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14 June, 2024
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Makis Keravnos voices concerns over geopolitical developments

Eurogroup and ECOFIN meetings tackle war-induced inflation surge

Panayiotis Rougalas

Panayiotis Rougalas

The global supply chain disruption and its economic impact on Europe and the world have raised concerns among Europeans.

The Eurogroup and the EU Council of Finance Ministers (ECOFIN) meetings on Monday and Tuesday respectively focused on the problems caused by the wars and the general turmoil in the region, which have triggered a new wave of inflation.

The Houthi attacks in the Red Sea have already disrupted the trade flow, and many companies have announced price hikes for several products.

The European Commission is widely concerned about how the economy's competitiveness is affected by geopolitical developments.

Finance Minister Makis Keravnos, speaking to "K" before entering the ECOFIN session on Tuesday, said that "there is a broad concern in the European Commission about how the economy's competitiveness is affected by geopolitical developments, energy prices, and raw materials".

He added that "these were the main topics of discussion at the Eurogroup on January 15, and the discussion will continue and be updated at the ECOFIN Council".

When asked about Cyprus' position at the Eurogroup on Monday, the minister said that "Cyprus is worried by the escalating geopolitical developments and hopes that there will be no further escalation in the region.

Geopolitical developments continue to threaten the competitiveness and the economy through their negative effects on the food and raw materials supply chain." Regarding energy, he said that "these geopolitical developments also create significant problems in energy supply and prices."

Energy Interconnection
"Cyprus depends on traditional fuels, so the country's effort is focused on the transition to a green economy," he said. "That is why we have included measures of 45% that address energy issues in the recovery and resilience programme, and it is important that there is also an energy interconnection for countries like Cyprus with a central European energy source, so that the country can deal with the issues that arise in the medium and long term on a more rational basis," he added.

Mr. Makis Keravnos summarized the focus of the discussions that took place at the Eurogroup, saying that "the discussions were centered on geopolitical developments, including the issue of the Houthis - Red Sea, which create problems in navigation, with negative effects on food prices, energy, raw materials, etc."

The finance ministers of the eurozone exchanged views on policies to address the negative effects of energy prices on the competitiveness of the eurozone on Monday, while on Tuesday the finance ministers represented Cyprus at the ECOFIN Council meeting.

Resilient economy
According to a statement from the Ministry of Finance, the ministers approved conclusions stating that the EU economy remains resilient despite a slowdown in 2023. In 2024, a gradual recovery in growth is expected, supported by strong labour market performance and the ongoing process of inflation easing, in an environment of increased uncertainty and risks due to geopolitical turmoil.

The Council emphasized the need to maintain a prudent fiscal policy in 2024, focusing on investment and reforms for the green and digital transition. In the Eurogroup's work, the International Monetary Fund (IMF) presented the results of the mid-term assessment of macroeconomic developments and prospects for the euro area economy, which are largely consistent with those of the European institutions, as well as the policy recommendations for its main economic priorities.

The ministers also received an update from the European institutions on the energy price developments and discussed their impact on the eurozone economy and especially on the competitiveness of European economies. In this context, they explored suitable policies, both at national and collective level, to enhance the resilience of the euro area economy against negative energy shocks.

The Finance Minister stated that Cyprus has stepped up its efforts to diversify its energy mix, ending its energy isolation. To this end, it is developing its own natural gas reserves with the aim of exporting them in the next four to five years, building the necessary infrastructure for the direct import of liquefied natural gas, and speeding up the development of electrical interconnections that will enable the faster integration of renewable energy sources into the electricity system and the export of electricity from renewable sources.

[This article was translated from its Greek original]

Cyprus  |  minister  |  finance  |  energy  |  economy  |  EU

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