The European Commission and the European Investment Bank (EIB) Group launched today the European Institutional Investors Pact (EIIP) at the TechEU Equity Summit.
The Pact is a new voluntary framework designed to channel more long-term institutional capital into Europe’s technology and scale-up ecosystem. Thirteen institutional investors have already expressed their intention to channel investments into Europe’s innovation and scale-up ecosystem, including through the €15 billion European Tech Champions Initiative (ETCI) 2.0 and the €5 billion Scaleup Europe Fund.
President of the European Commission, Ursula von der Leyen, said: “Talent, ideas and ambition – Europe has all of these. Now we are making sure our innovative companies can grow, scale and lead on the global stage – from Europe. By bringing together public and private partners, the goal is to unlock long-term capital for our technology. This is about turning European innovation into European industrial and economic strength.”
The EIIP has been developed jointly by the European Commission and the EIB Group under the EU Startup and Scaleup Strategy.
To support investors, the Pact includes two complementary elements:

A Policy Dialogue Forum: led by the Commission, this forum will enable exchanges with institutional investors on regulatory policy developments, as well as EU investment policies.
An Investment Platform: led by the EIB Group, this platform will help investors access to investment opportunities across Europe’s venture capital and growth equity ecosystem, through sharing of investment pipelines, market intelligence, peer exchange and ecosystem insights helping investors identify opportunities. It will be developed in close cooperation with Member States and aligned with relevant national initiatives, aiming at facilitating engagement and providing pathways linked to exit.

It aims to make it easier for institutional investors to invest in European venture capital and growth equity funds, helping high-growth European companies access the capital they need to scale up and compete globally while remaining rooted in Europe.
It forms part of the broader EU effort to unlock more institutional capital, from investors such as banks, pension funds and insurance companies, for European technology and innovation, addressing one of the key funding challenges identified in Europe’s competitiveness agenda.
Nadia Calviño, President of the EIB Group said: “Our goal is clear: to provide Europe’s institutional investors with a single, credible entry point into innovation financing. In today’s world, this partnership between EU institutions and the private sector sends a powerful message of European unity, ambition and determination.”
The 13 institutional investors ready to join the EIIP have expressed their intent in investing in large EU-based funds focused on later-stage and growth equity financing for European technology companies. These include the European Tech Champions Initiative 2.0, the Scaleup Europe Fund, the European Investment Fund-backed funds supported under InvestEU, and other investment strategies targeting the scale-up phase of venture and growth capital.
Ekaterina Zaharieva, Commissioner for Startups, Research and Innovation said ” Europe has the talent, the research base and the entrepreneurial ambition to lead in strategic technologies. What many companies still lack is access to sufficient late-stage capital. With the European Institutional Investors Pact, we are helping connect Europe’s deep pools of long-term capital with its most promising innovators so they can scale up and stay in Europe.”
Karl Nehammer, Vice-President of the EIB said “Leading investors recognise both the need and the opportunity to strengthen Europe’s innovation financing ecosystem and support companies as they grow. Through the EIIP, investors, the European Commission, the EIB Group and Member States can work together within a common framework to help develop deeper venture and growth capital markets across Europe.”
Marjut Falkstedt, Chief Executive of the EIF said “This first milestone demonstrates growing momentum among institutional investors and reflects the strong complementarity between the EIB Group and the European Commission in mobilising capital for Europe’s future tech champions. Our priority is now to connect investors with credible pathways into Europe’s innovation economy. The Investment Platform will help translate that interest into long-term investment activity.”
 
 
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Thank you, Graeme, and thank you SWIFT for the kind invitation.
The theme of this year’s conference is digital finance for AI-driven economies.  This is an important topic for the IMF because an efficient and secure payments system is critical to economic growth and stability.
Clearly, as the theme suggests, the financial system, and payments in particular, will need to evolve. If AI is used as widely as proponents expect, a great deal of economic activity will be undertaken by AI agents rather than by people. The current payments system was not built for autonomous agents operating continuously and at scale.
At the same time, AI has extraordinary potential to transform the payments system we already have, even before we get to the more difficult questions about how the financial system itself may need to evolve.
Today, I want to explore three points: first, how AI can improve the payments system; second, whether and how the financial system needs to be reengineered to support an AI-intensive world; and third, how policymakers should respond to certain risks that are unique to AI.
I. What AI can do for payments
Let me start with how AI can improve the payments landscape.
One way is by reducing information frictions and switching costs.  AI agents can assess fees, services, exchange rates and execution quality continuously, routing each transaction to the most efficient provider. That lowers barriers to entry, increases competition and puts pressure on incumbents to improve their prices and services.  This applies not just to financial services, but to all forms of commerce.  One might even wonder whether a sustained reduction in information frictions and switching costs could have macroeconomically significant consequences for inflation.
Second, agents can automate complex transactions that today require extensive human involvement.  They can manage the mechanics of paying, coordinating machine-to-machine payments and optimizing the timing based on liquidity, costs, and contractual obligations. Some of this is possible today through programmability. But programmability only takes you so far. It requires explicit instructions for each task and operates within predefined parameters. By contrast, agentic systems can interpret context and operate without requiring a new set of instructions for each transaction. That would open up more commerce to automation, increasing the volume and speed of transactions.
Third, agentic AI could substantially lower the costs of regulatory reporting and compliance by automating the collection, reconciliation and reporting of data across institutions and jurisdictions. Agents could continuously monitor transactions and positions against regulatory requirements, identify gaps in real time, and produce compliance documentation.
The benefits of AI become even more powerful in the context of cross-border payments, which bridge different legal systems, currencies and regulatory requirements.  Agents could automate activities such as customer due diligence and sanctions screening, improving the speed and consistency of compliance. And the benefits from agent-enabled price comparison are likely to be even larger than in the domestic context, given the incremental frictions faced by retail consumers making cross-border payments.
I would not underestimate the scale of the benefits of applying AI to the existing payments architecture. Payments are about much more than just the public infrastructure that supports them.  A full payments product requires regulatory compliance, dispute resolution, and customer support.  Those functions are needed regardless of whether payments run on blockchain rails or other infrastructures.
Many of the benefits promised by a reimagined financial system can instead be delivered by upgrading the core payment systems that we already have. That is where AI can help.  In the short run, this is where we are likely to see more tangible benefits.
The scale alone makes the case for investment. IMF staff estimate that cross-border payments move nearly $1 quadrillion a year. At that scale, even improvements measured in basis points can translate into very large gains.
II. How the financial system might evolve
As AI agents become a significant part of economic activity, the financial system will need to evolve alongside them. It must become more digital, more interoperable and more programmable.
A range of payment technologies could supply the infrastructure needed for autonomous agents to transact across financial networks. Tokenization may be especially promising, since tokenized assets are natively programmable and can settle almost instantly, at any hour.
We are already seeing progress.  CHIPS, for example, is leading a multi‑bank initiative to create a shared tokenized deposit settlement platform.
The challenge for policymakers is to support innovation without compromising stability.  That begins with legal and regulatory frameworks that permit different payment technologies to compete on their merits.
The law needs to clearly establish the legal nature of tokens, including the rights and claims of purported owners and parties with varying degrees of contractual privity.  It must also define the relationship between tokenized assets and their real-world equivalents.  Authorities should avoid erecting unnecessary obstacles to interoperability across networks.  And liquidity frameworks will need to keep pace because while atomic settlement removes counterparty risk, it also raises intraday liquidity needs by requiring prefunding.
If banks continue to embrace tokenization, it naturally raises the question of how central banks should respond, as the existing bank-based payments architecture rests on a foundation of central bank money that is not currently tokenized.
Stablecoins, too, raise questions of the form of liabilities issued by the government.  To maintain a stable value and function as a payment instrument, they need to be backed by safe and liquid assets like short-term government obligations, central bank deposits, or insured commercial bank deposits that are ultimately supported by central bank money.
At the Fed’s Jackson Hole conference this year, we had very interesting discussions about whether central banks should offer new forms of central bank money, such as tokenized reserves, and whether they should extend access to central bank money to new parties.  Finance ministries, too, might consider whether they should issue government obligations in tokenized form.
We are seeing a wave of experimentation across these domains.  For example, the ECB’s recently launched Project Pontes is designed to enable wholesale transactions on distributed ledger platforms to settle in central bank money.  The Bank of England is requiring certain issuers of stablecoins to hold central bank deposits.
The diversity of these approaches reflects varying country circumstances and underscores why policymakers should keep their options open, observe how developments unfold, and consider tailored solutions as the market matures. This is an area where the IMF supports central banks in evaluating alternative pathways through technical assistance.
It is certainly appropriate for central banks to provide new public infrastructure that supports competition, such as tokenized reserves.  But these services should be constructed in a way that does not lock out new technologies and business models that might emerge from market-based competition. The objective should be to create an enabling environment, while ensuring the integrity and stability of the payment system.
Preserving space for competition is not just about increasing efficiency and innovation.  It is also a financial stability issue.  Policymakers that encourage overly narrow solutions often discourage heterogeneity in business models that can be a source of resilience.  When the inevitable shock comes, similar institutions tend to fail in the same way, creating systemic risk.
III. Approaching AI risk
The development and diffusion of AI technologies may pose broader risks that need to be considered. Cyber risks are of course at the top of the list.  AI is reshaping cyber risk by accelerating the speed, frequency, and breadth of vulnerability discovery and potential exploitation. Tokenized markets depend heavily on shared, complex infrastructure and a small number of third-party providers. That means a cyber incident can propagate widely enough to become systemic.
Fortunately, we have not yet seen a macro-critical cyber event. Private risk management and the existing supervisory architecture have contained risks. That approach still applies: strong governance, technical controls that limit the blast radius of a breach, and robust incident response and recovery. We need more coordination among standard setters and supervisory networks, and between governments and industry.
As frontier AI tools are deployed by cyber actors, defenders will need those same tools to respond.  And that gets to a broader debate about whether increasingly powerful AI systems could pose such severe risks to society as a whole that new regulation is needed to slow the pace of development.
These concerns deserve to be taken seriously. The IMF contributes to this vital debate by bringing a macro-financial lens to questions of regulation and risk. We focus on where market failures may arise; where risks can become systemic or macro-critical; and where private incentives may diverge from the public interest.
In AI, that may include major externalities from defective products, information gaps between developers, users, and regulators, or operational dependencies on a small number of providers. It could also include the loss of competitiveness and concentration of market power that may result from the imposition of a poorly designed regulatory framework that creates barriers to entry.
The starting point should be to identify demonstrable market failures and evaluate whether existing regulatory frameworks are sufficient to address them.  To the extent that new interventions are needed, they should be proportionate, targeted, and internationally coordinated, while taking great care not to discourage competition and innovation.
AI could be transformative for the payments system. Handled well, AI can help build a payments system that is more efficient, more competitive, and better suited to the economy of the future.
For policymakers, the challenge is to enable this transformation, while safeguarding against risks. The IMF supports our membership by helping them assess spillovers and vulnerabilities from this transformation.
More broadly, the Fund also facilitates the international dialogue needed for the payments system to remain open and stable—consistent with our 80-year mandate to ensure the stability of the international monetary and financial system.
Thank you very much.
 
 
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The EU’s growing network of trade agreements helps European businesses to access new export markets and creates a more predictable trade and investment environment, according to a report published today. The sixth Annual Report on the Implementation and Enforcement of EU Trade and Economic Security Policy, covering the year 2025, concludes that EU trade agreements play a crucial role in increasing the resilience and competitiveness of EU operators.
Preferential trade works

At the end of 2025, the EU had in place 44 preferential trade agreements with 76 countries, representing 46.3% of the EU’s external trade. Trade in goods with these partner countries grew faster than the EU’s total trade with other third countries: 3.1% growth compared to 1,4%. In 2025, EU agri-food exports to countries with a trade agreement increased by 4.6%, while those to non-preferential partners fell by 3.6%.
The EU-Chile Interim Trade Agreement (ITA) illustrates the immediate and positive impact that a new trade agreement can have. Total bilateral trade amounted to €20.8 billion in the first 11 months since its entry into force on 1 February 2025, 3% higher year-on-year. EU exports of machinery and appliances grew by 9%, chemical products by 8%, and optical and photographic instruments by 17%.
Through a continued focus on the successful implementation of EU trade agreements, the Commission, in close cooperation with Member States and businesses, was able to get 20 barriers to trade fully or partially removed in 14 partner countries. This helps to improve market access for EU operators.

Strengthening the EU’s geopolitical presence
EU trade agreements continue to strengthen the EU’s geopolitical presence in a challenging international environment. Over the reporting period, EU goods exports to FTA partners increased by €250 billion, helping to compensate for reduced exports of goods to Russia, which fell by €54.5 billion during that time.
In 2025, EU trade agreements again played a significant role in providing stable import sources of raw materials and energy products of strategic importance to the EU economy:

Preferential partners supply a quarter of the EU’s critical raw materials imports. For example, between 2024 and 2025, EU critical raw materials imports from Canada increased by 62% in value terms to reach €3.3 billion.
The EU’s trade agreements with resource-rich partners such as Canada and Chile have facilitated imports of mineral products. Between 2024 and 2025, imports of mineral products from Canada increased by 14% (in value terms) to reach €6.1 billion: continuing a trend observed since 2022. Over a quarter of the EU’s mineral product imports now come from Canada. Since the entry into force of the EU-Chile ITA in February 2025, EU imports of mineral products have grown by 33%.

The EU currently has 45 trade agreements in place, covering 81 preferential trade partners.
Moreover, the EU continues to expand its network of trade agreements:

2025 and the first half of 2026 saw the EU conclude trade agreements with Mercosur (provisionally in force since 1 May 2026), Mexico, Indonesia, India, Australia, and the four Eastern and Southern African countries (Comoros, Madagascar, Mauritius, and Seychelles). Together, they will increase the EU’s share of preferential trade to 53.3%.
The EU is currently negotiating trade agreements with Malaysia, the Philippines, Thailand, and the United Arab Emirates. Moreover, as well as seeking to widen its network of trade agreements in recent years the EU has pursued other forms of engagement with partner countries, notably digital trade agreements with Singapore and Korea, a Sustainable Investment Facilitation Agreement with Angola, and a Clean Trade and Investment Partnership with South Africa.

 
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The State of the Union (SOTEU) address is an annual speech by the President of the European Commission to the European Parliament, setting the priorities for the Union for the year ahead.
President Metsola, Prime Minister Carney, Honourable Members,
‘It was the best of times, it was the worst of times.‘ This is how Charles Dickens describes Europe in the days of the French Revolution. And it is also a fair description of the world we live in. The speed of change is incredible. The challenges exceptional. So if I look at Europe today, my take is this: the state of our Union is the strongest it has ever been. The state of our Union can also feel as precarious as it has ever been.
These two statements may seem incompatible. But they are both true. And they reflect these exceptional times. This complex age of great possibilities and great perils, which all countries are seeking to navigate.
In this world, Europe has chosen to forge its own path. And a stronger, independent Europe is now emerging.
This is a Europe that is securing its prosperity. One that is breaking free from its toxic dependency on Russian fossil fuels. That has become the greatest trading power on the planet. That is transforming its industrial policy while upholding our unique social model.
This is a Europe better able to defend itself than ever before. One that has radically overhauled its approach to securing our homelands. That has increased defence spending by almost 80 % in the last five years alone.
This is a Europe that stands up for each other. As we are doing by standing with Ukraine as it fights for its future and for our freedom. Or when we stood up for Greenland when it was threatened. Or when drones, hybrid attacks or disinformation target our democracies.
All of this proves one thing. That Europe is there for Europeans. And that in the cold fragility of today’s world, only Europe can provide true sovereignty to Europeans.
And therefore, Honourable Members, this is a Europe we can be so proud of.
At the same time, we all know the threats that we are facing. As old assumptions and relationships have frayed, we are now dealing with an openly hostile world. A territorial war of aggression is raging on our continent; others have erupted nearby. A fight for industrial capacities is shaping global competition. And a battle of narratives is seeking to weaken confidence in Europe; to paralyse our democracies.
But people’s worries are not only linked to these big, global threats. The effects of the many crises are present for many European families, not least on the cost of living or housing. The dizzying speed of change and technology is impacting our jobs, our livelihoods and our society. And it is also having a profound effect on our democracy and our discourse.
We see this in the rise of the extreme, the decline of nuance – even in the way that we relate to each other.
These real concerns are being weaponised to drive a wedge between us. Sometimes from the outside – and too often from the inside. But our path is clear. Building an independent Europe that has the power to act. Nothing can divert us from this. Because in this world, the fate of Europe must remain in the hands of Europeans.
So our choice is clear. Do we want a strong and independent Europe that stands up for its values in this world? Or do we let divisions and dependencies hold us back? Do we want to rally around our European idea that together we can decide our own destiny? Or do we let our democracies be undermined by the proxies and puppets of authoritarians?
Whether it is the ultranationalists or the anti-Europeans, whether it is Russian interference or disinformation, the names may be different, but their goal is the same. They despise our values, and they want to shatter our European unity. So let’s not only fight back against that, let’s fight together for our European idea.
Honourable Members,
Our economy has withstood the impact of the Middle East wars better than expected. And unemployment is at near-record lows. But the pressures from higher energy prices and borrowing costs are biting for people and for businesses.
Clear fiscal choices will have to be made to ensure fiscal sustainability, while protecting investment. So, kickstarting Europe’s economy is our number one priority.
We have a huge market, world-class industry and services, a rich pool of savings and one of the world’s leading currencies. And yet, we still fragment our capital, networks and purchasing power.
This is why, when we took office, we put in place a bold plan. To build an economy where innovation and energy flow across borders. Where companies compete and grow across Europe, and savings finance our future. This is the logic of the Draghi and Letta reports. And together we are delivering. But we have to be faster – all institutions.
We now have the political agreement on the One Europe, One Market Roadmap. And together, by the end of next year, we can and must complete this historic overhaul of the Single Market.
In today’s economy, speed is of the essence. A permit or a form, a grid connection or a financing decision. All of this can determine where an investment is made. Where jobs are created. We need to move much faster. This is why we will put forward proposals to further speed up permitting.
Where projects are in Europe’s strategic interests, we need to massively accelerate. And where the administrative burden is slowing down business and SMEs, we need to slash that too.
You know that our 12 omnibus proposals are reducing the administrative burden by around €17 billion a year. But simplification cannot be a one-way street. All levels have to have skin in the game. We have long spoken about the harms of gold-plating.
Honourable Members,
Yes, we are doing our best at the European level to cut red tape. But now I think it is time for the Member States to step up. If we are serious about simplification, we also need a pact against gold-plating.
Europe cannot remain an industrial powerhouse if its energy prices are structurally too high.
When Russia cut off the gas we fought back. Our supplies are now more diversified. And we have invested in our homegrown clean energies – renewables and nuclear.
But then came the closure of the Strait of Hormuz. And again we bitterly felt the cost of our general dependence on imported fossil fuels. Since the start of the conflict, imported fossil fuels have cost us an additional €90 billion, without a single molecule of energy added.
So, we need to double down on our affordable, homegrown, clean energy. Be it renewables and nuclear, or biomethane and others. Technologically neutral. But they must give us independence and drive down energy prices.
For this independence, we need to electrify Europe. Our goal is to double the share of electricity by 2040. With this, Europe could cut its fossil-fuel import bill by €260 billion a year. But we also need to ensure that the electricity we generate is available.
Last year, we installed more than 80 gigawatts renewable capacity. But six times more capacity is still waiting to be connected. This is why we need the grids package so urgently.
We must invest faster. Speed up grid connections. Develop storage. In short, let’s make Europe’s future electric. This is a must.
Honourable Members,
We can bring down energy prices, invest and innovate more, reform our economies. But all this is undermined if our companies do not compete on a level playing field.
Our trade deficit with China is now €1 billion – a day. It has reached a tipping point. Some say the second China shock is looming. But it’s already here. It shows in our communities and in factories across our Union. It leads to deindustrialisation in the industrial heartlands of Europe. This is unsustainable.
And this is why we are engaged in a dialogue with China to rebalance our trade. But this dialogue must now lead to results. China’s weaker domestic demand means it also needs our European market. So, it is in both our interests to work together to find solutions.
Let me be clear: we will use all the tools at our disposal to rebalance our relationship. Words are good. But deeds are better.
And there is another point. We still have too many dangerous dependencies. We are more than 80 % dependent on China for many critical raw materials. 90 % for some rare earths. We have done a lot. But we are not the only ones trying to diversify. We need to urgently procure and build up our reserves.
No country can do this alone. So we need to think differently. This is why we will establish a new European Corporation on Critical Raw Materials. It will help us obtain and stockpile what we need. For electric cars, chips and batteries, clean tech and defence. And so much more.
Not only our industry depends on this, but also our independence and security.
This brings me to my next point, on financing. To be very clear, our budget is about our future. And any modern budget needs new own resources.
We must create the conditions for our companies to attract investment and grow. This is why our work on the Savings and Investments Union is so critical. But developing capital markets takes time. And the needs of our companies are urgent. We need a banking system that is built for growth – not just stability.
This is why we will put forward a new Banking Package focusing on simplification and tackling fragmentation. We know the demand for capital is out there. But we need a greater capacity and appetite for risk.
Our deep-tech start-ups are on track to attract record venture capital investment in 2026. This is why I announced a new Scaleup Europe Fund last year.
A year on, the first investments have been made in companies such as ICEYE. ICEYE was set up by two young Europeans: Rafał from Poland and Pekka from Finland. They initially met through Erasmus some 15 years ago. Together they founded a tech start-up. They developed their idea around satellite imagery. They got Horizon funding. They proved their technology. They grew with private investment. And today they are one of the world’s leading space technology companies. With offices in Finland, Poland, Spain and Greece.
ICEYE’s story shows that Europe is the home of innovation. And that we can reignite Europe’s entrepreneurial spirit.
I am delighted that the founders are with us today. Please join me in welcoming Rafał and Pekka. You are a true European success story.
Honourable Members,
These are Europe’s economic fundamentals. But our future prosperity and security will greatly depend on how we manage the tipping points of our time: climate change and AI.
On climate change, this summer was the summer of truth. Almost no part of our continent was spared. In Belgium’s High Fens, a peatland formed over centuries burned into a wasteland of ash.
Flames roared from the mountains of Ireland to the islands of Greece and Croatia. In the Alps, ancient glaciers retreat further every day. The impact of all of this is simply devastating: 660 000 hectares burnt to the ground. Some 12 million tonnes of crops lost.
Key rivers like the Danube, der Rhein and La Garonne are disappearing before our eyes.
More than 35 000 additional deaths during the heatwaves. Care homes and hospitals dangerously overheated. And all of this is a mere preview.
These were the hottest summer months ever – but probably the coolest of the years to come.
Science is clear. Europe is warming at double the global rate. Of course, the transition is complex. And we will need to adjust and learn along the way.
But there is no doubt: Europe can, must and will stay the course on its climate targets.
Honourable Members,
This is not about mitigation or adaptation. We need both. And they need to strengthen each other. This is the only way to reach climate resilience. But we need to step up dramatically on preparedness.
We will present a new framework for climate resilience next month. We will identify 100 of the most vulnerable territories in Europe. And we will assess the risks – and at which level they should be managed.
This will give us a whole of society approach – all the way through to the local level where adaptation matters most. And it will aim to make Europe the champion in adaptation technologies – a huge emerging market.
Whether drought-resistant crops, flood prevention or energy-efficient cooling, Europe is already a leader. And we must capture this market.
Today, only around 25 % of catastrophe losses in Europe are covered by private insurance. This means that, far too often, national budgets become the insurer of last resort.
We need to take action to close this gap. This is why the Commission will set up a Climate Insurance Alliance.
Honourable members,
There can be no repeat of this summer. This is why we will also soon present a European Heatwave Plan. We need better early warning systems and better health preparedness. We need urban adaptation and cooling. And we need to support the most vulnerable.
The second point is on water and food security.
We know the risks of water scarcity for our farmers, energy and supply chains. Yet, European pipes lose almost one in every four litres Mostly through leakage. What a waste. So we will put forward a new European Water initiative. Because water is precious. For our industry – and for our food security.
Crops need water to grow, while livestock need it to survive. Entire harvests depend on it. This is why we will make proposals to improve risk management and address the insurance gap.
Once again, Europe’s farmers have risen to the challenge of this never-ending summer.
Honourable Members,
Europe’s farmers are the best in the world. And we will support them every step of the way.
The next point is about wildfires. They are getting more intense, more frequent and more spread out.
I am so proud of Europe’s response. Of our European assets flying across the continent. But clearly, we need to think bigger. And learn faster.
This is why we have asked some of Europe’s most senior firefighters and emergency responders to lead the work. They will look at all aspects of preparedness and prevention. From civil–military coordination to needs for new capabilities. And I have asked them to make proposals, including for a future European Firefighting Fleet.
Our emergency crews have saved countless lives and homes this year alone. And there is one story I would like to tell. It is the story of a Danish pilot, Rune Kyndal.
His passion for flying took him all around the world. He settled down in a small Canadian city called Terrace. He became one of the country’s most experienced civilian pilots. But Rune wanted to put his talent at the service of a bigger mission. So he came back to Europe to help tame wildfires across our continent.
In July, he carried out many successful missions across Greece. He was then supposed to get a well-deserved break. But the emergency was at its peak. So Rune decided to stay.
A few days later he was involved in a tragic accident, with his fire liaison officer.
Both Rune and the officer were killed. They died as heroes.
I have asked Rune’s mother and brothers to join us today as special guests. Dear Margit, dear Tue, dear Kaare, We are honoured to have you. Rune gave his life to save others. Today, all of Europe owes him.
Honourable Members,
The second tipping point of our times is artificial intelligence.
AI is fast becoming a foundational layer for our economy and security. Europe’s stance is clear. We want to make the most of AI to improve our society, our quality of life and our productivity.
I am an optimist that AI has the potential to benefit humanity – if we get it right. But, as with any powerful new technology, AI comes with a balance of possibilities and risks. Without addressing these risks, we will never be able to unlock AI’s possibilities.
As the frontier models become more capable, these risks have come more sharply into focus.
Models being developed will allow hacking on a level we never thought possible. And they will soon be in the hands of adversaries who see the world very differently from us.
At the same time, the dangers of self-improving models are becoming ever more apparent.
Incidents of AI agents escaping their environment or inserting malicious code are a mere glimpse. After the HuggingFace incident, developers are ringing the alarm. And CEOs of the most advanced companies tell us that it is time to slow down on the self-recursive models. To pace the frontier.
If the people developing the technology are clear, then we should be too. The AI Act is of course a crucial piece to putting guardrails in place. And it puts Europe in the position to shape global efforts on how to tackle this.
So, we will step up together with our like-minded partners like Canada, the United Kingdom and others. We want to team up on model evaluation, verification, early warning, AI security and much more.
And I will invite the main frontier labs for a discussion on how we can support ongoing industry efforts to pace the frontier.
Honourable Members,
It is also true that Europe will need its own capabilities – in particular to protect our national security.
We need to stay in the race. Because this is crucial for our independence. So we need to massively boost our computing capacity. And we will set out our ideas for how to achieve this in a clean and efficient way.
We will also develop new ways to use public and private funds to invest in the most promising European start-ups and companies.
Honourable Members,
By limiting the risks of AI, we can maximise the benefits. We have already done a lot. On gigafactories and tech sovereignty, for example. But the next leg of this race is not only about frontier models. Just as was the case with the printing press in times gone by. It was invented by a German inventor, but was mastered and applied across Western Europe.
We do not need to be the ones who develop the frontier technology to be the ones who draw the greatest value from it. The key is creating the value that AI has not yet delivered. Moving AI from the screen to the real economy and society. On the factory floor. On the hospital ward. In precision agriculture. In our energy grids. Smart grids. For autonomous driving. For defence.
This is where the real value is hidden. And it is where Europe has big advantages. We have world-class industries that sit on the highest-quality data. These data are a precious European treasure. They are what can power tailor-made industrial AI models.
Let me give you one societal example. On breast cancer screening – an issue many of you have campaigned tirelessly on. Mammography screening reduces mortality by around 30–40 % among women who attend the screenings. Early detection is of the essence. This is where AI can step in.
AI-supported mammography can identify earlier and more cancers during screening. And as a result, more women can survive. So we need AI for health. But, here again, we must do it in a European way.
Do I want my doctor to have instant AI access to all the data needed to make the best diagnostic or treatment choice? Yes, of course. But do I want my doctor to be a robot, AI assisted? No, of course not. I do not want a robot to tell me whether I have cancer or not.
The point is that AI needs to empower our doctors. Not to replace them.
This is just one example. We are now focusing on five of the highest-value sectors in which industrial AI has the biggest potential and we have the data: health, transport, agri-food, advanced manufacturing, and defence and space.
In November, we will announce game-changing initiatives across these sectors.
We will invite Member States, MEPs, industry and entrepreneurs to join us in this ambitious European project.
Our approach is clear. We want AI. We want AI to create more value, more responsibly. And at a lower cost and with less energy consumption. But above all, we want AI with human agency. This is the essence of the European way.
Honourable Members,
Many of the risks of AI also spill over into our social market economy. For some, AI allows them to speed up repetitive tasks, to make better use of their skills. But clearly, these benefits are unevenly spread between skill sets, generations and regions.
Look at young people and the barriers they are facing, just to get on the first rung of employment.
Our response must keep pace. From education to employment, AI must help develop skills, improve the quality of jobs and give workers a fair chance.
This is why we need our Quality Jobs Act. And we will deliver before the end of the year.
Honourable Members,
Next year, we will celebrate the 10th anniversary of our European Pillar of Social Rights. And we will keep delivering on its promise.
We will invest in our regions, so everyone has the “right to stay”. We will launch a European Care Deal to address the challenges linked to our demographic changes.
We have just proposed the first-ever Housing Act to tackle short-term rentals and housing speculation.
Because, Honourable Members, staying in the region is not a privilege. Care is not a privilege. Housing is not a privilege. They are rights. And we have to give them to our Europeans.
When we proclaimed this Pillar of Social Rights 10 years ago, the world was different. Our society has changed. In many ways for the better, in others not.
Today, our fundamental values are being challenged. Some people even want to backslide on women’s rights. To send us back to an age in which women were second-class citizens.
We have fought so hard for equal treatment, equal opportunities, equal pay.
Look around this room. Finally, there are many of us here: Presidents, Vice-Presidents, Group Leaders, Commissioners, MEPs, staffers and ushers.
So let me send a very clear message: women are here to stay. We will defend our rights. And we will continue to stand up for our values every single day.
This is why, together with my dear friend António Costa, we will host a summit to uphold the enduring principles of our Social Pillar.
Times may change, technologies may change, but our values do not. In Europe, people will always come first.
Honourable Members,
In this age of tipping points, our prosperity and security will not only be built at home.
This year, we have signed free trade agreements with India, Mercosur, Mexico, Australia and Indonesia.
We now have trade deals in place with more than 80 countries – more than anyone else in the world. And business is asking us for more.
I can announce today a new international connectivity project. It will link the South Caucasus and Central Asia directly to the European market – what we call the Middle Corridor.
Through Global Gateway, we will aim to crowd in up to €12 billion in public and private investment. Our goal is to diversify routes, triple trade flows and slash freight transit times by 2030.
To make this a reality, we will organise a Regional Connectivity Summit with the Prime Minister of Bulgaria.
These partnerships are a strategic choice for Europe. But they also respond to the fracture in the international rules-based system.
For some, the answer is to go it alone. But this is not an option for us. Europe will always lead when it comes to defending the rules-based system. But we can no longer rely on it as the only way to secure our interests. Or assume that its rules will shelter us from the complex threats that we face.
In this new world, we must urgently reimagine our partnerships. And build global coalitions for our resilience and democracies.
And here too only Europe – with its size and power – can take the lead.
And this is why I have invited Prime Minister Mark Carney of Canada to be here today.
Mark, your presence here is a symbol of the enduring friendship between our people. Our cultural, historical and personal links run deep within the fabric of our societies.
And thanks to CETA, our trade in goods has grown by 75 % in less than a decade.
This shows the power of our trade agreements. We see the world with the same eyes: from AI to climate change, from the Arctic to geopolitics. And we have stood together: on Ukraine, on defence, on raw materials and on supply chains.
But above all, dear Mark, Europe and Canada believe in democracy.
We believe that power does not belong to the strongest, the richest or the loudest – but to all of us. That democracies have the freedom to choose with whom to work.
So, we are joining forces voluntarily. We will move from CETA to an Alliance for the Future to create a common prosperity and economic security space. We will work on intelligent manufacturing. We will create a tech alliance. We will integrate defence industrial bases. We will make the Arctic a flagship joint project. We will work on energy, critical minerals and batteries. On AI, quantum, cyber and economic security.
This is a partnership not against anyone else, but for our common strength.
In short, we want to bring the relationship with Canada to the highest level possible.
 
Dear Mark,
I said we must urgently reimagine our partnerships. So, I would like to work with you on opening the door for Canada to be the first associate member of the EU.
We share one ocean, one set of values, one way of seeing the world. And we will now build our shared future as well – thank you for being here.
 
Honourable Members,
Europe’s belief in cooperation has always been driven by peace. It is our raison d’être.
Today, that peace is threatened. Russia’s war of aggression on Ukraine rages on. And threats are mounting on our soil. In the last week we have seen it in Denmark, Lithuania and Poland. The attempted drone attack in Leipzig is further proof. We need to be clear about what this was. An attack using military-grade material, carried out by Russian operatives on European soil.
An attack not only on one Member State – but against all of our Union.
And, Honourable Members, we will not allow it.
We should be under no illusions about what is happening here: hybrid threats facing Europe are less and less hybrid and less and less threats.
Cyberattacks and sabotage, arson and drone incursions. They are ramping up every day. So, as the threat level climbs, so must Europe’s preparedness.
This is why I will propose, together with the HR/VP, a new European security strategy.
We already have many tools. And we are strengthening our work with NATO. But our doctrine, our institutions and our decision-making have not kept pace with the new reality.
Our systems were made for a different world. They are driven by well-intentioned attempts at consensus and compromise. But we need to consider whether they are still fit for purpose.
For instance, Europe needs its own counter-hybrid playbook. We urgently need a consensus on how to respond to certain incidents. Those which fall below armed aggression but clearly threaten our national security. In other words, a mechanism to flank NATO’s ‘Article 4′.
I believe it is time for Europe’s own Article 4 – or an Emergency Security Protocol. When triggered by one Member State, all Member States would convene. To coordinate a European response. To deter further escalation. And to mitigate the impact.
And I believe we must go further still.
For a long time, we have discussed a leaders’ format focused on the security of our continent. With partners like Canada, Norway, Ukraine, the United Kingdom and others involved.
This is even more urgent now, given the nature and scale of the risks at play. This is why we will set out our ideas to make a European Security Council a reality.
The urgency is clear.
This united front also drives our work on European defence.
The surge in defence spending has led to record levels of investment in our capabilities and forces.
New joint projects are getting off the ground. And we are spending more European than ever before. That is good.
Bigger orders for our industry, more interoperability and more economies of scale. Now we need to take that approach to the next level.
The war in Ukraine has shown us the importance of strategic enablers. These are the critical support assets and force multipliers that any credible defence relies on. From air and missile defence to strategic transport and air-to-air refuelling. From space to cyber.
These systems are essential, and we need more of them. Only together does Europe have the scale to deliver them.
That is why I can announce a new European Instrument for Strategic Enablers – fully aligned with NATO. Because only a strong and credible European defence posture will guarantee our security.
And that there is no room for any kind of doubt: Europe will defend each and every single square metre of its territory.
Honorable Members of Parliament,

The men and women in Ukraine show us every day what this means. We know that the coming winter will be harsh for Ukraine.

But we also know that North Korean missiles and Russian drones cannot break the Ukrainian spirit of resistance. For the Ukrainians are fighting for something. They are fighting for the survival of their state, their identity, and their freedom. And they are also fighting for our freedom and our self-determination.

Our task remains to support Ukraine in this endeavor to the best of our ability. In concrete terms, this means: First, we will support Ukraine more strongly than ever during this harshest winter of the war. Together with partners, we will provide humanitarian aid and reinforce Ukraine’s energy and heating infrastructure. Second, we will strengthen Ukraine’s air defense. Last week, for the first time, we approved the purchase of American Patriot interceptor missiles.

These must now be delivered urgently. But we must also work together to reduce our reliance on a single supplier. That is why we intend to develop a cost-effective, modular missile defense system with Ukraine. At the heart of this cooperation is “Freyja.”

Here, we are combining Ukrainian combat experience and innovative drive with Europe’s technological leadership—and, of course, our substantial production capacity. And Freyja is just the beginning. More is needed. Using the remaining funds from SAFE, we will launch a new program for joint projects with Ukrainian companies.

Third, we will tighten our sanctions against Russia. Pressure on Russia must continue to mount. What is needed is not necessarily a constant stream of new sanctions, but above all the enforcement of existing ones. Our sanctions are painful. They place enormous pressure on the Russian economy.

Russia is doing everything it can to circumvent them. Therefore, we must close all loopholes.

Because, Honourable Members,
Every day this summer, strike after strike hit Ukrainian cities.
In Odessa, Russian drones struck a crowded shopping mall in broad daylight. Then they struck a second time – deliberately targeting the rescue workers who rushed in to help.
This is not just war. This is a deliberate strategy of terror.
But Ukrainians have proved countless times that their spirit cannot be broken. And this summer, a little girl showed the whole world the true essence of this.
When the war began, Sasha was a six-year-old girl with a great passion. She loved gymnastics more than anything. But on a sunny day in May, a Russian missile struck her home. Sasha was rescued from under the rubble. She spent two weeks in a coma. And when she woke up, she discovered that her left leg was gone forever. It seemed her dream had collapsed with her house.
But Sasha refused to give up. Just seven months after the attack, she was back in the gym with her new prosthetic leg. She trained harder than ever. And started winning gold after gold.
This summer she travelled the world with her Dance of Freedom tour. Her aim is to tell the world about Ukrainian resilience in the fight for freedom. She has inspired people at the Tour Eiffel and in Times Square, in Rio and in Tokyo.
And today, she wants to bring her message right here to the heart of Europe.
Honourable Members, please join me in welcoming Sasha.
You are a great inspiration to all of us. Slava Ukraini!

Honourable Members,
The longing for peace is universal. The deep suffering in Gaza and unchecked settler violence in the West Bank have deeply affected Europeans.
The Israeli government’s decision to advance the illegal E1 settlement project is unacceptable.
Last year, I called for Europe to act, proposing a number of measures.
It is painful for many Europeans that Member States have been unable to build the necessary majorities for a unified response. Some Member States have moved ahead. Others are considering doing so.
When Europe is divided, it cannot change the course of events.
The months ahead in the region will be critical. Despite these challenges, Europe is leading the way in supporting Palestinians.
We have delivered more aid than anyone else. Through the Palestine Donor Group and the Team Gaza Initiative, we have brought together 65 delegations. Together we have pledged nearly €1 billion to rebuild Gaza and support a modern Palestinian Authority.
Europe supports the right to self-defence for Israel. And the Palestinian people have an equal right to live in safety and with dignity.
It is Europe’s role to keep the flame of a two-state solution alive.
Honourable Members,
Throughout this speech, I have spoken about the need for Europe to act together. Or risk being pulled apart.
Once again, this summer, this reality was tested at our borders.
From our eastern borders to the shores of Crete and right across the Mediterranean. And of course, with the crisis in Ceuta. These events are different in nature. But they have two things in common. The first is that vulnerable people are being exploited. By callous traffickers and smugglers. By our adversaries. This is why we have proposed a sanction regime to hit criminals where it hurts most.
This brings me to my second point.
All of our external borders are European borders. So, I want to address the people of Spain directly.
Ceuta’s border is a European border. Because Ceuta is Spain. Ceuta is Europe. And Europe will be there for you.
The point is that the only solution is a European solution. And that is the Pact on Migration and Asylum.
After years of work, we finally have a common European framework. One that gives responsibilities to all – and that demands solidarity from all. And it now needs to be fully implemented.
We are on the right path. We have seen a 55 % reduction in illegal arrivals over the past two years. And a further 35 % drop this year. That is real progress.
But the events of this summer show that our tools need to evolve – especially for emergency situations. Europe needs the means to protect its borders at all times. Especially in scenarios when mass movements are engineered and weaponised. This is why we will propose a new European Emergency Response Framework.
It will only be triggered under a strictly defined set of criteria. And in those cases, it will allow for time-limited and strictly defined flexibility in standard procedures.
The message from Europe is clear: we will always comply with our values and fundamental rights. But we will never compromise on protecting our borders. It is we, Europeans, who decide who comes to our Union and under what circumstances. And not the smugglers and the traffickers.
This is why we will also step up our work to strengthen Frontex – especially to speed up returns. We will improve our early warning systems – including in partnership with third countries. We will ensure that we can detect and anticipate online. And finally, we will keep tackling the root causes of illegal migration.
We need to work together with our neighbours to boost investment. To offer young people meaningful prospects – so they are not compelled to gamble with their lives. They need jobs, skills, training, apprenticeships.
This is why I am announcing today a new Mediterranean Youth Skills and Jobs initiative.
Honourable Members,
This is how we can reduce illegal migration. Uphold the rights of individuals seeking protection. Facilitate safe, legal migration with new Gateway Offices in partner countries. And defend the freedoms of our Schengen area.
This need for collective European solutions is more important than ever. Because it is also our European democracy that is being threatened.
Time and again, we have seen disinformation and foreign interference seeking to divide us. Seeking to erode trust in our democratic fabric and free media. Election campaigns poisoned by foreign propaganda. Conspiracy theories built on viral deepfake videos.
This is cognitive warfare. In Europe, we form our own opinions based on access to reliable, independent information. This is how we debate, compromise and find solutions – even on controversial issues. This openness is our biggest strength. But it is being weaponised by our opponents to distort debate and truth.
So we need a collective capacity to anticipate, detect and respond. This is why, last year, I announced the Centre for Democratic Resilience. It is already delivering with all the Member States and this House. Many thanks for that. We will step up our work, pooling our resources with Member States and stakeholders.
But we should be under no illusions. The threats to our democracies do not only come from the outside. We see the rise of anti-democratic, anti-European forces. And we know the risks.
But nothing is inevitable. Just look at Hungary.
The date of 12 April will stay in our memory for a very long time. The day the Hungarian people took their future into their hands. They chose democracy. They chose Europe. They brought Hungary back to where it belongs: at the heart of our Union.
Years of backsliding have started to be reversed. The fight against corruption and state capture is speeding up. There is real progress on fundamental rights. On academic freedom. And now, billions of euro of investment in Hungary have been unlocked.
There is of course much more work ahead. But this shows that hard work pays off.
Thanks to our Rule of Law Reports, any issues are now detected early and addressed through dialogue.
And thanks to this House, we have strengthened the link between funds and respect for the rule of law.
With the next long-term budget we must go even further. Respecting the rule of law and fundamental rights is a must for EU funds. It has to be front and centre in the budget. Now and in the future.
 
Honourable Members,
At its heart, democracy is about giving people the power to choose the society they want to live in.
Today, much of this power has been taken out of the hands of parents. Young Europeans now spend four to six hours per day on screens. Children are pulled ever deeper into feeds designed to keep them scrolling.
What we are witnessing is a great capture of our children. A capture of their attention, their focus, their minds. This is depriving children of their childhood.
What our children need is time to grow into themselves. To grow up with others. To be confronted with all of the emotions and choices that come with real life. They even need time to get bored. Because this is when they have to use their imagination. When they have to talk, agree, disagree, form an opinion, change an opinion.
But when a child has a smartphone, all of this is taken away.
Day and night, parents see the cost: loss of sleep, anxiety, even self-harm.
And in a growing number of cases even fatal tragedies. Like that of Oléa, a 14-year-old girl living in Belgium.
Oléa took her life exactly one month ago – a victim of online bullying.
The story is so tragic and full of sorrow, I was not sure whether to include it.
But Oléa’s mum has spoken so movingly about her daughter. And so passionately about stopping this from happening to others.
I want to do her words justice so I will speak in French, as she did.
‘Je suis persuadée que sans ces réseaux omniprésents, ma fille serait toujours là. C’est trop.’
Honourable Members,
She is right. C’est trop. Enough is enough.
I convened a Special Panel of experts. We spoke to young people. We looked at Australia and others who have moved ahead. And now it is time for Europe to act.
Tomorrow, the Commission is proposing the EU KIDS ACT. We will take a gradual and differentiated approach. Each age has its own sensitivities. And therefore, each will have its own tailored protection level.
No social media under the age of 13. No personal account under the age of 15.
That means, from 13 until a child turns 15, only mini accounts set up and supervised by parents or guardians, with limited features and time restriction of one hour a day. And between 15 and 18, safe design will be an obligation for the platforms.
I am aware that many perceive the power of big tech as overwhelming. And impossible to roll back.
I disagree.
We do not have to accept addictive features. We do not have to accept children being drawn into ever more extreme content. We do not have to accept that girls have their photos used for AI-generated sexualised images.
So we are reversing the burden of proof.
Platforms will have to prove to us that they are safe. Because it is not about our minors accessing social media. It is about when and how do we allow social media to access minors.
Europe has the power to act. It is we who decide our rules, not big tech.
But it is not only minors who are at risk. Addictive design, for example, is harming everyone. This is why we need a wider framework, the Digital Fairness Act. We will propose it in autumn.
Honourable Members, All of this shows us what Europe can achieve when it comes to what really matters.
But we must also win back the hearts of Europeans. We must foster a sense of belonging to something greater than ourselves. A sense of belonging to a common home. The certainty that, as Europeans, we will always be there for one another.
For one need only look beyond our borders to understand just how alive this European idea remains. One need only look to Ukraine and Moldova. To the Western Balkans. One need only look to all those countries close to our Union. And because their future lies within our Union, we will soon propose roadmaps for the most advanced candidate countries.
This process will remain merit-based. And, Honourable Members, I repeat: respect for our values ​​is non-negotiable. I was horrified by the images from Ratko Mladić’s funeral in Belgrade last week. He committed some of the most atrocious crimes against humanity.
The glorification of war criminals simply has no place in the European Union. All the victims of the wars in the former Yugoslavia deserve to be remembered, and all their families deserve our compassion.
For this is what we stand for as a Union: truth, justice, and respect for our values. Honourable Members, Europe will always remain true to its values. Our Union was born as a peace project. It was created so that our tragic past might give way to a shared future for Europeans.
Decades later, millions of people still see Europe as a promise—even as far away as Canada.
And yet, we often forget just how powerful that promise remains. In the wake of the war, a Congress of Europe was held in 1948. It brought together the greatest minds of our continent to reflect on the future of European cooperation—to nurture the European idea that we share. As a society, we must rediscover the ability to think about Europe.
Next year, we will celebrate the historic 70th anniversary of the Treaty of Rome.
To mark this occasion, I announce today that we will launch a new Congress of Europe. We need our brightest minds—from across our Union and our entire great continent.
Together, they will craft a vision capable of inspiring the new generation of Europeans.
A vision capable of recapturing the European imagination, so that the next generation can write its own history. Let us never forget the birth of our Union. Peoples who had been at war for so long united to build a common destiny—a destiny of peace and prosperity, of democracy and freedom.
They never wrote down exactly where that destiny would ultimately lead us. But each generation has built upon the legacy of the last.
Step by step. Stone by stone. Of course, our imperfections, our diversity, and our differences remain.
But that is precisely what makes Europe *our* Europe. Our common home. So, Honourable Members, Let us once again take our future into our own hands.
Long live Europe. Es lebe Europa.The post EU Commission | State of the Union 2026 first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

GDP (Gross Domestic Product) in the G20 area grew by 0.7% in the second quarter of 2026, slightly down from 0.8% in the previous quarter, according to provisional estimates (Figure 1). This reflected a mixed picture across G20 countries for which data were available, with most recording a slowdown.
Among G20 economies with available data, the contraction in Saudi Arabia deepened, with GDP falling by 4.8% in Q2 2026, following a 1.4% decline in Q1. This mainly reflected a sharp decrease in oil activities.1 GDP also contracted in South Africa, by 0.2% in Q2, after growing by 0.4% in Q1. In Korea, GDP growth slowed markedly, from 1.8% in Q1 to 0.6% in Q2, primarily reflecting weaker growth in exports and private consumption. Growth also slowed in Brazil, from 1.1% to 0.5%, China, from 1.3% to 0.9%, and India, from 2.1% to 1.8%. More moderate slowdowns were recorded in Japan, the United Kingdom and the United States, to 0.4% in each country, and in Germany and Italy, to 0.3% and 0.2%, respectively.
By contrast, growth rebounded strongly in Mexico, with GDP increasing by 1.4% in Q2 after contracting by 0.3% in Q1, and remained strong in Indonesia, at 1.3% (similar to Q1). Growth also strengthened in Türkiye, from 0.3% to 1.1%, and in Canada, from 0.1% to 0.8%, while it picked up slightly in Australia, from 0.3% to 0.4%. In France, GDP was unchanged in Q2, following a contraction of 0.2% in Q1.
Compared with the same quarter of the previous year, GDP in the G20 area was 3.1% higher in Q2 2026 (Table 2). Among G20 economies with available data, India recorded the highest year-on-year growth, at 8.1%, followed by Indonesia at 5.3% and China at 4.3%. By contrast, GDP contracted by 4.3% in Saudi Arabia.
Click here to access the interactive chart.
 
 

Compliments of the Organisation for Economic Co-operation and Development

The post OECD | G20 GDP Growth Slows Slightly to 0.7% in the Second Quarter of 2026 first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Speech by Christine Lagarde, President of the ECB, at “Hofburg im Dialog – Economy, Europe, Resilience” in Vienna, Austria
Vienna, 14 September 2026
Let me begin with a story that starts in this city.
In this country, the years before 1873 have a name: the “Gründerzeit”, or “founders’ era”.
The old city walls had come down and the Ringstrasse was rising where they had stood. Railways were pushing out across the empire. New banks and joint stock companies were being founded by the hundred.
But money did not stop at borders. On a scale never before seen, savers in Vienna, Berlin, Paris and London could lend abroad. Their money went into the transformative technologies of the day. French savers financed the Suez Canal. Larger sums still went from British and German savers into the American railways.[1]
The historian Eric Hobsbawm called these decades the age of capital.[2]
In 1873 that age came to an end. Eight days after the Emperor opened the World Exhibition in the Prater, the Vienna stock exchange collapsed, and four months later Wall Street followed.
The crash hit both continents. But what the money had built stayed in the United States, and so did the growth. By the end of the century, the US economy was the largest in the world, while Europe went through two decades of slow growth.
Today, European savers are again financing the transformative technology of the age: artificial intelligence. Again, most of the money is flowing to the United States. Euro area households hold about €440 billion in US technology firms.[3]
The question I want to ask today is whether, this time, Europe will get its share of the benefits. I believe it can. But only if we are clear about why we need this technology, why we cannot simply buy it, and why part of it must be built here.
Why Europe must adopt fast
Let me start with some good news.
Europe is often criticised when it comes to technology: good at running and regulating an advanced industrial society, but weaker at putting new digital tools to work. With AI, the picture is already different. Things are moving.
Firms are investing significantly. Euro area firms will devote around 10% of total investment to AI in 2026, and ECB staff estimate that AI-related borrowing accounted for about a quarter of the growth in credit to firms in the first quarter of this year.
Workers are adopting too. The share of euro area workers using AI on the job has doubled in two years and now exceeds 50%,[4] a level it took the internet about a decade to reach.[5]
Yet progress is not as fast as it could be, as the gap with the United States shows. Over the last two years, US digital investment has grown twice as fast as in the euro area. US workers spend two to three times as much of the working week using AI as workers in the largest euro area economies.[6]
The reason this matters comes down to growth.
An ageing society is straining our social model, and new strategic investment needs are adding to the bill: our analysis finds that existing budgets and EU instruments leave more than €100 billion a year of the public share of those investment needs uncovered.[7] With a workforce that will shrink by more than a million people a year over the next 25 years, there is no way to pay for all this without faster productivity growth.[8]
AI is therefore arriving at the right moment. After years of stalling productivity, it is the best chance we have to make the arithmetic work.
ECB estimates suggest that, if adopted quickly, AI could lift the level of productivity by up to 4% over a decade, which would be transformative for public finances.[9] To put that in context, the Draghi report estimated that a 2% rise in productivity over a similar horizon would cover up to one-third of the fiscal cost of Europe’s strategic investments.[10]
But the case for speed may be even stronger than these estimates suggest, because Europe will pay for this boom whether or not it shares in the growth.
AI investment is now growing so fast, above all in the United States, that the tech companies’ own cash flows no longer cover it. The big US hyperscalers issued more than USD 100 billion in bonds last year, most of it long-dated,[11] and they now account for close to a tenth of new euro bond issuance by non-financial companies.[12]
Measured against the economy, the buildout is not unprecedented, at about half the size of the IT surge of the late 1990s.[13] But it is arriving at a time when government deficits and debt are high, and market participants already attribute part of the rise in US long-term real yields to AI-related borrowing.[14]
Since euro area long-term rates move with US yields, Europe will bear part of the price of this boom in its own borrowing costs. The question is whether it will also get the growth that goes with it.
Why importing is not enough
Adopting, for Europe, means importing.
Here, there is an important difference compared with the world of 1873. The railways were a European invention, and it was the United States that was catching up. The Gründerzeit earned its name because Europe turned the inventions of that age into companies.
Today, the companies are being built elsewhere. Last year the United States produced 59 notable AI models and China produced 35. France and the United Kingdom produced one each.[15] Along the rest of the AI value chain, the picture is the same: the United States hosts three-quarters of the world’s AI computing capacity; Europe hosts 5%.[16]
There is nothing inherently bad about importing rather than producing new technologies. Historically, the gains from great technologies have mostly gone to those who adopted them, and Europe benefits from US investment in AI.
But there are three reasons why AI is special.
The first concerns data.
Much of what a firm knows now lies in its data. That knowledge is what sets it apart from its competitors, and economists have started to value it as an asset in its own right.[17]
Adopting AI means running that data through a system that belongs to someone else and sits under someone else’s law. Cloud computing already did this, but a cloud only stores data, whereas a model reads it. That puts the supplier of a model in a position to learn what an industry knows and to compete with it.
European firms understand this, and without domestic alternatives many will hold back. Eurostat asked firms that had considered AI and decided against it why they had done so. Almost half cited data protection concerns.[18]
The second reason is access.
Past technologies, once adopted, stayed with those who used them. The railway tracks that savers financed in the 1870s could not be taken up again from London or Berlin.
Where Europe has remained reliant on others for inputs or services, the damage a cut-off could cause has been painful but bounded. Halving imports of critical inputs from China would cost us 2-3% of manufacturing value added, for example.[19]
With AI, the loss would be of a different kind. Within a few years it will be screening goods at the border, deciding which tax returns are audited, dispatching trains, watching patients on wards and clearing payments at banks. A withdrawal of access, or a change in its terms, would then reach every sector at once.
That is leverage of a kind no trade partner has ever held over Europe, and it could be used in any negotiation, on tariffs or on digital taxes, for example.
The third reason concerns the frontier.
If we move to a world of many models, including open ones, the threat of a cut-off will diminish. For most of the economy, a model a year behind the best will do the job. But even then the frontier will matter in the most innovative sectors.
Where competition is cut-throat, a small edge in capability can produce outsized gains. Pharma, finance and defence, for instance, all work this way. And this can produce winner-takes-all dynamics: the firm with the best model earns the most from it and can spend the most on the next one, which can entrench its lead for good.
Faced with these properties of AI, Europe has an awkward choice.
Either it holds back on adopting, because it cannot protect its data, and forgoes the growth. Or it adopts AI quickly, becomes highly dependent, and risks losing the freedom to organise its economy according to its own values.
Financing sovereign AI
So what can we do to unite growth with sovereignty?
The foundation is building more European computing capacity. Companies should be deciding whether to adopt AI on its merits, without worrying about where their data ends up.
There is much debate about whether the AI buildout in the United States is a bubble. ECB staff have looked at past technological revolutions, and corrections have been part of the pattern. No one knows whether this one will follow a similar route, but if it does, we will feel the effects here in Europe.[20]
Most European savers’ exposure to US tech giants runs through investment funds, which would have to sell into a falling market to meet redemptions. Making sure our financial system can absorb that is a pressing task for supervisors and regulators. Banks, which the ECB is responsible for supervising, are well capitalised.
None of this is a reason to delay building on this side of the Atlantic. Europe already has too little data centre capacity to meet its own demand, and on current trends, that gap is projected to grow more than sixfold within a decade.[21]
The EU’s new gigafactories are a start, but they will fill only a fraction of it. Europe needs to build at a different pace altogether.
Next, Europe needs models that are “good enough” for most tasks and that run on European infrastructure, so that the threat of being cut off loses its force.
Today such models are mostly released with open weights, and the best of them are currently Chinese, such as DeepSeek and Kimi. But they offer no guarantee: a lab can stop releasing new versions openly whenever it chooses, and the licence terms can change with each one.
Europe has something to build on: Mistral in France has released its latest generation of models with open weights, and a firm in San Sebastián has compressed a Chinese open model into a version that now scores higher on independent benchmarks than any other European model. We need to grow that potential to give Europe a range of open models of its own.
The final step is securing access to the frontier, so that Europe stays competitive in the innovative sectors that will drive the fastest productivity growth.[22]
No country controls the whole AI supply chain today. It runs through China for rare earths, Taiwan for chips, Europe for lithography and the United States for models. What countries can do is protect their access by being indispensable to the frontier.
Some call this holding a chokepoint. I prefer to see it as being a link in the chain that no one can afford to remove.
Europe holds one of the most important links of all in ASML. But indispensability does not last on its own; others will try to build ways around it. When China restricted rare earth exports in 2010, Japan cut its dependence sharply within a few years. China is now spending heavily to replicate what ASML does.
So Europe must keep innovating, to find the links in the chain where it can become indispensable next.
Each step calls for many policies, and I will not list them all. But all of them come back to capital. Europe needs more of it, and it needs a different kind.
More of it, because data centres are expensive. The cost of closing Europe’s data centre gap over the next decade could be as high as €600 billion, chips included.[23]
In the United States the whole of the capital market has been drawn in to make the buildout possible: bonds, private credit and securitisation alongside traditional lending. Europe is still relying largely on its banks.
A different kind of capital, because new models and the links in the chain that keep us indispensable cannot be financed with debt alone. They take equity, and equity willing to carry a firm through years of losses before it earns anything.
The news is better than it was. Mistral’s funding round last week was the largest equity raise ever by a European technology company. But that is one round, and Europe needs many more.
In each case the money is there: European households save around €1.4 trillion a year.[24] What is missing are the markets that channel it to our own uses.
We hear a great deal about the savings and investments union. This, fundamentally, is what it is for. Savings will always go abroad in search of returns, as they have done since the age of capital. But Europe must first be able to deploy its savings at home.
Conclusion
Let me conclude by stressing the opportunity in front of us.
Three years ago I argued that capital markets do not spring up because policymakers call for them. They emerge to finance transformative projects that are beyond the reach of banks.[25]
That is what happened in the 1860s and 1870s, when US railways needed financing on a scale no bank could provide, and capital markets sprung up to channel savings, many of them European, to where they were needed.
I said then that Europe needed a project of its own to drive its capital markets forward. I believe AI is that project. It needs capital on a scale that only markets can provide, and the stakes for Europe could hardly be higher.
Governments across Europe have understood this. The Commission has put its proposals on the table. What remains is to act on them, so that this time Europe’s savings can build Europe’s future.
Thank you.

Wilkins, M. (1989), The History of Foreign Investment in the United States to 1914, Harvard University Press; Bonin, H. (2010), History of the Suez Canal Company, 1858-2008: Between Controversy and Utility, Droz.

Hobsbawm, E. (1975), The Age of Capital, 1848-1875, Weidenfeld & Nicolson.

Chart 3 in Andersson, M., Breckenfelder, J., Corradin, S., Nikolov, K. and Viola, M.A. (2026), “The AI boom: rational enthusiasm or the next dot-com bubble?”, The ECB Blog, ECB, 17 August.

Dias da Silva, A., Lebastard, L. and Sondermann, D. (2026), “AI adoption and the productivity promise: what workers report”, The ECB Blog, ECB, 26 August.

Lane, P.R. (2026), “AI and the euro area economy”, keynote speech at the ECB-SAFE-RCEA International Conference on the Climate-Macro-Finance Interface (3CMFI), Frankfurt, 23 March.

Bick, A., Blandin, A., Deming, D.J., Fuchs-Schündeln, N. and Jessen, J. (2026), “Mind the Gap: AI Adoption in Europe and the U.S.”, NBER Working Paper Series, No 34995, National Bureau of Economic Research, March.

Bouabdallah, O., Dorrucci, E., Nerlich, C., Nickel, C. and Vlad, A. (2025), “Time to be strategic: how public money could power Europe’s green, digital and defence transitions”, The ECB Blog, ECB, 25 July.

European Commission (2026), Demographic transformation in the EU: understanding change and adapting to its consequences, Publications Office of the European Union.

Lane, P.R. (2026), op. cit. The ECB scenarios refer to total factor productivity.

Draghi, M. (2024), The Future of European Competitiveness, European Commission, September, as cited in Bouabdallah, O. et al. (2025), op. cit.

Bank for International Settlements (2026), “Financing the AI infrastructure boom: on- and off-balance sheet borrowing”, BIS Quarterly Review, March.

Duquerroy, A., Furtuna, O., Rahmouni-Rousseau, I. and Vaz Cruz, L. (2026), “Big tech, big debt: when US tech giants tap the euro area bond market”, The ECB Blog, ECB, 31 August.

Aldasoro, I., Doerr, S. and Rees, D. (2026), “Financing the AI boom: from cash flows to debt”, BIS Bulletin, No 120, Bank for International Settlements, 7 January.

Duquerroy, A. et al. (2026), op. cit.

Stanford Institute for Human-Centered AI (2026), The 2026 AI Index Report.

Pilz, K.F., Rahman, R., Sanders, J., Emberson, L. and Heim, L. (2025), “The US hosts the majority of GPU cluster performance, followed by China”, Data Insights, Epoch AI, 5 June.

Jones, C.I. and Tonetti, C. (2020), “Nonrivalry and the Economics of Data”, American Economic Review, Vol. 110, No 9, September, pp. 2819-2858; Veldkamp, L. (2023), “Valuing Data as an Asset”, Review of Finance, Vol. 27, No 5, pp. 1545-1562; Baley, I. and Veldkamp, L. (2025), The Data Economy: Tools and Applications, Princeton University Press.

Eurostat (2026), Use of artificial intelligence in enterprises, survey year 2025. The concern has an economic basis independent of privacy law. Handing proprietary data to a model provider creates two risks that a cloud contract did not. First, a provider that sees the workflows of a whole industry is in a position to acquire the knowledge on which its customers’ margins rest and to launch a rival product. Second, once that knowledge is inside the system it can reach other subscribers, through models updated on customer data or through agents and shared features that carry information across firms.

Essers, D., Lebastard, L., Mancini, M., Panon, L. and Timini, J. (2025), “Critical input disruptions – mapping out the road to EU resilience”, Research Bulletin, No 128, ECB, 24 February.

Andersson, M., Breckenfelder, J., Corradin, S., Nikolov, K. and Viola, M.A. (2026), “The AI boom: rational enthusiasm or the next dot-com bubble?”, The ECB Blog, ECB, 17 August.

According to a study commissioned by the European Commission’s Directorate-General for Communications Networks, Content and Technology, a capacity gap of 3 gigawatts in 2025 rises to around 20 gigawatts by 2036 under the baseline scenario. See Bergamaschi, R. et al. (2026), “Cloud & AI Study: Executive Summary”, European Commission DG CNECT, July.

See “A Transformative AI Strategy for Europe”, 14 September 2026.

The Commission’s impact assessment report for the Cloud and AI Development Act (SWD(2026) 502) projects a gap of 19 gigawatts between EU data centre demand and installed capacity by 2036. Epoch AI estimates the up-front capital cost of a one-gigawatt AI data centre, including servers, at around USD 38 billion (Michael, A. and Cottier, B. (2026), “Servers account for 60% of the total cost of ownership of a one-gigawatt AI data center”, Epoch AI, 14 May). 19 gigawatts multiplied by USD 38 billion equals around USD 720 billion, or roughly €600 billion at current exchange rates. This should be treated as an upper bound, since the gap covers data centre capacity of all types, while the cost estimate is for GPU-dense AI facilities.

European Commission (2025), Savings and Investments Union: A Strategy to Foster Citizens’ Wealth and Economic Competitiveness in the EU, 19 March.

Lagarde, C. (2023), “A Kantian shift for the capital markets union”, speech at the European Banking Congress, Frankfurt am Main, 17 November.

 
 
 
Compliments of the European Central Bank The post ECB | A New Age of Capital: Growth, Sovereignty and AI first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Europe has plenty of world-class research, talent and creativity. However, too often ideas originating in Europe are turned into economic success by others, elsewhere. This is because European innovators face barriers here and find it difficult to bring their ideas to life. As a result, the Commission proposed a new European innovation act to help Europe’s most innovative ideas be developed, financed and scaled up in Europe.
To strengthen the EU innovation system, the proposal will address two main challenges. Firstly, it will help innovative companies access financing by

promoting a common EU framework to value intellectual property
creating a digital marketplace connecting buyers and sellers of intellectual property
offering expert support to help companies bring their ideas to the market

This can unlock €10.2 billion per year in additional financing and generate around €35 million in administrative cost savings.
Second, it will establish a common approach for research and development procurement that

will provide greater legal certainty
help new technologies reach the market faster
make it easier for public buyers from different EU countries to jointly carry out Research and Development procurements.

With this, companies could expect €25.92 billion in additional annual profits, while public buyers could save €1 billion per year.
The European innovation act is an element of the competitiveness compass, to strengthen the EU’s long-term competitiveness, prosperity and technological sovereignty. In parallel, the Commission will help innovators accelerate the transformation of innovative ideas into market solutions through a specific proposal on regulatory sandboxes.
 
 
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Surpluses and deficits reflect deeper choices about saving and investment across interconnected economies.
More than 80 years ago, John Maynard Keynes centered his work on the persistence of global imbalances. The great economist tried to resolve what he described as the “secular international problem” at the Bretton Woods conference in 1944 through an international clearinghouse. But the conference’s final agreement included only a weaker set of remedies.
Concern about imbalances has waxed and waned in the decades since, but has returned to the forefront of the policy debate in recent years. Global imbalances widened again in 2025, reversing steady narrowing during the decade after the global financial crisis and reviving difficult questions about their sustainability.
Keynes’s point was simple but profound: In a world of interconnected economies, countries cannot save, spend, or borrow independently. Imagine a small neighborhood. One household saves almost everything it earns. Another spends more than it earns and borrows to make up the difference. For a time, the arrangement works. The thrifty household finds a reliable borrower and earns a return while the spendthrift household enjoys a comfortable lifestyle. But as debts accumulate and positions become entrenched, what began as a mutually convenient arrangement can become fragile and fuel tensions.
Global imbalances are this story’s international version and refer to the pattern of surpluses and deficits across countries. Every country keeps a ledger with the rest of the world, called the current account. This records the value of the goods and services it sells and buys abroad as well as income flows associated with foreign transactions. When a country sells more than it buys, it runs a surplus and lends to the rest of the world. When it buys more than it sells, it has to borrow from other countries and run a deficit.
Saving and investment
At its core, a current account balance reflects a simple idea: the difference between what a country saves and what it spends. This is more than a simple accounting identity; it reflects the complex forward-looking choices of economic agents. For instance, households consume and firms invest when they expect higher income in the future or face temporary shortfalls. They save when their income exceeds their desired consumption, when investment opportunities are limited, or when they worry the economy might weaken and want to put money aside.
Exchange rates play a role, too, but it is often misunderstood. A country’s currency tends to rise or fall to keep trade broadly in line with the saving and investment balance. Exchange rates, in other words, tend to reflect current account positions rather than drive them.
Seen this way, global imbalances are not primarily about trade competitiveness. They reflect structural differences in the pattern of domestic saving and investment across countries—driven, for example, by demographics, growth prospects, financial development, and policy frameworks.
The recent increase in imbalances reflects mostly developments in the world’s two largest economies. A slump in China’s property market five years ago depressed domestic investment as construction of new homes stalled; households responded by slashing spending and saving more. In the United States, meanwhile, the government’s large fiscal deficit—coupled with robust consumer spending—has depleted national savings.
Cause for concern
Not all deficits or surpluses are a problem. They can be a natural and even desirable outcome of efficient resource allocation, if capital flows to younger fast-growing developing economies from aging advanced economies, for example. The concern arises when imbalances become excessive and are rooted in persistent distortions that pose serious risks to global economic and financial stability.
The longer deficit countries rely on external borrowing, the more vulnerable it leaves them to sharp changes in global financial conditions. If investors lose confidence or financing becomes more expensive, capital inflows can reverse suddenly. The result is often currency depreciation, financial stress, and economic recession, as occurred in Mexico in the early 1990s and East Asia later that decade.
Surplus countries do not face the same risks of correction, but their policies can have consequences for other countries that build gradually over time. When surpluses reflect weak domestic demand, underdeveloped financial systems, or policies that encourage saving, it may indicate that a country is using its resources inefficiently. Excess savings from surplus countries channeled abroad put downward pressure on global interest rates and prices.
Where surpluses stem from policies intended to strengthen export competitiveness, the disinflationary effects of cheaper exports can help trading partners struggling with high inflation—but they weigh on partners already facing weak demand, or those whose industries compete head‑to‑head with those of the surplus economy, dragging down their economic growth.
Financial markets can punish countries that run persistent deficits and correct their imbalances—by driving down the value of their currencies and driving up their borrowing costs—but countries with persistent surpluses face no comparable disciplining market forces.
At the global level, imbalances can amplify financial cycles. Large capital flows fuel credit booms and inflate asset prices in deficit countries. Surplus countries accumulate large foreign asset positions that are sensitive to exchange rates and interest rates. These dynamics can make the system more fragile.
Action on both sides
Left unchecked, global imbalances can also fuel geopolitical tensions. Factory closures, job losses, and other dislocations in communities or industries exposed to surging imports can fuel the perception that the playing field is unfair, strengthening support for trade tariffs and other protectionist measures.
So how should the world manage persistent imbalances? Countries may be tempted to reach for unilateral trade protection as a shortcut to rebalancing. But higher tariffs and other trade barriers generally have weak and unreliable effects on external balances because they do little to alter the underlying saving and investment drivers. The protectionist measures can instead trigger tit-for-tat reactions that can further disrupt the global economy.
A more balanced outcome requires action on both sides. Adjustment is never a one-country story. After all, one country’s deficit is another’s surplus, and changes in one economy’s saving and investment patterns affect outcomes elsewhere.
Deficit countries need to strengthen saving and ensure that borrowing supports productive investment. Surplus countries need to boost domestic demand or reduce excess saving. When these adjustments take place together, imbalances can narrow in a way that supports global growth.
A balanced approach like this would facilitate orderly adjustment: Saving and investment shift gradually, supported by policy changes and stable financial conditions; exchange rates adjust; domestic demand rebalances; and external gaps narrow without major disruption. In fact, policy-led reforms to fix domestic distortions could yield a double dividend, boosting growth at home and curbing imbalances abroad.
The alternative is disorderly adjustment, driven by sudden shifts in market sentiment or financial conditions. A reversal of capital flows would force a rapid correction of deficits, a sharp contraction in output, and potentially a serious financial crisis with a material loss of global output.
Everyday decisions
Global imbalances are not the result of mysterious forces. They are an outcome of everyday economic decisions—how much to save, how much to invest, and how to plan for the future. They reflect the fact that countries, like households, do not always spend exactly what they earn.
At their best, imbalances allow countries to share risk, smooth consumption, and allocate capital efficiently across borders. At their worst, they reflect domestic distortions, create vulnerabilities, and risk a costly reckoning. The thrifty household and the borrowing neighbor will eventually have to renegotiate their arrangement. The question is whether they can do so without creating a crisis that neither wanted.
That is the enduring challenge at the heart of the global economy—and the reason Keynes’s “secular international problem” remains with us today.
 
 
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Despite lower gas storage levels compared to previous years, the Member States and the Commission consider there is no immediate risk for security of gas supply in the EU. In a meeting of the Gas Coordination Group (GCG) this afternoon, experts from the Commission and Member States confirmed that while the situation on global energy markets remains exceptional and requires close monitoring, it also differs significantly from that of 2021/2022. Today, the EU is better prepared, thanks to increased diversification, higher LNG import capacity, and reduced gas demand.
Based on historical projections, the EU is on track to achieve an adequate level of winter preparedness. Under the current circumstances, the Commission sees no reason to intervene. The EU gas system is resilient enough to cope with lower storage levels for the upcoming winter.
Overall, the situation in the Middle East remains unstable and Qatari LNG production is still shut down. More recently, heatwaves in Europe have driven up gas demand for power generation. Geopolitical uncertainty continues to drive significant price volatility. The Commission will keep monitoring the situation very closely in cooperation with Member States and stakeholders. A further meeting of the Gas Coordination Group is scheduled for 24 September.
 
 
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