\n<\/p>\n
The eurozone is well placed to ride out recent market volatility and its economy will grow this year and next, the eurogroup president said, denying that the currency union faces a crisis akin to that which struck a decade ago.<\/p>\n
Paschal Donohoe, who is Ireland\u2019s finance minister as well as chief of the pan-eurozone<\/a> group of finance ministers, said current circumstances were \u201ccompletely different from the kind of crisis environment we were in\u201d when the bloc was gripped by a spiralling sovereign debt sell-off in the early 2010s. <\/p>\n Donohoe said the euro area now had \u201cstronger architecture\u201d\u2009and \u201cdeeper foundations for our common currency\u201d. <\/p>\n Since the region\u2019s last debt crisis, the EU has bolstered its bank regulation with the creation of a pan-European supervisor and crisis-fighting infrastructure through a common resolution mechanism when lenders fail. The European Central Bank has new tools to buy government bonds, while lawmakers created a recovery fund backed by common debt during the coronavirus pandemic. <\/p>\n \u201cWe are all confident about our ability to navigate through the changes that are taking place,\u201d he said.<\/p>\n Surging inflation and fraying confidence, stemming in part from energy supply disruptions caused by Russia\u2019s full-scale invasion of Ukraine in February, have sparked fears that the eurozone is heading into a sharp downturn. As the ECB joins other policymakers in lifting interest rates, those fears have intensified. Italian and Spanish bond yields hit their highest levels for eight years last week as market jitters intensified.<\/p>\n Donohoe\u2019s remarks came as ECB president Christine Lagarde prepares to face questions from MEPs at the European parliament on Monday over its recent contrasting messages. <\/p>\n Lagarde had sounded tough on inflation after the central bank\u2019s governing council met in Amsterdam on June 9, when it decided to end eight years of negative interest rates and massive bond purchases. But last Wednesday, the ECB announced at an emergency meeting<\/a> that it was speeding up work on a new \u201canti-fragmentation instrument\u201d to prevent borrowing costs from surging disproportionately in weaker countries such as Italy. <\/p>\n German finance minister Christian Lindner suggested last week that the ECB had overreacted to the sell-off in bond markets. Lindner claimed the euro area was \u201cstable and robust\u201d and there was \u201cno need for any concern\u201d about some countries\u2019 borrowing costs rising faster<\/a> than others. <\/p>\n Although member states would have to commit themselves to credible plans for reducing public borrowing and managing inflationary pressures \u2014 the pace of price growth has topped 8 per cent \u2014 Donohoe insisted that a strong labour market pointed to economic expansion.<\/p>\n Donohoe highlighted employment growth as well as support from the EU\u2019s \u20ac800bn NextGenerationEU programme, which he said would sustain the region\u2019s economic expansion even if growth expectations have been cut.<\/p>\n Hiring, he added, was set to be a \u201cvery powerful source of momentum\u201d, as was the implementation of post-Covid-19 recovery plans. <\/p>\n The eurozone economy is set to grow 2.8 per cent this year and 2.1 per cent next year, according to forecasts this month from the ECB. But the central bank also said a downside scenario involving Russia cutting off all energy supplies to Europe would lead the bloc\u2019s economy to shrink 1.7 per cent next year. <\/p>\n