European economic growth will continue in 2022, says Donohoe

The European economy will continue to grow in 2022 notwithstanding the shock imposed by the outbreak of war in Ukraine, Minister for Finance Paschal Donohoe has said.

Mr Donohoe, who is president of the Eurogroup of EU finance ministers, has said that there was strong momentum in all euro economies in the run-up to the outbreak of the war, and that will continue albeit at a lower pace.

“Our expectation is that the economy of the Eurozone will grow at a pace that is different and slower than what we would have anticipated.

“There (has been) a recovery with real momentum with virtually every economy in the euro area due to get back to their pre pandemic levels of grown by the end of this year,” he said.

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Mr Donohoe was speaking at the Palace of Versailles, France, where he is briefing EU leaders on the state of the economy in the euro area, as part of a two-day summit hosted by French president Emmanuel Macron.

“We are now in a heightened state of uncertainty due to the economic consequences of the awful war in Ukraine,” Mr Donohoe told reporters as he arrived at the Palace.

“However, we do have an economic recovery that has a strong momentum going into our latest challenge. The economy (in the euro area) will still grow.”

He said the Eurogroup would issue a statement next Monday setting out the budgetary principles for the rest of this year and for all of 2023.

“We will be indicating that due to the uncertainty that is there we stand ready to change our plans during the year to respond back to the situation which is changing by the day,” he said.

Asked about the efforts by him and Taoiseach Micheál Martin to gain more flexibility in EU laws regarding VAT on fuel, he said the Government has made a case at a time when Ireland is facing a “unique set of challenges”.

He said they had both made further cases this week and said it would not be appropriate at this stage to say if and when the request would be granted.

Mr Donohoe would not be specific on additional sanctions on Russia that might be agreed at a European level but said that it was the EU’s intention to impose “massive sanctions to undermine the ability of Vladimir Putin to prosecute his war. We need to make sure those sanctions are fully implemented. All of the Ministers are playing our part.”