MNI BRIEF: Euro Area 2025 Fiscal Stance Now Seen Neutral

The euro area fiscal stance now looks likely to be "close to neutral" compared with earlier estimates that it would be "mildly contractionary", as a result of increases in defence spending, a senior EU official told reporters on Tuesday.

"On which side it eventually falls will depend on absorption issues, whether countries are able to ramp up their spending plans within this year and this is somewhat difficult to forecast. In the context of defence we are dealing with a fast-moving landscape, where we are trying to ramp up production capacities that were not there. We are seeing rapidly increasing activity in that space but how fast it can translate into GDP numbers and actual expenditure is still quite unclear," the official said, adding that the Eurogroup would publish an updated assessment of the fiscal stance at its meeting in Brussels next month. (See MNI INTERVIEW: France Ready To Join SAFE Loan Facility)