In 2025, the European Union Intellectual Property Office received 327 735 new applications for EU trade marks and EU designs. It is the highest annual number of intellectual property (IP) applications since the Office began accepting filings in 1996.
Overall, it represents a 7.8% increase compared to 2024, surpassing the previous record set in 2021 (313 928 applications received)
Trade Marks Drive Overall Growth
European Union trade marks (EUTMs) accounted for the largest share of applications in 2025. The EUIPO received 196 886 EUTM applications, an increase of 9.1% compared to 2024.
Applicants based in EU Member States drove this growth, with filings rising by 9.4%. The 27 EU countries together accounted for over 57.5% of all European Union trade marks applications received. Germany (12.7%), Italy (6.9%) and Spain (6.4%) were the most active countries.
Outside of the EU, applications from China also continued to increase, growing by 13.3% (accounting for almost 16% of all EUTMs). The USA (9%) and the UK (4.2%) complete the top three.
Regarding products and services, ‘advertising and business management’, ‘electrical apparatus’ and ‘technological services’ are among the main ones requested. Followed by ‘education and sporting activities’ and ‘clothing and footwear’.
Together, these trends confirm the continued relevance of the EUTM system for businesses operating both within and beyond the European Union.
Design Filings Reach New Highs
Demand for EU designs (EUDs) also increased in 2025. The EUIPO received 130 849 design applications, marking a 6% rise and the second consecutive year of record-breaking figures.
For the first time, applications from outside the EU accounted for the majority of design filings, representing 52% of all EUD applications.
China emerged as the leading source country in 2025, with filings increasing by 18.4% (accounting for 29.9 % of all EUDs applications received), followed by the United Kingdom (+17.8%) and the United States (+8.4%). These figures underline the growing international importance of the EU design system.
Within the EU, filings were led by Germany (13.4%), followed by Italy (10.5%), Poland (4.2%), France (4%) and Spain (3.4%).
New Competence for Craft and Industrial Geographical Indications
In December 2025, the EUIPO began accepting applications for craft and industrial geographical indications (CIGIs), marking a significant expansion of the Office’s mandate.
Within the first weeks of operation, the EUIPO received 45 CIGI applications, with stones and minerals and textiles as the main products represented.
The new system aims to support local value creation and strengthen competitiveness in regions across the European Union.
Looking Ahead
These results provide a strong starting point for the second year of the EUIPO Strategic Plan 2030.
Sustained growth in filings shows that businesses, innovators and creators worldwide continue to invest in protection through the European Union’s IP system.
The record figures recorded in 2025 confirm confidence in the EUIPO and its role in supporting a modern, resilient and inclusive European innovation ecosystem.
 
Click here to explore the charts and figures.
Disclaimer: These figures are provisional and subject to final confirmation.
 
 

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The Council has adopted today an amendment to the regulation governing the activities of the European High-Performance Computing Joint Undertaking (EuroHPC JU), extending its objectives to facilitate the creation of Artificial Intelligence (AI) gigafactories in Europe and to include a dedicated quantum technologies pillar.
The amended regulation allows for the development and operation of AI gigafactories in Europe, a world-class AI compute infrastructure that will strengthen Europe’s industry and competitiveness, while fostering cooperation through public-private partnerships that include member states and industry stakeholders. It also sets rules for funding and procurement, while safeguarding the interests of start-ups and scale-ups. The amendment provides flexibility for partners, enabling them to optimise results while advancing Europe’s leadership in AI and quantum technologies.

“Today, we’ve taken a bold and swift step towards proceeding with establishing AI gigafactories in Europe. AI is one of the most critical technologies of our time, defining our digital future, and investing in the needed infrastructure capacity for AI is essential for boosting Europe’s resilience, competitiveness, and sovereignty. This move demonstrates our commitment to ensuring that Europe leads in this transformative field.”
Nicodemos Damianou, Cyprus deputy minister of research, innovation and digital policy

Next steps
Following the Council’s approval, the legislative act has been adopted. The regulation will be published in the Official Journal of the European Union on 19th of January and will enter into force on the following day.
Background
EuroHPC aims to develop, deploy, and maintain supercomputing, quantum computing, and data infrastructure in the EU, while also supporting the growth of high performing computing (HPC) systems, technologies, and skills for European science and industry. The EuroHPC regulation was amended in 2024 to include the development and operation of AI Factories —dynamic ecosystems that promote innovation and collaboration in artificial intelligence. The Commission’s proposed second amendment, introduced on 15 July 2025, builds on this by supporting the establishment of AI gigafactories, further advancing Europe’s leadership in AI innovation.
 
 
 
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Speech by Luis de Guindos, Vice-President of the ECB, at the 16th edition of Spain Investors Day

Madrid, 14 January 2026
The global economy is facing a period of profound transformation and heightened uncertainty. The past year has brought major shifts in the international economic environment, driven by significant changes in US policy and the erosion of the multilateral, rules-based system which has long supported global trade and international relations. The introduction of substantial tariffs on US imports has disrupted trade flows, weakened confidence and created ripple effects across economies. Geopolitical risks remain elevated. The shift to a new paradigm – one where rule of law principles are challenged – reflects profound global uncertainties that are likely to persist.
These developments have had tangible implications for economic activity and financial stability in the euro area. Heightened uncertainty weighs on growth prospects through two main channels: by delaying firms’ investment decisions and so affecting euro area exports, and by prompting households to increase precautionary savings and consume less than expected. At the same time, fiscal policy in several euro area countries is set to ease to accommodate higher spending, including for military and security purposes. In this environment, disrupted trade patterns can further complicate inflation dynamics. Financial stability risks remain elevated as valuations are stretched in increasingly concentrated asset markets, non-banks exhibit liquidity and leverage vulnerabilities and increasing interlinkages with banks, while growing private markets remain opaque.
Euro area Monetary Policy
Inflation remains in a good place: having hovered within a narrow range since the spring, it stood at 2.0% in December. Energy prices were lower than a year ago, while core inflation, which excludes energy and food, also fell slightly. Strong wage growth continues to push up underlying inflation. However, more forward-looking indicators point to wage growth easing in the coming quarters, before stabilising towards the end of 2026. Our most recent assessment reconfirms that inflation should stabilise at the 2% target in the medium term.
Despite the challenging environment, economic activity has been resilient. It grew by 0.3% in the third quarter of 2025, mainly reflecting stronger consumption and investment. Growth was largely driven by the services sector, while activity in industry and construction remained flat. The economy also continues to benefit from a robust labour market, with unemployment close to its historical low.
Compared with earlier projections, economic growth has been revised up to stand above 1% this year and rise to 1.4% in the following years. Given the challenging environment for global trade, domestic demand is seen as the main engine of growth in the coming quarters. Business investment and substantial government spending on infrastructure and defence should increasingly underpin the economy. Consumption is also expected to rise but the household saving rate is only gradually coming down from still elevated levels. According to a recent ECB survey, the main reasons for high savings by euro area households include the fear of higher taxes in the future (Ricardian motives) and concerns about their future income (precautionary motives).[1]
Ricardian saving motives are linked to consumers’ expectations about future developments in taxes and welfare spending. Saving scores are thus higher in euro area countries with weaker fiscal positions, such as those with public debt-to-GDP ratios above 100%.[2] Precautionary saving motives are linked to income risk, which is strongly influenced by differences in individual perceptions about uncertainty. Elevated uncertainty and geopolitical developments also pose risks to business investment, with significant repercussions for euro area exports.
Risk Environment
As an open economy deeply integrated into global supply chains and international financial markets, the euro area is exposed to external shocks and vulnerabilities stemming from geopolitical and trade developments. China has become increasingly competitive in key export sectors of euro area countries, with its share of global exports rising steadily, particularly in advanced manufacturing and green technology sectors.
But high uncertainty in the global environment does not appear to be reflected in current market pricing.[3] In fact, negative surprises – such as a re-escalation of trade or other geopolitical tensions, setbacks in AI advances with asset price adjustments or intensifying doubts regarding US fiscal credibility – could trigger abrupt shifts in sentiment, with spillovers across asset classes and geographies.
Geopolitical risk noticeably raises downside risks to growth.[4] Countries more reliant on trade, or burdened with higher levels of public debt, are at greater risk of amplification effects and resulting downside pressures.
Inflation could be affected in different directions: it could be lower if the rise in US tariffs reduced demand for euro area exports and if countries with overcapacity increased their exports to the euro area; or higher if more fragmented global supply chains pushed up import prices, curtailed the supply of critical raw materials and added to capacity constraints in the euro area economy.
On the financial side, the heightened uncertainty could result in higher risk premia, tighter lending conditions and weaker loan growth. While financial markets appear to price in very benign outcomes and downplay tail risks, safe-haven flows into gold have driven up prices to record highs, signaling high geopolitical risk and policy uncertainty.
The materialisation of geopolitical risks could form a common trigger for three of the main sources of risk and vulnerability for euro area financial stability today.[5]
First, stretched valuations in increasingly concentrated asset markets raise the risk of sharp, correlated asset price adjustments. Sudden market drawdowns could pose challenges to euro area non-banks, especially given their liquidity and leverage vulnerabilities, increasing the risk of fire sales. And opaque private equity and private markets could easily cause or amplify market downturns.
Second, growing interlinkages between banks and the non-bank financial sector could expose funding vulnerabilities in stressed market conditions.[6] As non-banks provide short-term funding to banks while banks provide credit for the leveraged activities of the non-bank sector, exposures are at risk on both sides of banks’ balance sheets.
Third, fiscal challenges in some advanced economies could test investor confidence, possibly triggering stress in sovereign bond markets. Market concerns over US fiscal credibility have risen on the back of persistently high fiscal deficits and have contributed to a steepening of yield curves. This may create risk spillovers from the United States to the euro area amplified by policy uncertainty and a depreciating dollar. Fiscal fundamentals in some euro area countries have also been persistently weak. That said, financial markets have so far smoothly accommodated high levels of issuance, but structural challenges could further limit the fiscal space.
Planned defence spending to meet the new NATO target, ageing populations and climate change, with the associated physical and transition risks, represent major challenges. To mitigate the current risks to the sustainability of sovereign debt, excessive fiscal deficits and public debts in the euro area need to be reduced in line with the revised economic governance framework. The consolidation of public finances should be designed in a growth-friendly way and combined with strategic investment and growth-enhancing structural reforms.
EU Challenges Ahead
In this uncertain macro-financial environment, preserving the resilience of banks and the broader financial system remains crucial. Banks should maintain sound solvency and liquidity positions to enable them to absorb potential shocks ahead. At the same time, we are making significant efforts to reduce undue complexities and simplify EU banking rules and the reporting and supervisory framework for banks. In view of the growing importance of the non-bank sector, it is also vital to monitor it more closely and strengthen its regulation from a macroprudential perspective.
We are facing a big change in the world order with mounting geopolitical challenges. The only viable path forward is to sustain our European values and promote stronger cooperation and deeper integration within Europe. To strengthen Europe’s growth prospects and reduce its vulnerability to future shocks, we need more Europe, not less. Unlocking the full potential of the Single Market is crucial, as is completing the banking union. A truly integrated market for goods and services would advance progress towards the savings and investments union, reduce national fragmentation and support deeper and more efficient capital markets.
The world has changed, and Europe has to adapt to this new paradigm. Greater cooperation and integration are not optional – they are the only way forward for Europe.
 

See ECB (2026), ECB Consumer Expectations Survey results – November 2025, 8 January. While other saving motives, such as intertemporal substitution and saving out of habit, are also significant, they scored slightly lower in importance.
In the survey, Ricardian motives are validated by the finding that respondents reporting trust in their national government assign a significantly lower importance to the Ricardian saving motive relative to respondents who distrust their government. These survey results are consistent with those of Tabellini, G. (2010), “Culture and Institutions: Economic Development in the Regions of Europe”, Journal of the European Economic Association, Vol. 8, No 4, pp. 677-716.
See Financial Stability Review, ECB, November 2025.
See ECB/ESRB report on the financial stability risks from geoeconomic risks, forthcoming January 2026.
See footnote 3.
Bochmann, P., Dieckelmann, D., Grodzicki, M., Horan, A., Larkou, C. and Lenoci, F. (2025), “Systemic risks in linkages between banks and the non-bank financial sector”, Financial Stability Review, ECB, November.

 
 
 
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Yet one in four developing economies remains poorer than it was in 2019
WASHINGTON, January 13, 2026—The global economy is proving more resilient than anticipated despite persistent trade tensions and policy uncertainty, according to the World Bank’s latest Global Economic Prospects report.  Global growth is projected to remain broadly steady over the next two years, easing to 2.6% in 2026 before rising to 2.7% in 2027, an upward revision from the June forecast.
The resilience reflects better-than-expected growth—especially in the United States, which accounts for about two-thirds of the upward revision to the forecast in 2026. Even so, if these forecasts hold, the 2020s are on track to be the weakest decade for global growth since the 1960s. The sluggish pace is widening the gap in living standards across the world, the report finds: at the end of 2025, nearly all advanced economies enjoyed per capita incomes exceeding their 2019 levels, but about one in four developing economies had lower per capita incomes.
In 2025, growth was supported by a surge in trade ahead of policy changes and swift readjustments in global supply chains. These boosts are expected to fade in 2026 as trade and domestic demand soften. However, the easing global financial conditions and fiscal expansion in several large economies should help cushion the slowdown, according to the report. Global inflation is projected to edge down to 2.6% in 2026, reflecting softer labor markets and lower energy prices. Growth is expected to pick up in 2027 as trade flows adjust and policy uncertainty diminishes.
“With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President for Development Economics. “But economic dynamism and resilience cannot diverge for long without fracturing public finance and credit markets. Over the coming years, the world economy is set to grow slower than it did in the troubled 1990s—while carrying record levels of public and private debt. To avert stagnation and joblessness, governments in emerging and advanced economies must aggressively liberalize private investment and trade, rein in public consumption, and invest in new technologies and education.”
In 2026, growth in developing economies is expected to slow to 4% from 4.2% in 2025 before edging up to 4.1% in 2027 as trade tensions ease, commodity prices stabilize, financial conditions improve, and investment flows strengthen.  Growth is projected to be higher in low-income countries, reaching an average of 5.6% over 2026–27, buoyed by firming domestic demand, recovering exports, and moderating inflation. However, this  will not be sufficient to narrow the income gap between developing and advanced economies. Per capita income growth in developing economies is projected to be 3% in 2026—about a percentage point below its 2000-2019 average. At this pace, per capita income in developing economies is expected to be only 12% of the level in advanced economies. 
These trends could intensify the job-creation challenge confronting developing economies, where 1.2 billion young people will reach working age over the next decade. Overcoming the jobs challenge will require a comprehensive policy effort centered on three pillars. The first is strengthening physical, digital, and human capital to raise productivity and employability. The second is improving the business environment by enhancing policy credibility and regulatory certainty so firms can expand. The third is mobilizing private capital at scale to support investment. Together, these measures can help shift job creation toward more productive and formal employment, supporting income growth and poverty alleviation.
In addition, developing economies need to bolster their fiscal sustainability, which has been eroded in recent years by overlapping shocks, growing development needs, and rising debt-servicing costs.  A special-focus chapter of the report provides a comprehensive analysis of the use of fiscal rules by developing economies, which set clear limits on government borrowing and spending to help manage public finances. These rules are generally linked to stronger growth, higher private investment, more stable financial sectors, and a greater capacity to cope with external shocks.
“With public debt in emerging and developing economies at its highest level in more than half a century, restoring fiscal credibility has become an urgent priority,” said M. Ayhan Kose, the World Bank Group’s Deputy Chief Economist and Director of the Prospects Group. “Well-designed fiscal rules can help governments stabilize debt, rebuild policy buffers, and respond more effectively to shocks. But rules alone are not enough: credibility, enforcement, and political commitment ultimately determine whether fiscal rules deliver stability and growth.”
More than half of developing economies now have at least one fiscal rule in place. These can include limits on fiscal deficits, public debt, government expenditures, or revenue collection. Developing economies that adopt fiscal rules typically see their budget balance improve by 1.4 percentage points of GDP after five years, once interest payments and the ups and downs of the business cycle are accounted for.  Use of fiscal rules also increases by 9 percentage points the likelihood of a multi-year improvement in budget balances.  However, the medium- and long-term benefits of fiscal rules depend heavily on the strength of institutions, the economic context in which the rules are introduced, and how the rules are designed, the report finds.
Click here to download the full report.
 
 
 
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Published as part of the ECB Economic Bulletin, Issue 8/2025.
Trade policy uncertainty has risen significantly in the face of higher tariffs and tariff threats, adding a new layer of complexity to assessing the global economic outlook. Shifts in tariff and trade policy, unpredictable communication and the move away from rules-based multilateralism towards bilateral leverage have heightened uncertainty for firms and investors. This has influenced sourcing, production and investment decisions, and may weigh on trade dynamics, investment and overall macroeconomic performance. Moreover, uncertainty can affect expectations and dampen activity even in the absence of concrete policy changes. Monitoring it has therefore become crucial to assessing the economic outlook. Trade policy uncertainty has been an important part of the technical assumptions underlying recent rounds of the Eurosystem/ECB staff macroeconomic projections for the euro area.[1]
However, trade policy uncertainty is unobservable and difficult to model. To capture it, indicators such as the trade policy uncertainty (TPU) index set out in Caldara et al. (2020) count press articles in which trade-related and uncertainty-related keywords appear in close proximity. This index, shown in Chart A for 1990-2025, remained subdued during 1990-2016 before rising during the first Trump election campaign and presidency as well as the first US-China trade conflict, in 2018-20. In April 2025 it reached a historical high when the second Trump Administration imposed a 10% baseline tariff on most imports and additional country-specific tariffs of up to 50%. Although the TPU index has since eased, it remains elevated by historical standards.
As regards gauging the macroeconomic effects of trade policy uncertainty, for the last couple of quarters standard linear models often imply implausibly large effects. One reason for this is that these models extrapolate from historical relations that may no longer hold. Another reason relates to the construction of the TPU index itself: the April spike implies that a very large proportion (around 10%) of all press articles in the underlying text data corpus mention trade policy uncertainty-related keywords, which suggests the index may have been inflated by heightened media attention or trade policy keywords being mentioned in the context of other topics.

Chart A
Trade policy uncertainty index

(percentages of press articles mentioning TPU keywords, multiplied by 100)

Sources: Caldara et al. (2020) and ECB staff calculations.
Note: The chart shows the raw TPU index as reported by Caldara et al. (2020).

The contamination of text-based TPU indicators is likely related to media coverage of trade policy coinciding with broader economic or political reporting. One concern is that policy actions have heightened uncertainty not only in trade but also in other policy areas. As a result, measured trade policy uncertainty may overlap with other forms of uncertainty. For instance, an article published by Reuters in June (Saphir, 2025) mentions trade policy, but primarily in the context of geopolitical risk: “with the U.S. economy already expected to slow under pressure from the Trump administration’s high import tariffs, a rise in oil prices resulting from the conflict [the strike on Iran] ‘could provide powerful downward pressure on households’ ability to spend…”. Such reporting also highlights another borderline case: articles discussing the economic uncertainty regarding the effects of tariffs rather than uncertainty about trade policy itself, as in “and while it is also expected to show inflation running near the Fed’s 2% goal last month, many Fed officials expect tariffs to feed into higher prices…” in the same article. Consequently, media reports may inflate counts of TPU-related keywords when the index is interpreted in a strictly economic sense. Against this background, this box cautions against mechanically interpreting TPU indicator readings as pure uncertainty shocks and proposes an alternative measure for use in standard macroeconomic models.
The standard TPU measure can be refined by eliminating contaminating influences. These influences become problematic when econometric analysis is seeking to disentangle distinct uncertainty channels, for instance in scenario analysis, and may lead to double-counting if readings from the raw TPU measure are treated as a primitive trade policy uncertainty shock. This box therefore proposes an alternative TPU measure, which uses the raw index cleaned for cases of keyword-driven co-mentions, such as those cited in the previous paragraph. Rather than being constructed from the ground up, the unadjusted series is cleaned indirectly by regressing it on a set of proxies, a constant and a COVID-19 pandemic dummy. This removes variation explained by historical co-movements of uncertainty-related keywords while preserving changes that extend beyond them. The first set of proxies controls for instances where broad uncertainty coverage inflates TPU counts, and includes: the categorical economic policy uncertainty indices of Baker et al. (2016), excluding trade policy; the geopolitical risk index of Caldara and Iacoviello (2022); the CBOE Volatility Index (VIX); and oil price volatility. The second set addresses episodes when financial or supply chain stress drives reporting on trade-related risks: the US National Financial Conditions Index (NFCI) and the Global Supply Chain Pressure Index (GSCPI). Finally, the effective tariff rate, defined as customs revenues relative to imports, controls for cases where media coverage reflects realised changes in trade policy rather than uncertainty about future measures.[2]
The cleaned indicator shows significantly smaller spikes throughout 2025. Chart B, panel a) presents the cleaned TPU indicator alongside the untreated indicator.[3] While it maintains the primary characteristics of the original indicator, the spikes observed in 2025 are only 20% as high and exceed the levels observed during the first US-China trade conflict by a smaller margin.[4] Recent developments are generally comparable to those observed in measures of economic policy uncertainty (EPU), such as the news-based US EPU, the three-component US EPU and the global EPU illustrated in Chart B, panel b). The coincidence of spikes across different uncertainty measures in part explains the disproportionate spike in the raw TPU indicator if not controlled for. At the same time, the cleaned TPU indicator still spikes during the first US-China trade conflict, aligning well with the raw TPU. Taken together, this supports the view that the unadjusted TPU indicator may be misinterpreted in the present high-uncertainty environment unless a narrow interpretation of trade policy uncertainty shocks is adopted.

Chart B
The TPU index and other uncertainty measures

a) TPU and cleaned TPU

b) Cleaned TPU and economic policy uncertainty measures

(diffusion indices)

(diffusion indices, standardised)

Sources: Panel a): Caldara et al. (2022) and ECB staff calculations; Panel b): Baker et al. (2016), Davis (2016) and ECB staff calculations.
Note: Latest observations: September 2025.

The adjusted TPU index allows counterfactual scenarios to be constructed that yield more plausible estimates of macroeconomic impacts. On the basis of the adjusted index, alternative paths for the degree of trade policy uncertainty can be defined and updated as new data become available, providing a flexible input for conditional forecasting and projection exercises. Chart C, panel a) illustrates two scenarios: one in which TPU declines from current levels to the average observed during the first trade conflict, and another that assumes a more protracted decline. Chart C, panel b) shows the corresponding effects on US GDP and on global GDP (excluding the US), taking into account TPU-implied shocks since the beginning of the year. Under these assumptions, GDP in the United States and the rest of the world would contract by about 0.1 percentage points by the end of 2027 if uncertainty fell back to first trade conflict levels, but by roughly 0.2 percentage points if uncertainty remained elevated for longer.

Chart C
The impact of trade policy uncertainty on growth

a) Evolution of trade policy uncertainty
(index, three-month moving averages)

b) Cumulative impact of uncertainty on GDP growth, 2025-27
(percentage points)

Source: ECB staff calculations.
Notes: Panel a): Latest observation: July 2025, extrapolations thereafter. Panel b): The impacts are computed from forecasts based on Bayesian vector autoregression models, conditional on the assumed path of cleaned TPU. The models include, for one region at a time, the cleaned TPU; the logs of GDP, investment and CPI; as well as a COVID-19 pandemic dummy. The TPU shock is identified with Cholesky identification.

In conclusion, adjusting TPU measures can improve their indicator properties and make them easier to interpret. This box argues that text-based measures of trade policy uncertainty might capture a broader concept of uncertainty than uncertainty surrounding trade policy announcements and implementation alone. Once confounding influences and media cycle effects are removed, adjusted measures of trade policy uncertainty yield less sizeable macroeconomic impacts than commonly reported in the literature. In addition, if a more restrictive definition of trade policy uncertainty is adopted, these alternative indicators can readily be used to define scenarios for conditional forecasting and projection exercises. In this context, the adjusted TPU index was used as a starting point for analysing the impact of trade policy uncertainty in the Eurosystem/ECB staff macroeconomic projections for the euro area, and was employed both for baseline projections and scenario analysis.
References
Baker, S.R., Bloom, N. and Davis, S.J. (2016), “Measuring Economic Policy Uncertainty”, The Quarterly Journal of Economics, Vol. 131, Issue 4, November, pp. 1593-1636.
Caldara, D. and Iacoviello, M. (2022),“Measuring Geopolitical Risk”, American Economic Review, Vol. 112, No 4, April, pp. 1194-1225.
Caldara, D., Iacoviello, M., Molligo, P., Prestipino, A. and Raffo, A. (2020), “The economic effects of trade policy uncertainty”, Journal of Monetary Economics, Vol. 109, January, pp. 38-59.
Davis, S.J. (2016), “An Index of Global Economic Policy Uncertainty”, NBER Working Papers, No 22740, National Bureau of Economic Research, October.
Saphir, A. (2025), “US attack on Iran adds to economic uncertainty”, Reuters, 23 June.

See Box 2 of “Eurosystem staff macroeconomic projections for the euro area, June 2025” and Box 1 of “ECB staff macroeconomic projections for the euro area, September 2025”.
The effective tariff rate is outlier-adjusted.
The cleaned index is centred on its long-term historical average. Negative values hence indicate cleaned TPU levels below that average while positive values indicate above-average uncertainty.
The adjusted indicator is slightly more volatile, potentially adding noise to the analysis.

 
Author:
• Maximilian Schröder, Graduate Programme Participant · International & European Relations, External Developments, ECB

Compliments of the European Central Bank 
 

 The post ECB | From Text to Trouble: Understanding the Limits of Text-Derived Trade Policy Uncertainty Measures first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The Council today adopted two decisions authorising the signature of the EU-Mercosur Partnership Agreement (EMPA) and of the Interim Trade Agreement (iTA) between the EU and Mercosur.
Together, these agreements mark an important milestone in the EU’s long-standing relationship with Mercosur partners – Argentina, Brazil, Paraguay and Uruguay. Once in force, they will establish a framework for political dialogue, cooperation and trade relations within a modernised and comprehensive partnership.
The agreements will require the consent of the European Parliament before they can be formally concluded by the Council. Ratification by all EU member states will also be required for the EMPA to enter into force.
“After over 25 years, today’s decisions mark a historic step forward in strengthening the EU’s strategic partnership with Mercosur. At a time of growing global uncertainty, it is essential that we reinforce our political cooperation, deepen our economic ties and uphold our shared commitment to sustainable development. These agreements will create new opportunities for businesses on both sides, while ensuring robust safeguards for our most sensitive sectors and a fair, sustainable framework for trade.”

Michael Damianos, Cyprus’ minister for energy, commerce and industry

EU-Mercosur partnership agreement
The EMPA brings together political dialogue, cooperation and comprehensive sectoral engagement under a single framework. It also includes a trade and investment pillar, which will become fully applicable once the agreement is concluded and enters into force.
These provisions will strengthen cooperation in areas such as sustainable development, environment and climate action, digital transformation, human rights, mobility, counter-terrorism and crisis management. The political dialogue provisions will foster closer coordination on global challenges such as climate change, peacekeeping and migration. This framework will also facilitate a robust exchange of best practices on issues ranging from governance to technology innovation. The EMPA also reinforces EU-Mercosur coordination in multilateral fora and provides structured platforms for sectoral dialogue.
Under the decision adopted today, the EU will sign the agreement and apply large parts of the political and cooperation chapters on a provisional basis, pending completion of the ratification procedures.
Interim trade agreement
The Interim Trade Agreement (iTA) reflects the trade and investment liberalisation pillar of the EMPA and will function as a stand-alone agreement until the full EMPA enters into force. Its objective is to deliver the economic benefits of the negotiated trade commitments as early as possible.
The agreement offers tariff reductions and opens access to new markets for a wide range of goods and services. Key sectors such as agriculture, automotive, pharmaceuticals, and chemicals will benefit from improved trade terms. Additionally, it includes provisions for investment facilitation and the removal of barriers to cross-border trade in services, particularly in digital and financial services. Provisions on government procurement will allow EU companies to access public tendering processes in Mercosur countries.
The iTA falls within the EU’s exclusive competence and therefore does not require ratification by individual EU member states. It will cease to apply once the EMPA enters into force.
Bilateral safeguards
In view of the ongoing legislative process on a dedicated Mercosur safeguards regulation, the Council decision introduces specific arrangements ensuring the EU can rapidly address market disturbances arising from imports of sensitive agricultural products.
Until the permanent legislative framework is formally adopted following negotiations between the Council and the European Parliament, the Commission will be empowered to apply bilateral safeguard measures under the iTA for agricultural products and enhanced monitoring requirements will apply to products subject to tariff-rate quotas. Member states may request the Commission to initiate safeguard investigations and the Commission will be required to inform the Council in a complete and timely manner of any intended safeguard action.
These temporary arrangements ensure a high level of protection for EU farmers and agri-food sectors during the transition period.
Next steps
Following today’s decisions, the EU and its Mercosur partners will proceed with the signature of the agreements. Before the agreements can be formally concluded, the European Parliament will have to give its consent.
The EMPA will fully enter into force once all EU member states and Mercosur parties have completed ratification. The iTA will remain in effect until it is superseded by the entry into force of the full partnership agreement.

Background
The deal with the Mercosur partners (Argentina, Brazil, Paraguay and Uruguay) will create the world’s biggest free trade zone, covering a market of over 700 million consumers. The EU is Mercosur’s second largest partner in trade in goods, accounting for almost 17% of Mercosur’s total trade in 2024. On that year, the EU’s trade with Mercosur was worth over €111 billion: €55.2 billion in exports and €56 billion in imports, with the trade in goods between the two blocs growing by over 36% from 2014. In 2023 (the most recent year for which there is available data) trade in services between the EU and Mercosur was worth over €42 billion.
Negotiations for an EU-Mercosur association agreement began in 1999. They were successfully concluded on 6 December 2024 and resulted in two parallel, legally distinct instruments: the EU-Mercosur Partnership Agreement (EMPA), combining political dialogue, cooperation and trade pillars, and the interim Trade Agreement (iTA), containing the trade and investment commitments, designed to apply ahead of the EMPA’s entry into force.
On 17 December 2025, the Council and the European Parliament reached a provisional agreement on the regulation on the EU-Mercosur bilateral safeguards. The agreement will have to be endorsed and adopted by both institutions before entering into application.

 
 
 
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Keynote Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Danish Economic Society Conference
Kolding, 9 January 2026
I am grateful to the Danish Economic Society for the invitation to participate in this conference. In line with the overall theme of the event, I will speak today about the implications of a changing world for the euro-denominated monetary system.
In our 2025 assessment exercise that reviewed the monetary policy strategy of the ECB, the Governing Council concluded that:
“Ongoing structural shifts related to geopolitics, digitalisation, artificial intelligence, demography, the threat to environmental sustainability and changes in the international financial system suggest that the inflation environment will remain uncertain and potentially more volatile, with larger target deviations in both directions, posing challenges for the conduct of monetary policy. A more resilient financial architecture – supported by progress on the savings and investments union, the completion of banking union and the introduction of a digital euro – would also support the effectiveness of monetary policy in this evolving environment.”
In addition to their implications for monetary policy, this set of structural factors will also re-shape labour markets, investment dynamics, productivity and the financial system. In what follows, I will focus my attention on how structural changes might affect the euro monetary system.
Monetary Union: Common Shocks and Scale Economies
By and large, the structural changes facing Europe can be interpreted as common shocks. While each country might face some specific challenges, forces such as revisions to the global geopolitical equilibrium (including the global trading system), digitalisation, AI, demography, climate change and shifts in the international financial system have broadly similar implications across EU Member States.
Under such circumstances, a monetary union acts as an embedded coordination mechanism by enabling that a common monetary policy can respond effectively to the evolution of common trends and common shocks.
Moreover, the identified structural changes are arguably more easily handled in a larger-scale monetary system than under the hypothetical alternative of a collection of standalone national monetary systems. First, all else equal, a larger-scale monetary system means that a greater proportion of trade and financial transactions will be denominated in domestic currency – both among domestic counterparties and with external counterparties. In turn, this provides considerable insulation against shifts in the exchange rate or changes in foreign monetary systems. Chart 1 illustrates the high euro invoicing share in trade involving euro area member countries: there is a strong positive correlation between the importance of the euro area as an export destination and the invoicing share of the euro.[1]

Chart 1
Share of exports to the euro area and euro export invoicing share

(x-axis: share of exports to euro area, percentages; y-axis: euro export invoicing share, percentages)

Sources: ECB staff calculations based on analysis in Boz, E. et al. (2025), “Patterns of Invoicing Currency in Global Trade in a Fragmenting World Economy”, Working Papers, No 178, IMF, September, and expanded and updated data from Boz, E. et al. (2022), “Patterns of invoicing currency in global trade: New evidence”, Journal of International Economics, Vol. 136, May; Taiwan Ministry of Finance; IMF Direction of Trade Statistics; and World Development Indicators.
Notes: Data are averaged over the period 1999-2023. Country names on the chart are displayed as three-letter ISO codes.

Second, the existence of considerable fixed costs in running the market infrastructure and payment systems that underpin the monetary system means that larger-scale monetary systems can be operated more efficiently.[2] Large-scale monetary systems also have the capability to reduce dependencies on external providers of infrastructural services. In addition, large-scale monetary systems can afford to undertake infrastructural innovations that might not be viable for smaller-scale monetary systems.
This means that the automation and digitalisation of the financial system can be accompanied and reinforced by investment projects that ensure that central bank money can adapt to such innovations. A prime example is the digital euro project that, if the supporting legislation is adopted, will provide retail central bank money in digital form.[3] It also includes the Pontes/Appia projects that aim to ensure that settlement in central bank money can play its essential role in the future-ready, innovative and integrated financial ecosystems that can best exploit the opportunities promised by technological development in the financial system. For smaller-scale monetary systems, such projects would be more daunting and incur higher unit costs, increasing the likelihood of transactions migrating to foreign-currency systems.
Third, scale matters for the efficiency, breadth and liquidity of the financial system. Euro area residents can allocate assets across borders within the euro area without taking on currency risk, which is especially relevant for the money market, the bond market and the banking system.[4] Chart 2 illustrates the high area-wide integration in these markets.

Chart 2
Price-based financial integration indicators by market segment

(monthly data, January 1995 – October 2025; January 1995 – September 2025 for the banking sub-index)

Sources: ECB and ECB calculations.
Notes: See also the report “Financial Integration and Structure in the Euro Area” and the Statistical Annex document on the ECB webpage Indicators of financial integration and structure in the euro area.

In addition, a larger market is also more attractive for foreign investors and foreign issuers, especially since the availability and cost of hedging instruments are scale-dependent. A larger market also makes it more feasible to fund supranational initiatives such as the Next Generation EU (NGEU) programme and other EU bond issues, as well as bonds issued by the European Stability Mechanism and the European Investment Bank.
These scale benefits from a monetary union are at risk if internal imbalances and financial fragilities give rise to fragmentation dynamics. These lessons were learned at a high cost during the sequence of crises over 2008-2013. However, the euro area financial architecture is now far more resilient, thanks to the significant institutional reforms that were introduced in the wake of these crises and the track record of financial stability Europe has shown over the last decade.[5]
The list of reforms include: an increase in the capitalisation of the European banking system; the joint supervision of the banking system through the Single Supervisory Mechanism; the adoption of a comprehensive set of macroprudential measures at national and European levels; the implementation of the Single Resolution Mechanism; the narrowing of fiscal, financial and external imbalances; the introduction of the fiscal backstops provided by the European Stability Mechanism; solidarity shown during the pandemic through the innovative NGEU programme; the demonstrated track record of the ECB in supplying liquidity in the event of market stress; and the expansion of the ECB policy toolkit (Transmission Protection Instrument, Outright Monetary Transactions) to address a range of liquidity tail risks.
As illustrated in Chart 3, the improved resilience has increased the role of common factors in driving the euro area bond market, with much less volatility in inter-country spreads in recent times.

Chart 3
Ten-year sovereign bond spreads vs Germany

(percentage points)

Sources: LSEG and ECB calculations.
Notes: The spread is the difference between individual countries’ ten-year sovereign yields and the ten-year yield on German Bunds. The latest observations are for 2 January 2026.

An Increasing Global Role for the Euro?
The events of 2025 have prompted much discussion of possible shifts in the international monetary system. In particular, a more domestically oriented US economy suggests that the US dollar will offer a less effective hedge against global risks.[6] For euro area investors, this might translate into a lower portfolio allocation to dollar assets and/or increased currency hedging of dollar positions, with a greater “euro home bias” in financial holdings. For global investors, it might entail a somewhat lower portfolio allocation to dollar assets and a somewhat higher portfolio allocation to the euro as the “next best” international currency. While the dollar should remain by far the largest international currency, there is some scope for a shift towards a less unipolar international monetary system.
Across a range of metrics, the euro is firmly established as the second-largest international currency (Charts 4 and 5). In relation to the raising of debt (bonds and loans), Tables 1 and 2 illustrate some of the largest euro-denominated issuances in 2024 by external entities.

Chart 4
The euro is the second-largest international currency

(percentages)

Sources: Bank for International Settlements; IMF; CLS Bank International; Ilzetzki, E., Reinhart, C. and Rogoff, K. (2019), “Exchange Arrangements Entering the Twenty-First Century: Which Anchor will Hold?”, The Quarterly Journal of Economics, Vol. 134, No 2, pp. 599-646; and ECB staff calculations.
Notes: The latest data on foreign exchange reserves, international debt, international loans and international deposits are for the fourth quarter of 2024. Global payment currency (SWIFT) data are as of December 2024. Foreign exchange turnover data are as of April 2025. The US dollar is not shown in the chart. *Since transactions in foreign exchange markets always involve two currencies, foreign exchange turnover shares add up to 200%.

Chart 5
Share of the euro in global foreign exchange reserves

(percentages; at constant Q4 2024 exchange rates)

Sources: IMF and ECB staff calculations.
Notes: The vertical line is for 1 October 2016, i.e. when the Chinese renminbi was first identified as a reporting currency in IMF data. Previously, its share was included under the remaining currencies, denoted as “Other currencies excluding USD’’ in the chart. The latest observations are for the fourth quarter of 2024.

Table 1
Largest euro-denominated international bonds issued in 2024

Pricing date

Issuer

Deal nationality

Deal value (USD millions)

4 March 2024

TD Bank Group

Canada

5,962

18 March 2024

Morgan Stanley

United States

5,444

19 September 2024

Romania

Romania

5,438

30 October 2024

DSV Finance BV

Denmark

5,403

15 May 2024

Novo Nordisk

Denmark

5,023

28 August 2024

Bulgaria

Bulgaria

4,851

Sources: Dealogic and ECB staff calculations.

Table 2
Largest euro-denominated international loans issued in 2024

Credit date

Issuer

Deal nationality

Deal value (USD millions)

20 September 2024

DSV A/S

Denmark

15,598

24 April 2024

Swisscom AG

Switzerland

8,650

21 February 2024

Axpo Holding

Switzerland

7,556

15 October 2024

Bank Gospodarstwa Krajowego

Poland

7,263

25 October 2024

Nestlé S.A.

Switzerland

7,022

27 August 2024

Novo Nordisk

Denmark

6,537

Sources: Dealogic and ECB staff calculations.

There are also some signs of a step up in demand for euro-denominated assets (and in the hedging back to euro of dollar exposures) during 2025. As illustrated in Chart 6, the shift in international debt flows was largely concentrated in the second quarter.

Chart 6
Net foreign investment in debt securities of euro area non-monetary financial institutions

(flows as a percentage of the previous year’s annual GDP)

Sources: ECB (balance of payments and international investment positions), Eurostat and ECB calculations.
Note: The latest observations are for the third quarter of 2025.

Of course, much of the adjustment took the form of a level shift in the EUR/USD rate, with the euro appreciating against the dollar by 9 per cent (1.08 to 1.18) during the second quarter. According to a BVAR model maintained by ECB staff (Chart 7), much of this appreciation can be attributed to a risk sentiment factor, reflecting some mix of a decline in risk sentiment towards the dollar and an improvement in risk sentiment towards the euro.

Chart 7
BVAR historical decomposition of the drivers behind the USD/EUR exchange rate

(percentages; increase = appreciation of the euro)

Sources: Haver and ECB staff calculations.
Notes: The model extends a Bayesian vector autoregression (BVAR) (Farrant, K. and Peersman, G. (2006), “Is the Exchange Rate a Shock Absorber or a Source of Shocks? New Empirical Evidence”, Journal of Money, Credit and Banking, Vol. 38, No 4, pp. 939-961) to include seven endogenous variables: USD/EUR rate, relative GDP, relative CPI, relative two-year yields (euro area-United States), euro area GDP, euro area CPI and euro area two-year yields. Quarterly data (from the first quarter of 1999 to the third quarter of 2025) are entered in first differences. The model includes four lags and a constant, estimated via Bayesian methods following Korobilis, D. (2022), “A new algorithm for structural restrictions in Bayesian vector autoregressions”, European Economic Review, Vol. 148. A tightening euro area (US) monetary policy shock is assumed to increase euro area (US) interest rates more than in the United States (euro area) and to reduce euro area (US) GDP growth and inflation more than in the United States (euro area), while causing the euro to appreciate (depreciate) against the dollar. A risk sentiment shock assumes that stronger investor sentiment towards the euro causes the euro to appreciate, weighing on inflation and growth, which lowers euro area yields (more than US yields). The latest missing GDP observations are projected; shocks are identified via sign restrictions. The latest observations are for the third quarter of 2025.

Chart 8 shows that 2025 was also a strong year for euro-denominated bond issuance by external firms.

Chart 8
Net issuance of euro-denominated bonds by non-euro area corporations

(accumulated flows in EUR billions since the beginning of each year)

Sources: ECB (centralised securities database) and ECB calculations.
Notes: Figures are not seasonally adjusted. The latest observations are for November 2025.

The benefits of such an increase in euro asset demand would be larger if Europe undertook reforms to increase the scale of high-quality euro asset supply.[7] Most importantly, pro-growth economic policies would increase the size and profitability of European firms, thereby increasing the incentives to issue and hold corporate securities. As laid out in the Draghi and Letta reports, a concerted campaign to increase the pan-European integration of product markets would not only contribute to a faster growth rate but would also enable more firms to expand to the scale at which market-based financing becomes a more viable option. By lowering transaction costs, improving liquidity and increasing domestic demand for the full spectrum of financial assets, the savings and investments union package of measures (reinforced by further progress on banking union) can further boost the scale and efficiency of the European financial system.
In recognition of the implications for monetary policy transmission of the participation of foreign investors in euro area financial markets, the ECB provides swap and repo lines to key partners. The provision of such liquidity lines ensures the smooth transmission of monetary policy, prevents euro liquidity shortages abroad and strengthens global trust in the euro. Our frameworks for providing liquidity lines are reviewed regularly to ensure that they continue to serve their purpose.
An Increase in the Supply of Safe Assets
A foundational element of the international monetary system is the provision of global safe assets.[8] In particular, a safe asset should rise in relative value during stress episodes, thereby providing essential hedging services.
The current design of the euro area financial architecture results in an undersupply of the safe assets that play a special role in investor portfolios. Since the Bund is the highest-rated large-country national bond in the euro area, it serves as the main de facto euro-denominated safe asset, but the stock of Bunds is too small relative to the size of the euro area or the global financial system to satiate the demand for euro-denominated safe assets. Especially in the context of much smaller and less volatile spreads (as shown in Chart 3), other national bonds also directionally contribute to the stock of safe assets. However, the remaining scope for relative price movements across these bonds means that the overall stock of national bonds does not sufficiently provide safe asset services.
In principle, common bonds backed by the combined fiscal capacity of the EU Member States are capable of providing safe asset services. However, the current stock of such bonds is simply too small to foster the necessary liquidity and risk management services (derivative markets; repo markets) that are part and parcel of serving as a safe asset.
There are several ways to expand the stock of common bonds. Just as the NGEU programme was financed by the issuance of common bonds jointly backed by the Member States, these countries could decide to finance investment in European-wide public goods through more common debt. From a public finance perspective, it is natural to match European-wide public goods with common debt, in order to align the financing with the area-wide benefits of such public goods. In related manner, common policy imperatives such as the urgent funding of Ukraine also warrant joint borrowing.
Outlining the general potential for greater scope for joint debt in funding joint programmes raises many governance issues, especially when the natural set of participants in a joint programme does not fully match the current membership of the EU. Accordingly, innovative forms of governance may be desirable, including taking into account the coordination of programme operation and programme funding. To this end, Philipp Hildebrand, Hélène Rey and Moritz Schularick have recently developed a set of principles that jointly address how European countries could expand shared defence capabilities and develop a common framework for their financing.[9] Over time, the associated joint debt could make a sizeable contribution to the expansion of euro safe assets.
In addition, in order to meet the rising global demand for euro-denominated safe assets more quickly and more decisively, there are a number of options to generate a larger stock of safe assets from the current stock of national bonds. For instance, Olivier Blanchard and Ángel Ubide recently proposed that the “blue bond/red bond” reform be re-examined.[10] Under this approach, each member country would ring-fence a dedicated revenue stream (say a certain amount of indirect tax revenues) that could be used to service commonly issued bonds. In turn, the proceeds from issuing blue bonds would be deployed to purchase a given amount of the national bonds of each participating Member State. This mechanism would result in a larger stock of common bonds (blue bonds) and a lower stock of national bonds (red bonds).
As emphasised in the Blanchard-Ubide proposal, there is an inherent trade-off in the issuance of blue bonds. In one direction, a larger stock of blue bonds boosts liquidity and, if a critical mass is attained, would also trigger the fixed-cost investments needed to build out ancillary financial products such as derivatives and repos. In the other direction, too large a stock of blue bonds would require the ring-fencing of national tax revenues on a scale that would be excessive in the context of the current European political configuration in which fiscal resources and political decision-making primarily remain at the national level. As emphasised in the Blanchard-Ubide proposal, this trade-off is best navigated by calibrating the stock of blue bonds at an appropriate level.
In particular, the Blanchard-Ubide proposal gives the example of a stock of blue bonds corresponding to 25 per cent of GDP. Just to illustrate the scale of the required fiscal resources to back this level of issuance: if bond yields were in the range of 2 to 4 per cent on average, the servicing of blue bond debt would require ring-fenced tax revenues in the range of 0.5 to 1 per cent of GDP. While this would constitute a significant shift in the current allocation of tax revenues between national and EU levels, it would still leave tax revenues predominantly at the national level (the ratio of tax revenues to GDP in the euro area ranges from around 20 to 40 per cent). The shared pay-off would be the reduction in debt servicing costs generated by the safe asset services provided by an expanded stock of common debt.
An alternative, possibly complementary, approach that could also deliver a larger stock of safe assets from the pool of national bonds is provided by the sovereign bond-backed securities (SBBS) proposal.
The SBBS proposal envisages that financial intermediaries (whether public or private) could bundle a portfolio of national bonds and issue tranched securities, with the senior slice constituting a highly safe asset. The SBBS proposal has been studied extensively (I chaired an ESRB High-Level Task Force on Safe Assets that published a report in January 2018) and draft enabling legislation was published by the European Commission. Just as with the blue/red bond proposal, sufficient issuance scale would be required in order to foster the market liquidity needed for the senior bonds to act as highly liquid safe assets.
In summary, there are several complementary routes to expand the stock of common euro debt and thereby help to meet the demand for euro-denominated safe assets. I have focused on proposals that are potentially feasible, constituting incremental steps that build on the current institutional configuration. Of course, the safety of common debt inescapably relies on the robust and demonstrable commitment of all Member States to maintain sustainable national debt paths: an expansion of common debt increases the importance of fiscal discipline at the national level.
Monetary Policy and Structural Shocks: Incorporating Uncertainty
Finally, I would like to comment on the implications of structural change for the conduct of monetary policy. Our 2025 assessment of our monetary policy strategy drew several conclusions.
First, in an environment of elevated uncertainty, it is all the more important that people can be confident that the central bank will protect price stability. For the ECB, this translates into a symmetric commitment to ensure that inflation stabilises at the two per cent target in the medium term. In turn, this commitment determines our monetary policy decisions, which is evident in our track record in delivering the return of inflation to target after the 2021-2022 inflation surges.
Second, especially given the range of structural factors operating on the economy, the flexibility of the medium-term orientation should take into account that the appropriate monetary policy response to a deviation of inflation from the target is context-specific and depends on the origin, magnitude and persistence of the deviation. This means that it is unhelpful to seek out all-purpose monetary policy rules that set interest rates on the basis of a fixed relation to a small number of variables. Rather, optimal monetary policy requires a nuanced, full-scale assessment of the underlying drivers of inflation and activity.
Third, monetary policy decisions should take into account not only the most likely path for inflation and the economy but also the surrounding risks and uncertainty, including through the appropriate use of scenario and sensitivity analyses.
Taken together, these considerations call for a pragmatic, evidence-based approach to making monetary policy decisions that draws on a comprehensive and rigorous analytical framework for interpreting the unfolding evidence in relation to the shocks driving inflation, economic activity and monetary and financial developments. Arguably, there are increasing returns to scale in providing such an analytical framework: the range and quality of analysis prepared by Eurosystem staff in recent years (much of which has been published in the ECB’s Economic Bulletin, other ECB outlets and the publications of the national central banks) would be difficult to match for a smaller central bank. In particular, scale economies are especially relevant in building and maintaining a range of macroeconomic models that are capable of facilitating useful scenario analysis and the exploration of optimal policy paths.

A significant exception relates to commodities trade, which is largely US dollar-based. See also Brüggen, A., Georgiadis, G. and Mehl, A. (2025), “Global trade invoicing patterns: new insights and the influence of geopolitics”, The International Role of the Euro, June.
In addition to the financial costs of setting up and running these systems, scale also matters in terms of the benefits of harmonisation of procedures and technical standards and in terms of operational simplicity especially for multi-country financial intermediaries. Scale economies also means that it can be efficient for smaller countries to use the systems developed by larger neighbours. For instance, Danish market participants can use the ECB-developed TARGET Services to settle wholesale and retail payments in Danish krone. The three TARGET platforms are: the T2 platform for settling large payments instantly and individually in central bank money; the TARGET2-Securities (T2S) platform for settling securities transactions in central bank money; and the TARGET Instant Payment Settlement (TIPS) platform for real-time, pan-European instant payments in central bank money.
The costs of launching a digital currency have a substantial fixed component, arising from the design, development, governance and operation of the system, rather than rising linearly with the number of transactions processed. Compared to fragmented national systems, the payment rails provided by the digital euro spreads the costs incurred by financial intermediaries over a very large user base, sharply reducing unit costs.
Currency risk is less relevant for the equities market.
See also Lane, P.R. (2021), “The resilience of the euro”, Journal of Economic Perspectives, Vol. 35, No 2, pp. 3-22.
See also Hassan, T., Mertens, T., Wang, J. and Zhang, T. (2025), “Trade war and the dollar anchor”, Brookings Papers on Economic Activity, 24 September.
See also Lagarde, C. (2023), “A Kantian shift for the capital markets union”, speech at the European Banking Congress, Frankfurt, 17 November; Lagarde, C. (2025), “Earning influence – lessons from the history of international currencies”, speech at an event on Europe’s role in a fragmented world organised by Jacques Delors Centre at Hertie School, Berlin, 26 May; Lagarde, C. (2025), “Europe’s “global euro” moment”, The ECB Blog, ECB, 17 June; Lagarde, C. (2025), “Turning openness into strength – the moment of the euro”, speech at the Business France event “Business en Européens”, Paris, 7 October; and Lagarde, C. (2025), “From resilience to strength – unleashing Europe’s domestic market”, speech at the 35th European Banking Congress, Frankfurt, 21 November.
This section draws on the discussion in Lane, P.R. (2025), “The euro area bond market”, keynote speech at the Government Borrowers Forum 2025, Dublin, 11 June.
Hildebrand, P., Rey, H. and Schularick, M. (2025), “European defence governance and financing”, VoxEU, 20 November.
Blanchard, O. and Ubide, Á. (2025), “Now is the time for Eurobonds: A specific proposal”, Peterson Institute for International Economics, 30 May.

 
 
 
 
 
 
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1 January 2026

Euro banknotes and coins start circulating in Bulgaria
Bulgarian National Bank joins Eurosystem
Bulgaria becomes 21st euro area member
Bulgarian National Bank now also full member of Single Supervisory Mechanism following period of close cooperation

The euro officially entered into circulation in Bulgaria today, bringing the number of European Union (EU) Member States using the single European currency to 21. This follows on from the formal decision made in July, which also announced the official conversion rate of 1.95583 Bulgarian lev per 1 euro.
“I warmly welcome Bulgaria to the euro family and Governor Radev to the ECB Governing Council table in Frankfurt” said Christine Lagarde, President of the European Central Bank (ECB). “The euro is a powerful symbol of what Europe can achieve when we work together, and of the shared values and collective strength that we can leverage to confront the global geopolitical uncertainty that we face at the moment.”
The ECB also marked the historic milestone of Bulgaria’s official adoption of the euro by lighting up its main building in Frankfurt, symbolising the integration and unity of 358 million Europeans who use the euro as their currency.
With Bulgaria joining the euro area, Българска народна банка (Bulgarian National Bank), the country’s national central bank, becomes part of the Eurosystem and the Governor of the Bulgarian National Bank gains a seat on the Governing Council of the ECB.
The Bulgarian National Bank also becomes a full member of the Single Supervisory Mechanism, although the country has been part of the close cooperation framework since October 2020. As such, the ECB is currently responsible for directly supervising four significant institutions in the country and overseeing 17 less significant institutions there. As part of its supervisory tasks, the ECB is also responsible for licensing banks and assessing the buyers of qualifying holdings in all banks. Bulgarian National Bank has a representative on the ECB’s Supervisory Board.
Bulgarian National Bank has paid the remainder of its contribution to the capital of the ECB and transferred its contribution to the ECB’s foreign reserve assets. Bulgarian counterparties of the Eurosystem will be able to participate in ECB open market operations announced after 1 January 2026. A list of credit institutions and branches of credit institutions located in Bulgaria that are subject to reserve requirements will be published shortly on the ECB’s website, as will lists of branches of Bulgarian credit institutions located in other EU Member States already using the euro. The ECB announced transitional provisions for minimum reserve requirements on 13 October 2025. Assets located in Bulgaria that fulfil the necessary requirements will be added to the euro area’s list of eligible collateral.
As of today, the Bulgarian market has also joined the Eurosystem’s TARGET services which ensure the free flow of cash, securities and collateral across Europe. These services are T2 (for settling payments), T2S (for settling securities), TIPS (for settling instant payments) and ECMS (for collateral management of Eurosystem credit operations). Settlement in euro in T2S and TIPS has been possible for the Bulgarian market since 2023 and 2024, respectively. The migration of Bulgarian counterparties went smoothly, and all services are now active.
As of today the new system of rotating voting rights comes into force in the ECB’s Governing Council, as shown in this calendar.
 
 
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The 147 countries and jurisdictions working together within the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) have agreed on key elements of a package that charts a course forward for the co-ordinated operation of global minimum tax arrangements in the context of a digitalised and globalised economy.
Following months of intense negotiations, the comprehensive package for a “side by side” arrangement announced today represents a significant political and technical agreement which will set the foundation for stability and certainty in the international tax system. It will preserve the gains achieved so far in the global minimum tax framework and protect the ability for all jurisdictions, particularly developing countries, to have first taxing rights over income generated in their jurisdictions.
The package includes five key components:

First, a series of simplification measures will reduce compliance burdens for multinational enterprises (MNEs) and tax authorities in calculating and reporting under the global minimum tax rules.
Second, the package further aligns the treatment of tax incentives globally through the introduction of a new targeted substance-based tax incentive safe harbour.
Third, new safe harbours are available to MNE Groups having an ultimate parent entity located in an eligible jurisdiction which meets minimum taxation requirements.
Fourth, the package includes an evidence-based stocktake process to ensure a level playing field is maintained for all Inclusive Framework Members.
Fifth, the package reinforces the objective that qualified domestic minimum top-up tax regimes remain a primary mechanism in the global minimum tax framework for ensuring the protection of local tax bases, particularly in developing countries.

“This agreement by the Inclusive Framework including 147 countries and jurisdictions is a landmark decision in international tax co-operation,” OECD Secretary-General Mathias Cormann said. “The Members of the Inclusive Framework are to be commended for their work in finalising this package, which enhances tax certainty, reduces complexity, and protects tax bases. I look forward to seeing the Inclusive Framework take forward the implementation of this package, as well as to future proposals for further simplifications of the global minimum tax rules and compliance burdens.”
Additional tools and fact sheets to support implementation of the package will be made available in the coming weeks, alongside a dedicated webinar hosted by the OECD on 13 January 2026. The OECD will also continue to ensure that the rules can be implemented effectively and efficiently by all countries and jurisdictions, offering comprehensive capacity-building assistance where needed.
To access the comprehensive package, please visit: https://www.oecd.org/en/topics/sub-issues/global-minimum-tax/global-anti-base-erosion-model-rules-pillar-two.html
 

Working with over 100 countries, the OECD is a global policy forum that promotes policies to preserve individual liberty and improve the economic and social well-being of people around the world.

 
 
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