Europe has come a long way. Despite some challenges, the recovery is taking hold. The euro area has good recovery momentum, largely reflecting the successful vaccine rollout programme, as well as our sizeable, our timely and our effective policy response. The boost to reforms and investment is clearly taking shape now that recovery funding has started to flow, and that growth figures for the third quarter show that the euro area is nearly back to pre-pandemic levels. The urgency of our response during the pandemic has proved its merit, but we now turn to the future, and this was essentially the backdrop to our meeting today.
We started off with a discussion on macroeconomic developments and inflation, and I debriefed my colleagues on the international meetings that I attended on their behalf in my capacity as Eurogroup president.
I could summarise the discussion that we had under two different words. One of complexity and one of certainty. Certainty first. It has been the certainty of our policy response, both at national and EU level that has been crucial in dealing with the challenge of COVID-19 and its economic consequences. This disease has been and remains a challenge for our health systems, particularly as we see infections rising across Europe again, though this time we are much better prepared for it.
From a complexity point of view, we acknowledge much change taking place within economies as we speak. Bottlenecks that are being experienced in some sectors of our economy are contributing to changes in inflation. We’ve seen much change taking place in labour markets all over the European Union. While the increase in prices is largely due to temporary factors, they are a bit more persistent than anticipated but they are expected to fade away over 2022.
We also acknowledge the discussions that took place at the IMF and World Bank meetings, which focussed on issues linked to global supply chains and highlighted the importance of testing their resilience. COP26 is taking place as we speak as you all know. As you also know, EU finance ministers have jointly worked on the preparation of this important summit in the October ECOFIN Council when we adopted Council conclusions on climate financing and the EU is committed to tackling this challenge forcefully.
Digital euro was our next topic. This is a longer-term project. It was our first substantive discussion on this issue at ministerial level, following on from the work plan we agreed in July and the launch of the ECB’s investigation. This time round, we focussed on the policy objectives and uses of the digital euro in the context of the fast pace of digitalisation in the global economy. We agreed there are a number of important developments and strategic considerations which justify that we continue in our investigation of this project, primarily as consumers and firms turned increasingly to electronic payments, we want to ensure that our citizens and our companies continue to have access to public money in a range of scenarios.
The digital euro should also aim to foster an efficient and innovative payment system by providing the backbone and infrastructure for pan-European payment solutions. So we will continue with our discussion on this project; and a little further down the road we will discuss and express our views on the relevant policy issues we identified in June, ranging from privacy concerns to financial stability considerations and to the broader business model for the deployment of the digital euro.
At this point, we moved into Eurogroup in an inclusive format and started off with the important issue of the review of the economic governance framework recently launched by the Commission. We discussed how the Eurogroup would be involved in the governance review in the coming months, and we’ve agreed on a work plan for doing this. We had an initial discussion on how the Eurogroup could address challenges regarding the coordination of fiscal and economic policies within the euro area. And we emphasise the role that fiscal policy does have to play in addressing these challenges.
We all agreed on the importance of an effective economic governance framework and of the need for discussion on overarching issues, including national ownership, simplification and enforcement. Overall, our efforts will be about how we can strike a balance between fostering growth-friendly investments and ensuring fiscal sustainability. We aim to come back to this governance framework on several occasions in the coming months.
Finally, we moved on to Banking Union, where there was good news to report. The institutions presented the main results of the bi-annual monitoring of risk reduction in the Banking Union. We continue to make good progress on the path towards risk reduction in the banking system. The institutions cautioned us that the impact of the pandemic continues to be difficult to pin down precisely, so we will continue to be vigilant and we are going to come back to the topic of Banking Union in December.
The technical work to introduce the common backstop to the SRF has now been completed and we reviewed where we are with all member states under work to ratify the ESM treaty and the amending agreement to the Intergovernmental Agreement, which will take the final procedural step to put the backstop in place at the beginning of 2022. That will be an important day on the Banking Union project, and I’m confident that it will spark momentum for further progress.