Treasury Secretary Paschal Donohoe will chair a meeting of EU and US finance leaders in Washington this morning to discuss the risks to the global economy from the energy crisis, inflation and Russia’s deepening war in Ukraine.
Washington officials are also concerned that the budget-related turmoil in UK financial markets could be contributing to global inflation and dampening sluggish growth.
More than 20 EU finance ministers are expected to attend the hour-long meeting with US Treasury Secretary Janet Yellen on the sidelines of the annual International Monetary Fund-World Bank winter meeting.
The head of the European Central Bank (ECB), Christine Lagarde, will be present, as will the head of the IMF and three EU commissioners, including Mairead McGuinness from Ireland.
The meeting comes after annual US core inflation – excluding energy and food – climbed to a four-decade high of 6.6 percent in September and headline inflation came in at 8.2 percent.
It comes on the same day that the Bank of England is due to withdraw the emergency bond-buying program it launched after new Chancellor Kwasi Kwarteng’s underfunded mini-budget caused investors to flee, putting pressure on exercised the cash holdings of UK pension funds.
The IMF this week forecast a slowdown in global growth and recessions in Germany, Italy and Russia in 2023 as energy-driven inflation lasts longer. It also warned that the UK’s partially reversed spending plans could “complicate” its fight against inflation.
Dutch central bank governor Klaas Knot, who was in Washington for IMF meetings, called for “at least two more significant” ECB rate hikes next year to curb soaring prices.
He spoke of “steps to 75 basis points” to bring inflation down to the ECB’s 2 percent target. The key interest rate of the ECB has risen to 1.25 percent since July.
ECB Governing Council member Pierre Wunsch told CNBC he “wouldn’t be surprised” if interest rates “have to rise above 3% at some point”.
The ECB and IMF have warned EU governments not to overspend to combat the rising cost of living, saying it could fuel inflation further.
EU countries are at odds over whether to seek to stem rising energy costs through a gas price cap, with Energy Secretary Eamon Ryan saying this could have “adverse consequences” and he didn’t think it would happen at a heads of state summit next week – and heads of government would come to an agreement.
This was announced by EU Vice President Vera Jourova Irish Independent this week that “nothing is off the table” but that the EU must act as one on energy prices.
“We all know that action is urgent, but we must remember that we must act together and this must be based on a broad consensus.”
Today’s EU-US meeting is the first of its kind outside of Europe. Ms Yellen attended a similar meeting in Brussels in July 2021.
Mr Donohoe organized today’s meeting in his capacity as head of the 19-member Eurogroup.
He also attended a meeting of G7 finance ministers this week. He will lose access to G7 meetings when he resigns as finance minister later this year and loses his seat in the Eurogroup.
https://www.independent.ie/business/irish/paschal-donohoe-to-chair-meeting-of-eu-and-us-finance-chiefs-in-washington-today-42065327.html Paschal Donohoe chairs the meeting of EU and US finance heads in Washington today