Paschal Donohoe is “absolutely confident” that the eurozone is not headed for a recession

Finance Minister Paschal Donohoe says a euro-zone recession is unlikely despite a recent bond market crisis and rising energy prices amid the Russian war in Ukraine.

We still expect to be able to see the euro area economy grow this year and next,” said Mr Donohoe, who also chairs the 19-member Eurogroup of finance ministers.

“We are absolutely convinced of the resilience of the euro area.”

The European Commission’s chief economic officer, Paolo Gentiloni, pointed to the EU growth figures for the first quarter, which he said were “more positive than expected”.

But the data was inflated by a 10.8 percent increase in Ireland’s gross domestic product, causing EU activity to rise 0.7 percent and euro-zone GDP to expand 0.6 percent – double original estimates. Without Ireland, eurozone GDP would have been 0.3 percent.

The EU recently cut its GDP forecast for 2022 by almost half due to the war in Ukraine.

“Obviously we don’t have the level of growth that we projected for 2022 – it will be much, much lower – but that doesn’t mean we’re in for a recession,” Mr Gentiloni told reporters in Luxembourg on Thursday.

“Of course the environment is challenging, but I don’t think it helps to have catastrophe prophecies.”

His comments come as Russia’s state utility Gazprom halted gas flow to Europe via the Nord Stream 1 pipeline for the second straight day over “maintenance issues”.

Dutch wholesale gas prices – a European benchmark – rose 30 percent on Thursday afternoon.

Meanwhile, investors dumped EU and US government bonds after a surprise Swiss rate hike and an expected 0.25% rise in UK interest rates.

The move comes the day after the US Federal Reserve hiked interest rates by 0.75 percent to curb inflation.

At an emergency meeting on Wednesday, the European Central Bank pledged to accelerate a new “anti-fragmentation tool” to curb rising yields on Italian, Greek and other peripheral euro-zone bonds.

But German and Austrian finance ministers have urged governments in those countries to do more to control spending and borrowing, and not just rely on the ECB.

“Get your budgets in order, that’s the message,” said Austrian Finance Minister Magnus Brunner. “The ECB must have more opportunities, and the ECB can only have opportunities if all budgets in all member states are in order.”

German Finance Minister Christian Lindner said there was “nobody to be nervous” about rising bond yields and said sound public finances are the best way to restore market confidence.

“The ECB has a responsibility to fight inflation, but we must live up to our responsibilities as finance ministers.

“The responsibility of us, governments, is to reduce the deficits in our budgets and get back on a reliable deleveraging path. This allows us to maintain market confidence and our fiscal stability.”

The Governor of the Central Bank of Ireland, Gabriel Makhlouf, said this week that an Irish recession was “unlikely” given the buoyant job market and high tax revenues.