Bernard Durkan (Kildare North, Fine Gael)
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68. To ask the Minister for Finance the extent to which he unilaterally or in conjunction with his European Union colleagues might seek to tackle inflation on a Europe-wide basis; and if he will make a statement on the matter. [9486/22]

Bernard Durkan (Kildare North, Fine Gael)
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257. To ask the Minister for Finance the extent to which he has had dialogue and or expects to so do in the future with his European Union counterparts regarding the Europe-wide threat of inflation and its possible consequences for European stability. [8371/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 68 and 257 together.

At both the ECOFIN and Eurogroup meetings, my fellow Ministers and I work alongside the European Commission and the European Central Bank to take stock of the latest economic situation, including inflation developments throughout the EU.

The latest Eurostatestimates point to euro area annual inflation of 5.1 per cent in January. This was largely driven by energy inflation, which increased by an estimated 29 per cent. Pandemic-related effects, such as the impact of temporary VAT reductions, and technical factors, such as measurement issues, added further volatility. Core inflation – which strips out energy and non-processed food inflation – was 2.5 per cent in January.

HICP inflation moderated slightly from 5.7 per cent to 5.0 per cent in Ireland in the same period.

The latest figures point to inflation, including energy prices, remaining high over the near-term, before gradually easing later this year. The ECB projects inflation to average 3.2 per cent this year but to decline to rates of 1.8 per cent in both 2023 and 2024. Both the Commission and the ECB are confident that elevated inflation is largely linked to temporary factors, including supply-side constraints and the recovery in demand as our economies reopen.

As the Deputy is aware, the ECB is an independent institution with a mandate to maintain price stability, defined as around 2 per cent over the medium-term. The ECB currently expects inflation to fall slightly below 2 per cent by end-2022.

That said, energy prices can entail wide-ranging consequences for inflation and raise costs for businesses and families. In recognition of these potential social impacts, many Member States have introduced targeted measures to protect vulnerable households from energy poverty.

Ireland is one of these Member States. In framing Budget 2022, I was conscious of these cost of living pressures and announced a range of measures including targeted social welfare initiatives. Last week, Minister McGrath and I announced a suite of further supports to aid households and to target the main underlying problem – higher energy prices. This is in addition to the electricity credit for households announced late last year.

In addition, at an EU level, the Commission has issued a Communication on Tackling Rising Energy Prices, and the matter was discussed at various Council configurations. The Communication emphasises the broad nature of the impact and policy response.

In short, my fellow Finance Ministers and I all agree that this is an important issue and that we need to continue closely monitoring inflation and energy price developments and the potential implications for our economies.