity and proportionality".