As Paschal just said, we started our meeting discussing the report of the European Fiscal Board, it was the last time for Niels Thygessen, so we congratulated him for his extraordinary work. We concur with the outlook described in the report. The euro area economy is gradually picking up, with consumption emerging as a key driver. Unemployment remains historically low. Moderating inflation and rising real wages mean families are starting to recover purchasing power; and investment is expected to benefit from improving credit conditions and the continued deployment of the Recovery and Resilience Facility.
So despite geopolitical uncertainty, which is still the main risk to the outlook, the conditions for an acceleration of economic activity which we mentioned in our recent Spring Forecast remain in place for the second half of this year and next year.
In this context, prudent fiscal policies are needed in the euro area as a whole and especially in those Member States with high debt and deficit levels.
Looking to next year, the implementation of the new fiscal rules will result in a fiscal stance that remains overall restrictive and contractionary. This is the message of the Eurogroup Statement, which we fully support. This is consistent with the need to continue to enhance fiscal sustainability and to support the ongoing disinflationary process. How restrictive will depend on the length of the adjustment period chosen by Member States in the national medium-term fiscal-structural plans they will submit in autumn.
Of course at the same time, given the uncertainty, fiscal policies must be prepared to adapt quickly. So prudence in spending, but readiness to respond to risks if they materialise.
The Bulgarian Finance Minister updated us on the implementation of the post-ERM II entry commitments. In the Commission assessment Bulgaria has made progress on most of the remaining elements of these commitments, but further efforts are needed especially to improve the governance of state-owned enterprises.
Finally, we had the pleasure of having Enrico Letta with us. I want to praise his work not only for the quality of his report but also for the method. Of course a lot of political will is needed to make the progress that the Letta report is signalling.
This is an enormous challenge. Part of the challenge is exactly to fill the funding gap. Estimates vary, but the order of magnitude of our investment needs in the green and digital transition, in energy security, in skills, in defence, is enormous.
It's clear the private sector needs to do the heavy lifting. Because today we are not suffering from a lack of public investment, as was the case after the global financial crisis. Public investment has increased, but private investment has lagged behind. So this is why for us Capital Markets Union is such a priority.
Of course, the public and private sector must work together. We can do more to exploit these synergies. And finally, we must develop an appropriate toolkit at EU level in terms of common instruments and financial firepower to meet our common challenges. But as Letta told us, there is a momentum and it's now up to Finance ministers to bring it forward.
