ECB | Why Europe must safeguard its global currency status

Blog post by Piero Cipollone | For the last quarter of a century, the euro has been a key global currency, second only to the dollar. It has demonstrated its resilience despite the coronavirus pandemic, Russia’s war in Ukraine and the tragic conflict in the Middle East. The euro’s estimated share of international currency use stands at over 19 per cent, a level that has remained broadly stable over the past five years.

Nevertheless, the currency’s place on the global stage cannot be taken for granted, as a recent report by the European Central Bank on the international role of the euro shows. More reforms are needed.
China’s increasingly large role in global trade is encouraging use of its currency. By 2023, the renminbi’s share of China’s trade invoicing had risen to around one-quarter for goods and one-third for services. It is racing with the euro to become the second most used currency for trade finance[1].
History shows that the evolution of global currencies is deeply intertwined with that of the global geopolitical order. In an increasingly multipolar world, there are signs that the fragmentation of the global monetary system is no longer a remote possibility. To diversify and protect against geopolitical risks, central banks — led by China’s — are accumulating gold at the fastest pace seen since the second world war. And anecdotal evidence suggests that some countries are exploring ways of using their own currencies more in international trade transactions instead of those of countries sanctioning Russia.
Yet nowhere else are the risks of global monetary system fragmentation more visible than in international payments. At a time when we should be integrating payment systems to reduce their complexity and cost to users, some nations are deliberately creating separate platforms as alternatives to existing global infrastructures.
For example, China, Iran and Russia have created their own cross-border payment messaging systems, while BRICS members have started to discuss a “bridge” platform for linking digital payments and settlement. These developments could potentially disrupt the smooth flow of capital and reduce the efficiency of the global financial system.
Given these shifts, there are compelling economic and political reasons for seeking to preserve the euro’s global currency status. This status brings tangible benefits to European citizens, such as low borrowing costs in international capital markets and protection from exchange rate volatility. Moreover, in a fragmented geopolitical landscape, the euro’s international currency status provides strategic autonomy by shielding Europeans from external financial pressures.
Internally, the euro’s appeal to foreign investors hinges on maintaining confidence in its stability, supported by well-anchored expectations of price stability and sound economic policies. And its appeal depends on the size and liquidity of the market for safe euro-denominated debt securities and the resilience of the underlying market infrastructures, particularly as a haven in times of stress. A majority of official reserve managers have expressed an interest in increasing their euro holdings but note that the currency’s attractiveness is hampered by a lack of highly-rated assets and centrally-issued debt.[2]
So building a stable, technically resilient, and deeper market for internationally accepted euro debt securities is essential. To be a reliable haven in times of stress, this market could be supported by a robust and flexible supply of common instruments.[3] Providing a broader pool of euro-denominated safe assets, which would act as a European risk-free benchmark, would also be crucial to deepening euro-denominated capital markets. That is why building a genuine European capital markets union must go hand in hand with efforts to further strengthen the fiscal dimension of the EU economic and monetary union.
Externally, Europe needs to further develop the infrastructure for making cross-border payments in euro with key partners. This could, for example, involve interlinking the euro area’s Target Instant Payment Settlement system with fast payment systems in other jurisdictions, either through bilateral links or by connecting to a common, multilateral platform. Such steps could strengthen the trade and financial relations with key partners, including emerging economies, especially where legislation on combatting money laundering and terrorist financing is fully aligned with the international standards established by the Financial Action Task Force. They could also pave the way for central bank digital currencies to be used to make cross-border payments in the future.
Robert Mundell — the late international economist whose Nobel Prize-winning work was so influential for the creation of Europe’s single currency — once said of the euro: “In all the aspects in which it was expected economically to make an improvement, it has performed spectacularly.”[4] By bolstering safety, liquidity and connectivity, we can ensure that the euro continues to strengthen as a cornerstone of the global monetary system.
This blog post was also published in the media as an opinion piece.

Check out The ECB Blog and subscribe for future posts.

“China’s renminbi pips Japanese yen to rank fourth in global payments”, Financial Times, December 21, 2023.
“HSBC Reserve Management Trends: How central bank reserve managers are adapting their strategies amid a rapidly changing environment”, 15 April 2024.
Panetta, F. (2020), “Covid-19 crisis highlights the euro’s untapped potential”, Financial Times, June 12.
Wallace, L. (2006), “Ahead of His Time – Interview with Robert Mundell”, Finance and Development, Volume 43, No 3.

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IMF | Dollar Dominance in the International Reserve System: An Update

The US dollar continues to cede ground to nontraditional currencies in global foreign exchange reserves, but it remains the preeminent reserve currency

Blog post by Serkan Arslanalp, Barry Eichengreen , Chima Simpson-Bell | Dollar dominance—the outsized role of the US dollar in the world economy—has been brought into focus recently as the robustness of the US economy, tighter monetary policy and heightened geopolitical risk have contributed to a higher greenback valuation. At the same time, economic fragmentation and the potential reorganization of global economic and financial activity into separate, nonoverlapping blocs could encourage some countries to use and hold other international and reserve currencies.

Recent data from the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) point to an ongoing gradual decline in the dollar’s share of allocated foreign reserves of central banks and governments. Strikingly, the reduced role of the US dollar over the last two decades has not been matched by increases in the shares of the other “big four” currencies—the euro, yen, and pound. Rather, it has been accompanied by a rise in the share of what we have called nontraditional reserve currencies, including the Australian dollar, Canadian dollar, Chinese renminbi, South Korean won, Singaporean dollar, and the Nordic currencies. The most recent data extend this trend, which we had pointed out in an earlier IMF paper and blog.

These nontraditional reserve currencies are attractive to reserve managers because they provide diversification and relatively attractive yields, and because they have become increasingly easy to buy, sell and hold with the development of new digital financial technologies (such as automatic market-making and automated liquidity management systems).
This recent trend is all the more striking given the dollar’s strength, which indicates that private investors have moved into dollar-denominated assets. Or so it would appear from the change in relative prices. At the same time, this observation is a reminder that exchange rate fluctuations can have an independent impact on the currency composition of central bank reserve portfolios. Changes in the relative values of different government securities, reflecting movements in interest rates, can similarly have an impact, although this effect will tend to be smaller, insofar as major currency bond yields generally move together. In any event, these valuation effects only reinforce the overall trend. Taking a longer view, over the last two decades, the fact that the value of the US dollar has been broadly unchanged, while the US dollar’s share of global reserves has declined, indicates that central banks have indeed been shifting gradually away from the dollar.

At the same time, statistical tests do not indicate an accelerating decline in the dollar’s reserve share, contrary to claims that US financial sanctions have accelerated movement away from the greenback. To be sure, it is possible, as some have argued, that the same countries that are seeking to move away from holding dollars for geopolitical reasons do not report information on the composition of their reserve portfolios to COFER. Note, however, that the 149 reporting economies make up as much as 93 percent of global FX reserves. In other words, non-reporters are only a very small share of global reserves.
One nontraditional reserve currency gaining market share is the Chinese renminbi, whose gains match a quarter of the decline in the dollar’s share. The Chinese government has been advancing policies on multiple fronts to promote renminbi internationalization, including the development of a cross-border payment system, the extension of swap lines, and piloting a central bank digital currency. It is thus interesting to note that renminbi internationalization, at least as measured by the currency’s reserve share, shows signs of stalling out. The most recent data do not show a further increase in the renminbi’s currency share: some observers may suspect that depreciation of the renminbi exchange rate in recent quarters has disguised increases in renminbi reserve holdings. However, even adjusting for exchange rate changes confirms that the renminbi share of reserves has declined since 2022.
Some have suggested that what we have characterized as an ongoing decline in dollar holdings and rise in the reserve share of nontraditional currencies in fact reflects the behavior of a handful of large reserve holders. Russia has geopolitical reasons to be cautious about holding dollars, while Switzerland, which accumulated reserves over the last decade, has reason to hold a large fraction of its reserves in euros, the Euro Area being its geographical neighbor and most important trading partner. But when we exclude Russia and Switzerland from the COFER aggregate, using data published by their central banks from 2007 to 2021, we find little change in the overall trend.
In fact, this movement is quite broad. In our 2022 paper, we identified 46 “active diversifiers,” defined as countries with a share of foreign exchange reserves in nontraditional currencies of at least 5 percent at the end of 2020. These include major advanced economies and emerging markets, including most of the Group of Twenty (G20) economies. By 2023, at least three more countries (Israel, Netherlands, Seychelles) have joined this list.

We also found that financial sanctions, when imposed in the past, induced central banks to shift their reserve portfolios modestly away from currencies, which are at risk of being frozen and redeployed, in favor of gold, which can be warehoused in the country and thus is free of sanctions risk. That work also showed that the demand for gold by central banks responded positively to global economic policy uncertainty and global geopolitical risk. These factors may lie behind the further accumulation of gold by a number of emerging market central banks. Before making too much of this trend, however, it is important to recall that gold as a share of reserves still remains historically low.

In sum, the international monetary and reserve system continues to evolve. The patterns we highlighted earlier—very gradual movement away from dollar dominance, and a rising role for the nontraditional currencies of small, open, well-managed economies, enabled by new digital trading technologies—remain intact.
—For more, see IMF First Deputy Managing Director Gita Gopinath’s May 7 speech: Geopolitics and its Impact on Global Trade and the Dollar.

Full post can be found here
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European Parliament | Election 2024: Updated seat projection for new European Parliament

Updated projection for the composition of the new Parliament based on final and provisional results in 26 countries and pre-electoral data for one (as of 11.38).

2024 provisional results as of 10 June at 11:38

The above projection is based on:

final results from 12 EU member states: Belgium, Croatia, Cyprus, Czechia, France, Germany, Greece, Lithuania, Luxembourg, Malta, Poland, Slovakia;

provisional results from 14 countries: Austria, Bulgaria, Denmark, Estonia, Finland, Hungary, Italy, Latvia, Netherlands, Portugal, Romania, Slovenia, Spain, Sweden;

and pre-electoral data for Ireland.

Preliminary figures suggest an estimated turnout across the EU of 50,8%.
The projections of Parliament’s composition are based on the structure of the outgoing Parliament and its political groups, without prejudice to the composition of the next Parliament at its constitutive session.
All national parties without a current official affiliation and not part of “Non-attached” in the current Parliament are assigned to a holding category called “Others”, regardless of their political orientation.
Seat projections will continue to be updated and published on https://results.elections.europa.eu where you will also find national results, seats by political group and country, the breakdown by national parties and political groups, and turnout. You will also be able to compare results, check majorities or create your widget.

For more information, please contact:

Neil Corlett, Head of the Press Unit

Natalie Kate Kontoulis, Press Officer

Eoghan Walsh, Press Officer

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European Commission | European elections: EU institutions prepared to counter disinformation

The EU institutions are playing their part to defend the European elections on 6-9 June against disinformation and information manipulation targeting European democracy.
The European elections are a flagship of European democracy. As documented by e.g. the European Digital Media Observatory, disinformation actors from inside and outside the EU seek to undermine the integrity of the electoral process, trust in democratic processes at large and sow division and polarisation in our societies. According to the Eurobarometer, 81% of the EU citizens agree that news or information that misrepresent reality or is even false is a problem for democracy.
Attempts to mislead citizens
Institutions, authorities, civil society actors and fact-checkers such as the European Digital Media Observatory, the European Fact-Checking Standards Network and EUvsDisinfo have detected and exposed numerous attempts to mislead voters with manipulated information in recent months.
Disinformation actors have pushed false information about how to vote, discouraged citizens from voting, or sought to sow division and polarisation ahead of the vote by hijacking high-profile or controversial topics. Sometimes these attempts to deceive consist in flooding the information space with an abundance of false and misleading information, all with the aim to hijack the public debate. Often top politicians and leaders are targeted by information manipulation campaigns. Several European policies are often target of disinformation: support to Ukraine, the European Green Deal, migration.
Disinformation actors have also employed networks of fake accounts as well as fake or impersonated media outlets to manipulate the information environment. Recent revelations by the EEAS and national authorities of EU Member States include the False Facade, Portal Kombat and Doppelgänger operations.
Recently an investigative report called “Operation Overload” by Finnish software company Check First documented how suspicious accounts contacted more than 800 fact-checkers and media in over 75 countries – to overload them with false information, drain their resources and try and convince them to spread the false information by way of debunking articles.
EU institutions: Increased efforts to protect the EU from information manipulation
While the threats are there, so are EU’s collective responses. Based on a clear mandate from the political leadership, the EU institutions have been tackling the challenge stemming from foreign information manipulation and interference, including disinformation for years.
These efforts take place in close collaboration and coordination between the institutions and with the involvement of a wide range of other stakeholders, such as EU Member States, media and fact-checkers and civil society, in order to share insights, exchange experiences and best practices and coordinate responses.
Being in the global forefront of addressing threats related to foreign information manipulation and interference, the EU is working in close cooperation with its like-minded partners outside of the EU via fora such as the G7 Rapid Response Mechanism, among others. To raise resilience to external interference attempts, the EU has developed a dedicated toolbox to counter foreign information manipulation and interference, including a set of tools ranging from situational awareness and resilience building to legislation and diplomatic levers. All these efforts always take place in full respect of European fundamental values, such as freedom of expression and freedom of opinion.
Our comprehensive response to disinformation is centred around the following building blocks:

Developing policies to strengthen our democracies, making it more difficult for disinformation actors to misuse online platforms, and protect journalists and media pluralism;
Raising awareness about disinformation and our preparedness and response;
Building societal resilience against disinformation through media literacy and fact-checking;
Cooperating with other institutions, national authorities or third parties.

The EU institutions have been promoting several activities, including awareness-raising campaigns and media literacy initiatives, to raise societal resilience against disinformation and information manipulation. Examples include:

The official European elections website with a section on “Free and fair elections”;
A series of videos by the European Parliament (in 24 official EU languages) informing about the techniques used by disinformation actors to deceive people;
A leaflet by the European Parliament with 10 tips to tackle disinformation;
A toolkit for teachers by the European Commission on how to spot and fight disinformation;
A joint campaign of the Commission and by the European Regulators Group for Audiovisual Media Services with a video running on social media and broadcast around the EU, raising awareness of the risks of disinformation and information manipulation ahead of the European elections;
A dedicated series of articles and insights on foreign information manipulation and interference  on the EEAS’  EUvsDisinfo.

New EU legislation in place
In this mandate, important legislation has been adopted by co-legislators, such as the Digital Services Act (DSA), the AI Act and the Act on Transparency and Targeting of Political Advertising. During the past mandate, the European Parliament’s Special Committee on Foreign Interference in all Democratic Processes in the European Union, including Disinformation (and its successor) also cast a spotlight on the issue of foreign interference, including disinformation, and recommended that all of society play their part, also through non-legislative measures, to tackle them.
The DSA requires platforms to assess and mitigate risks related to the protection of electoral processes, such as disinformation, including through AI generated content. The DSA is already fully applicable and is being enforced by the Commission in relation to so called “very large online platforms” (i.e. those reaching at least 45 million users in the EU or 10% of the EU population). In this context, the Commission has already opened proceedings against X and Meta – for both Instagram and Facebook – on potential DSA violations related to election integrity. On the preventive side, in March 2024, the Commission adopted election guidelines, recalling the measures platforms need to adopt to ensure compliance. In April 2024, the Commission has also organised a voluntary stress test with these designated platforms, civil society and national authorities. The Commission is in continuous dialogue with platforms to ensure effective implementation and compliance with the DSA.
For more information see the background note.

You can read the full report here.
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European Commission | EU Civil Protection Forum assesses how to improve EU crisis response

Today and tomorrow, the European civil protection community will discuss lessons learned and ways forward in civil protection during the 8th edition of the European Civil Protection Forum. The European Commission is organising this conference under the theme of shaping a disaster-resilient Union: charting a path for the future of European civil protection. The event will be a timely opportunity to look back at what has been achieved by the Union Civil Protection Mechanism, and to generate ideas for development, innovation and collaboration in the field of disaster risk management going forward.
The Civil Protection Forum offers an opportunity for experts to discuss the latest evaluation on the Union Civil Protection Mechanism (UCPM). The evaluation, adopted by the European Commission on 29 May 2024, shows that a more coordinated response across different sectors and levels will be needed in the face of the increasing number, and severity, of complex emergencies.
The evaluation, which was presented at the Civil Protection Forum today by Crisis Management Commissioner Janez Lenarčič, found that the EU’s Emergency Response Coordination Centre – its crisis hub – is best placed to coordinate disaster management for effectively supporting and complementing the efforts of Member States in prevention, preparedness, and response.
In addition, the evaluation showed that rescEU, which is the EU’s own reserve of equipment and supplies to respond to disasters, is an effective and efficient EU tool to bolster the EU’s resilience.
However, the evaluation also raised concerns that the UCPM’s flexibility might not be sufficient to address new needs and developments going forward, with disasters becoming ever more frequent and complex. Climate change exacerbates this trend.
The European Commission has worked hard to build up its prevention, preparedness and response capacities to ensure that Europe is ready for a more unpredictable future.  Looking forward, it is crucial Europe builds on the lessons learnt and continues to strengthen its civil protection capacities. This is the only way to keep people safe.
The EU’s Civil protection Forum takes place in Tour & Taxis from 4-5 June and brings together experts, policy makers, first responders, scientists and the private sector.
When an emergency hits, any country can request assistance via the EU Civil Protection Mechanism. Once activated, the EU’s Emergency Response Coordination Centre coordinates and finances assistance made available by EU Member States and ten additional Participating States (Albania, Bosnia and Herzegovina, Iceland, Moldova, Montenegro, North Macedonia, Norway, Serbia, Türkiye and Ukraine) through spontaneous offers.
The UCPM has been activated 520 times between 2017 and 2022. Recent innovations have been introduced to cope with evolving demands, such as logistical hubs to ensure that support, such as transport, logistics and private donations, reached Ukraine in a rapid and efficient manner.
The European Commission adopted the Communication on the evaluation of the Union Civil Protection Mechanism accompanied by a Staff Working Document. Following an initial interim evaluation of the UCPM in 2017, the European Commission conducted an independent evaluation of all actions carried under the UCPM in EU Member States and Participating States between January 2017 and December 2022 and the Evaluation analysed these five years of the operations of the UCPM.
You can read the full report here.
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European Commission | Commission establishes AI Office to strengthen EU leadership in safe and trustworthy Artificial Intelligence

Today the Commission has unveiled the AI Office, established within the Commission. The AI Office aims at enabling the future development, deployment and use of AI in a way that fosters societal and economic benefits and innovation, while mitigating risks. The Office will play a key role in the implementation of the AI Act, especially in relation to general-purpose AI models. It will also work to foster research and innovation in trustworthy AI and position the EU as a leader in international discussions.
The AI office is composed of:

Regulation and Compliance Unit that coordinates the regulatory approach to facilitate the uniform application and enforcement of the AI Act across the Union, working closely with Member States. The unit will contribute to investigations and possible infringements, administering sanctions;
Unit on AI safety focusing on the identification of systemic risks of very capable general-purpose models, possible mitigation measures as well as evaluation and testing approaches;
Excellence in AI and Robotics Unit that supports and funds research and development to foster an ecosystem of excellence. It coordinates the GenAI4EU initiative, stimulating the development of models and their integration into innovative applications;
AI for Societal Good Unit to design and implement the international engagement of the AI Office in AI for good, such as weather modelling, cancer diagnoses and digital twins for reconstruction;
AI Innovation and Policy Coordination Unit that oversees the execution of the EU AI strategy, monitoring trends and investment, stimulating the uptake of AI through a network of European Digital Innovation Hubs and the establishment of AI Factories, and fostering an innovative ecosystem by supporting regulatory sandboxes and real-world testing.

The AI Office will be led by the Head of the AI Office and will work under the guidance of a Lead Scientific Adviser to ensure scientific excellence in evaluation of models and innovative approaches, and an Adviser for international affairs to follow up on our commitment to work closely with international partners on trustworthy AI.
AI Office setup and tasks
The AI Office will employ more than 140 staff to carry out its tasks. The staff will include technology specialists, administrative assistants, lawyers, policy specialists, and economists.
The office will ensure the coherent implementation of the AI Act. It will do this by supporting the governance bodies in Member States. The AI Office will also directly enforce the rules for general-purpose AI models. In cooperation with AI developers, the scientific community and other stakeholders, the AI Office will coordinate the drawing up of state-of-the-art codes of practice, conduct testing and evaluation of general-purpose AI models, request information as well as apply sanctions, when necessary.
To ensure well-informed decision-making, the AI Office will collaborate with Member States and the wider expert community through dedicated fora and expert groups. At EU-level the AI Office will work closely with the European Artificial Intelligence Board composed of representatives of Member States. The Scientific Panel of independent experts will ensure a strong link with the scientific community and further expertise will be gathered in an Advisory Forum, representing a balanced selection of stakeholders, including industry, startups and SMEs, academia, think tanks and civil society.
The AI Office will promote an innovative EU ecosystem for trustworthy AI. It will contribute to this by providing advice on best practices and enabling access to AI sandboxes, real-world testing and other European support structures for AI uptake, such as the Testing and Experimentation Facilities in AI, the European Digital Innovation Hubs, and the AI Factories. It will support research and innovation activities in the field of AI and robotics and implements initiatives, such as GenAI4EU, to ensure that AI general-purpose models made in Europe and trained through EU supercomputers are finetuned and integrated into novel applications across the economy, stimulating investment.
Finally, the AI Office will ensure a strategic, coherent and effective European approach on AI at the international level, becoming a global reference point.
Next Steps
The organisational changes outlined above will take effect on 16 June. The first meeting of the AI Board should take place by the end of June. The AI Office is preparing guidelines on the AI system definition and on the prohibitions, both due six months after the entry into force of the AI Act. The Office is also getting ready to coordinate the drawing up of codes of practice for the obligations for general-purpose AI models, due 9 months after entry into force.
In April 2021, the Commission proposed the EU AI Act and a new Coordinated Plan with Member States, to guarantee the safety and fundamental rights of people and businesses, while strengthening investment and innovation across EU countries. The EU AI Act was provisionally agreed by co-legislators in December 2023 and is the world’s first comprehensive law on Artificial Intelligence. The AI Act should enter into force by end July 2024.
In January 2024 the Commission launched a package of measures to support European startups and SMEs in the development of trustworthy Artificial Intelligence (AI). As part of these measures, a Commission decision to establish the AI Office was adopted.
You can read the full report here.
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IMF | Why I Remain Optimistic About Global Economic Cooperation

Acceptance Speech by Kristalina Georgieva, IMF Managing Director, Venice, Italy
President Mattarella, Governor Visco, Mayor Brugnaro; Professors Lippiello and La Malfa; Commissioner Gentiloni; all of you who have come here today: I am deeply grateful for your presence and for the honor of being the first recipient of the Ugo la Malfa Prize for International Cooperation from the Università Ca Foscari Venezia, the Enciclopedia Treccani, and the Fondazione Ugo La Malfa. I will cherish it and will work hard to serve our family of nations so as to be worthy of it.
Dear Ignazio, your meticulous laudatio deeply touched me. Grazie di cuore!
May I add to it a tribute to the person whose life we celebrate through this prize:
Ugo La Malfa: pioneer in the post-war Italian reconstruction and economic miracle. Parliamentarian from 1946 to 1979. Minister of transport, minister of foreign trade, minister of budget and the treasury, deputy prime minister. European visionary, having helped guide Italy into the EU.
And, during our earliest years, a respected figure in the IMF’s highest governing body—our Board of Governors—appointed as Italy’s very first alternate governor in 1947, renewed twice, serving until 1959.
To receive this prize in his name in this beautiful and historic city—a monument to international trade and cooperation—is a proud and unforgettable moment.
My brief remarks today tell the story of global economic cooperation since World War II, weaving in my own experiences—experiences that have made me an unwavering optimist.
Let me start in 1947—the year Ugo La Malfa joined our Board of Governors.
In 1947, the world was—how to say it simply—the world was a mess. Europe sat in the rubble of total war. Former allies were already pointing their guns at each other. Women, girls, and old men—so many of the young men were dead—lifted broken bricks by hand. In Italy, widespread devastation, including of priceless cultural sites. In Japan, cities reduced to ash. In India, partition. In China and elsewhere, hunger. Almost everywhere, millions of displaced people on the move.
And yet, three years earlier, as the Western Allies fought their way out of Normandy, as the Red Army waged vast battles in the east, and as the Nazi holocaust reached its terrible climax, a group of statesmen met at Bretton Woods, New Hampshire, to craft a new global economic order. Great economic progress would result.
Given the positive outcomes, it is doubly regrettable that, for the first 45 years, a large section of the globe—the Soviet bloc—would remain outside the Bretton Woods system. A world divided.
Step one in my life—Bulgaria.
Back in the 1950s, as Italy grew by 7 percent a year, I was a child growing up in the communist world. Looking back, and knowing what I know now, it was a cold place. Not everything was bad—education was free, women could study and work, there was basic healthcare—but, overall, life on the other side of the Iron Curtain was frugal and oppressive.
Central planning, we can now confidently say, was an experiment doomed to failure. A system where the party faithful decided how to allocate the people’s savings simply could not compete with the entrepreneurial energy of the West. First the Soviet system groaned. Then it broke.
Step two in my life—the leap from central planning to markets.
When the Wall came down in 1989, I was one of the few Bulgarians to have been on the other side. When Gorbachev came to power and initiated Glasnost and Perestroika, we were allowed for the first time to apply directly for scholarships in the west—I won one of them and in the summer of 1987 went to the London School of Economics. The time I spent there equipped me with precious knowledge about the functioning of the market economy—and when at the end of 1989 the centrally planned system collapsed, I wrote the first microeconomics and macroeconomics textbooks for Bulgarian students, helping a whole generation to transition to a new world.
I went on to teach economics in Fiji and later at the Department of Urban Studies at the Massachusetts Institute of Technology. And it was there that the World Bank found me and then hired me in 1993. It gave me a chance to support the plan-to-market transitions on a much larger scale. It was an exciting time—an historic injustice was being corrected, with the eastern bloc joining its former enemies. The full potential of Bretton Woods, one might have concluded, was finally within reach.
In the three decades since I first joined the Bank, a billion-and-a-half people have escaped abject poverty. The woman in rural China who used to walk miles a day for firewood now has a gas stove and a moped. The mothers and babies who died at childbirth, mostly they now survive. Schools built. Lives transformed. Mud roads paved. Cellphones for countless millions, linked directly to satellites in the sky. The internet, not just for the few, but for more and for play.
As I noted in a speech at Cambridge University two months ago, so much of what John Maynard Keynes, himself an optimist, predicted in 1930 has come true. In a hundred years, technological advancements and capital accumulation have delivered eight times higher income per capita, despite the quadrupling of the world’s population; despite wars, genocides, and divisions. The decades since 1930 have been defined by a long march of cooperation, trade, and innovation that has lifted productivity, growth, and living standards. And the best record of progress came in the years after the end of the Cold War—the decades that enjoyed a truly integrated global economy.
A loop back to my own journey.
The year was 2010. I had already served in a number of very noteworthy positions at the World Bank. It turned out my learning process was not over—far from it. My life was about to take another big turn, exposing me to new things. Again, inspiration and hope—but also human suffering, up-close and personal.
Step three for me—back to Europe.
Sometimes things just happen. Call it luck, call it destiny. As you know, every EU member state gets to send one commissioner to Brussels. In 2010, as President Barroso assembled his second European Commission, the Bulgarian nomination fell through. I was called to step in as the EU commissioner for humanitarian aid and crisis management. Just in time for the response to the Haiti earthquake, the famine in the Horn of Africa and the terrible civil wars in Syria and Libya.
I saw the children after their boat crossings. I met the men who had left their loved ones behind in search of jobs to send money home. It reminded me: human history is a history of migration. And I resolved—in this chapter at least—to let it also be a story of compassion and integration.
It was during my seven years in Brussels that I began to fully appreciate the Great European Experiment. In the years when the Bretton Woods institutions were finding their feet, western Europe had embarked on a journey of cooperation that would become a shining light for all.
Former enemies burying their traumas to become friends. Founding fathers like Adenauer, De Gasperi, and Schuman sitting together, carefully considering every detail. Treaties, laws, referenda. The democratic will of the people, driving ever-closer economic integration. In the 1980s, Spain joining. In the 2000s, the central and eastern European countries, including mine. Freedom of movement of goods, services, people, and money. A powerful engine of convergence at work. Prosperity in togetherness.
If ever there were an exhibit to international cooperation, the EU is it! Italy can be proud of having been involved right from the start. In my own small way, I am proud to have served the European project.
Finally, let me take you back to Washington for step four in my journey.
By the time I was chosen to lead the IMF in 2019, I had already long understood that the economic progress all around us could not be taken for granted. It requires sound fundamentals—good policies and strong institutions to secure economic and financial stability as preconditions for growth, jobs, and improvements in living standards. And for that, the IMF is there, to help countries do what is necessary to ensure these fundamentals are in place.
Most people know the Fund for its lending programs. Some hate the Fund for its lending conditions—essential medicine can be bitter. It may well be true that the role that makes the IMF unique is its balance-of-payments support, timelessly written into the Articles of Agreement in 1944.
But I think more people should notice the health check-ups it conducts with all its 190 member countries (soon to be 191 with Lichtenstein) and the capacity development it provides to help countries put in place the necessary responses to these check-ups. An annual policy consultation with the US authorities as well as technical assistance to clean up the banking sector in Spain? Only the IMF.
Very early in my term at the Fund, COVID‑19 arrived. We all remember the images of biochemical suits in Wuhan and then the human suffering, especially of the elderly, here in Italy and soon everywhere. What followed was not a recession—it was a total lockdown. In the rich countries, governments stepped in on an epic scale to support lives and livelihoods. In Africa, Latin America, and so many other places, governments lacked the resources to do so. We at the IMF were these countries’ only source of support: we were the first responders.
Two years later, just when we hoped the worst was over, Russia launched its invasion of Ukraine. One result: a global energy shock bigger than the oil shocks of the 1970s. Major disruptions to the supply of wheat and many other commodities. Europe, so reliant on Russian gas, hit very hard.
In both the pandemic and the energy shock, the IMF didn’t just sit back and watch the action. For 97 of our member countries—of which 57 are low-income countries—we were the action, lending a combined total of almost 370 billion dollars. And we provided a special drawing rights allocation of 650 billion—the largest in our history.
To lead the Fund is my great privilege. To be asked to do so for not one five-year term, but two—essentially for the entire decade of the 2020s—is not only a great honor, it is a great responsibility.
Let me conclude with the main question: where to from here?
I see great cause for concern. In front of our eyes, wars in Ukraine and the Middle East. Climate disasters on all continents. Unprecedented speed of change and frequency and severity of shocks. Inequality rising within and across countries.
On many occasions I have spoken about the trade and financial fragmentation underway. I know intimately well the constraints under which the IMF, the World Bank, and the United Nations must operate. Nobody needs to tell me how difficult it is to get 190 countries to agree on common actions.
When the history is written, will it be said that after the golden age of global economic cooperation the world fell back into two hostile camps, not talking, as we saw during my childhood?
With the post-Soviet rapprochement at an end and new partnerships taking shape, this is certainly a major risk.
If so, how can I be optimistic?
Four reasons, by way of a summing up:

First, international cooperation as conceived at Bretton Woods has delivered profound human progress. This is the essential point of my cursory historical review today.
Second, technological progress, including artificial intelligence, and wealth accumulation, as predicted by Keynes, continue ever faster. And they do so in an immeasurably more intertwined and co-dependent world than in 1947. The process of integration may be slowing, but it has not gone into reverse—the social, economic, and political costs of that would simply be too high.
Third, world leaders of every political hue and political system appear to pragmatically agree that no matter what happens, we benefit from having safe places where we can still talk. Places where you leave your trade wars, cold wars, hot wars, and proxy wars outside the front door. This is what I see every time we hold our Spring and Annual Meetings.
Fourth, as I noted at the outset, we are coming to grips with the realization that we share the same home—our beautiful planet—and that climate change and environmental destruction are universal threats. Either we face these threats together or—like this beautiful and historic city of Venice—we will struggle to survive.

Respected friends and colleagues, here is my bottom line: even though the setbacks we see are very serious, I am deeply convinced that the zig zags of history take us up and forward. Global economic cooperation may face headwinds but is here to stay.
As a graduate of Karl Marx University in then communist Bulgaria, and now the head of the IMF, I am evidence that anything is possible.
Once more, my deepest, heartfelt gratitude!
Full speech can be found here
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European Council | Industrial policy: Council gives final approval to the net-zero industry act

The Council has today adopted a regulation on establishing a framework of measures for strengthening Europe’s net-zero technology manufacturing ecosystem, better known as the ‘net-zero industry act’.
This is the last step in the decision-making process.
The regulation aims to boost the industrial deployment of net-zero technologies that are needed to achieve the EU’s climate goals, using the strength of the single market to reinforce Europe’s position as a leader in industrial green technologies.
“The net-zero industry act is one of the foundation stones of a new industrial policy. This legal act will help Europe to lead the global race for green technologies and make sure that our contribution to the fight against climate change also reduces our dependencies, reinforces our strategic autonomy and helps us to create growth and jobs in Europe.”
– Jo Brouns, Minister of Flanders for Economy, Innovation, Work, Social Economy and Agriculture
Boosting green technologies
The net-zero industry act will create favourable conditions for investment in green technologies by:

simplifying the permit-granting process for strategic projects
facilitating market access for strategic technology products (in particular in public procurement or the auctioning of renewable energies)
enhancing the skills of the European workforce in these sectors (i.e. with net-zero industry academies and high-concentration industrial areas or ‘valleys’)
creating a platform to coordinate EU action in this area

To foster innovation, the legal act proposes to create favourable regulatory frameworks for developing, testing and validating innovative technologies (known as ‘regulatory sandboxes’).
Progress towards the objectives of the net-zero industry act will be measured by two indicative benchmarks. Firstly, manufacturing capacity of net-zero technologies, such as solar photovoltaic panels, wind turbines, batteries and heat pumps, reaching 40% of the EU’s deployment needs. Secondly, a specific target for an increased Union share for these technologies with a view to reaching 15 % of world production by 2040.
In addition, the net-zero industry act sets up an annual injection capacity of at least 50 million tonnes of CO2 to be achieved by 2030 in geological storage sites located in the territory of the Union.
Next steps
Following the Council’s approval today of the European Parliament’s position, the legislative act has been adopted.
After being signed by the President of the European Parliament and the President of the Council, the regulation will be published in the Official Journal of the European Union and will enter into force on the day of its publication.
The net-zero industry act is one of the three key legislative initiatives of the green deal industrial plan – together with the critical raw materials act and the electricity market design reform – to enhance the competitiveness of Europe’s net-zero industry and support a rapid transition to climate neutrality.
The Commission tabled its proposal on 16 March 2023. The European Parliament adopted its position on 21 November 2023 and the Council its general approach on 7 December 2023. The Council and the Parliament reached a provisional agreement on 6 February 2024, which was voted on in a plenary session in the European Parliament on 25 April 2024.
See full press release here
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OECD | Developed countries materially surpassed their USD 100 billion climate finance commitment in 2022

Developed countries provided and mobilised USD 115.9 billion in climate finance for developing countries in 2022, exceeding the annual 100 billion goal for the first time and reaching a level that had not been expected before 2025.
According to new figures from the OECD, in 2022 climate finance was up by 30% from 2021, or by USD 26.3 billion. This is the biggest year-on-year increase to date and means that the 100 billion mark was reached a year earlier than the OECD had previously projected, albeit two years later than the initial target date of 2020.
Climate Finance Provided and Mobilised by Developed Countries in 2013-2022 is the OECD’s seventh assessment of progress towards the UNFCCC goal, agreed in 2009, of mobilising USD 100 billion a year by 2020 – a commitment later extended through to 2025 – to help developing countries mitigate and adapt to climate change. It comes as UNFCCC discussions are under way to set a New Collective Quantified Goal (NCQG) on climate finance for the post-2025 period, taking into account developing countries’ needs and priorities as well as the evolving global economic landscape.
“It is good to see that developed countries have exceeded the USD 100 billion goal in 2022. Exceeding this annual commitment materially by more than 15% is an important and symbolic achievement which goes some way towards making up for the two year delay, which should help build trust. We encourage developed countries to keep up the momentum, also to leverage it further with additional policy efforts to boost private climate finance,” OECD Secretary-General Mathias Cormann said. “It will be important to sustain this level of elevated support through to 2025 while also increasing our ambition for the new post-2025 goal. Multilateral providers and the private sector will be key to further bridging the investment gap, notably in areas such as clean energy, agriculture and resilience. For the post-2025 period, the scope and design of the New Collective Quantified Goal on climate finance must be more comprehensive and effective than the existing goal by optimising the roles of different actors, finance sources, and policy incentives in order to address the scale and range of climate-related finance needs.”
Additional OECD analysis published this week highlights the need for the NCQG on climate finance to reflect and incentivise contributions from a broad range of sources in line with the scale of investment needed to achieve the Paris Agreement’s goals. The report explores ways the new goal could incorporate elements relating to public interventions that can either directly finance climate action or help mobilise private climate finance. It also discusses options for factoring in elements related to the quality of finance, as well as addressing key issues faced by developing countries such as access to finance and the sustainability of debt.
The 2022 climate finance data shows that public funds, from both bilateral and multilateral channels, continue to make up the bulk of climate finance, accounting for 80% of the total. Over the period recorded, multilateral public climate finance showed the biggest rise, up by USD 35 billion or 226% since 2013. The 2022 growth in public climate finance was accompanied by a jump of 52%, or USD 7.5 billion, in mobilised private finance, which reached USD 21.9 billion in 2022 after several years of relative stagnation.
The figures also show an uptick in climate finance destined for adaptation action. Following a small drop in 2021, adaptation finance reached USD 32.4 billion in 2022, three times the 2016 level. The amount of public adaptation finance tracked by the OECD in 2019 was USD 18.8 billion and USD 20.3 billion with mobilised private finance included. Based on these figures, in 2022, developed countries were about halfway towards meeting the 2019 COP26 Glasgow Climate Pact’s call to double the provision of adaptation finance by 2025.
As with previous OECD assessments, this year’s edition provides insights relating to financial instruments as well as geographical distribution of climate finance. It shows that loans continue to represent the lion’s share of public climate finance, especially for multilateral development banks that typically finance large infrastructure projects, although grants are being prioritised in lower-income countries. The mix is more balanced for multilateral climate funds and bilateral providers, owing to a larger and more diverse range of activities and projects. Between 2016 and 2022, grants increased by USD 13.4 billion (more than doubling with an increase of 109%) and public loans by USD 30.3 billion (up 91%).
Climate finance to low-income countries remained relatively low at 10% in 2022. Importantly, however, least developed countries (LDCs) and small island developing states (SIDS), benefitted from a larger amount of finance for adaptation (about 50%) than the average for all developing countries (25%). On the other hand, private mobilised finance for LDCs and SIDS was very limited, underscoring the need for tailored international support to help address the challenges faced by these countries in attracting private investment for climate action.
The OECD will continue to track the fulfillment of the USD 100 billion goal through to 2025 as well as, pending the outcome of COP29 in Baku, contributing to international efforts to implement the NCQG in an effective way.
View full press release here
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IMF | Europe Can Reap Sizable Energy Security Rewards by Scaling Up Climate Action

Meeting the continent’s emission reduction targets could enhance energy security metrics by 8 percent by 2030—and that would be just the start
Blog post by Geoffroy Dolphin, Romain Duval, Galen Sher, Hugo Rojas-Romagosa | Russia’s invasion of Ukraine triggered Europe’s worst energy crisis since the 1970s and put energy security back at the top of the policy agenda.
Policymakers reacted swiftly by securing alternative natural gas supplies, improving energy efficiency, and expanding renewables. Reducing greenhouse gas emissions would, they said, not only mitigate climate change but also strengthen energy security. Skeptics, however, countered that this approach would increase the cost of energy, phase out safe (albeit dirty) domestic coal more rapidly, and ultimately weaken the continent’s energy security.
So, which view is correct? Our new research shows that boosting Europe’s climate action delivers sizable energy security benefits, too.
We weigh the effects of climate action on energy security in a global economic model with many countries and sectors. It simulates the impacts of policies to reduce emissions on two essential security measures.
The first measure, security of supply, assesses the risk of a disruption to energy supply by combining how dependent a country is on imports for its energy consumption with how diversified those energy imports are. The second is the resilience of its economy to an energy disruption, represented by the share of gross domestic product it spends on energy.
Strikingly, our analysis reveals that Europe’s energy security deteriorated in the decades before Russia’s invasion of Ukraine, as countries relied increasingly on imports from ever fewer suppliers.

The simulations also show that higher carbon prices, stronger sector-specific energy efficiency regulations, and accelerated permitting for renewables would all improve Europe’s energy security along these two key metrics. Effects would differ across policies, however:

Carbon pricing cuts emissions at the lowest output cost to the economy but may take time to improve energy security in some energy- and emission-intensive economies in Central and Eastern Europe, if used as the only emission-reduction tool. This is partly because these countries would have to phase out domestic coal sooner than otherwise.

Stronger energy-efficiency regulations for transport and buildings, by contrast, are less efficient than carbon pricing in cutting emissions, but they deliver larger energy security co-benefits. They also spread those benefits more evenly across countries. Such regulations lower the consumption of energy, just as carbon pricing does, but they tend to reduce the price of energy—and thereby overall energy expenditures—more. Combining them with support to poorer households—for purchases of more energy-efficient vehicles and domestic heating systems, for example—would make them more palatable and thereby speed up implementation.

Accelerated permitting for renewables also improves energy security widely across Europe by expanding domestic energy supply.

Packaging climate policies
A climate policy package that includes all these tools is the most promising way forward because it combines the economic efficiency of carbon pricing with the larger and more evenly shared energy security benefits of regulations.
Specifically, a package of measures improves energy security in three ways. First, it lowers dependence on imports by replacing imported fossil fuels with domestically produced renewable electricity.
Second, it diversifies individual economies’ energy imports away from non-European suppliers toward European ones—through enhanced penetration of renewables and electrification of end uses such as vehicles and house heating systems, in particular, given that European countries predominantly trade electricity with their European neighbors.
And third, it lowers energy expenditures because efficiency investments reduce demand and accelerated renewables deployment raises energy supply—both of which lead to lower energy prices. This more than offsets the higher cost from higher carbon pricing.
An illustrative policy package that cuts emissions by 55 percent compared to 1990 levels would improve the two energy security metrics by close to 8 percent by 2030 for Europe as a whole.

For the European Union, this package, which is consistent with the “Fit-for-55” agenda, would reverse 13 years of deterioration in economic resilience to energy disruptions and eight years of reduction in security of energy supply. As Europe continues to ramp up its climate policy action beyond 2030, these gains would only increase.
Multilateral cooperation
The simulations also support the case for strong multilateral cooperation within Europe, given that countries differ in their energy security gains and emission reduction costs (which, in turn, reflect factors such as their current energy intensity, energy mix, and potential for renewable power generation). A common facility that would pool resources and coordinate green investments at the EU level could accelerate the green transition at low cost while distributing its gains more evenly, including by tapping cheap abatement options in emerging EU member countries.
Completing the EU’s energy union strategy is a case in point: better connecting national grids would lower costs and help individual countries import electricity from other member countries in the event of domestic disruptions, improving energy security for all.
At a time when the momentum behind climate action is at risk of fading, European policymakers should consider its full benefits. By ramping up their individual emission reduction policies as planned and strengthening their cooperation, not only will they remain global leaders on the path toward net zero emissions by 2050, but they will also secure abundant and safe energy supply to power their economies into the future.
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Full post can be found here
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