The European Commission has concluded that Polish measures to support the restructuring of Polish Regional Railways, the nationwide operator of regional passenger rail transport in Poland, are in line with EU state aid rules.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Our investigation showed that the Polish restructuring aid measures in favour of Polish Regional Railways were necessary and proportionate to ensure that the company could continue operating. This avoided serious disruptions in the provision of regional passenger rail transport and ensured connectivity in Poland. At the same time, the possible negative effects on competition brought about by the public intervention will be limited by Poland’s commitment to accelerate the opening of the Polish regional passenger rail transport sector to competition.”
Polish Regional Railways (Przewozy Regionalne) is the largest passenger regional rail operator in Poland and the sole provider of public passenger rail transport in 7 out of 16 regions. The company, which is majority owned by the State-owned Industrial Development Agency, has been experiencing financial difficulties.
In January 2018, the Commission opened a formal investigation to assess whether certain aid measures in favor of Polish Regional Railways were in line with EU State aid rules.
The Commission’s investigation covered a restructuring aid measure for an amount of PLN 770 million (around €181 million), notified by Poland to the Commission in 2015, as well as other State aid measures granted to the company in the context of the same overall restructuring prior to 2015, namely:

Aid to cover past losses for an overall amount of PLN 2,403 million (around €565 million);
A debt restructuring agreement between the company and the Polish rail infrastructure manager, PKP PLK, providing for the restructuring of liabilities towards the State-owned PKP Group companies, in the amount of PLN 1,902 million (around €448 million);
25 agreements between Polish Regional Railways and State-owned creditors providing for deferral of the company’s liabilities towards those creditors for the total amount of PLN 1,106.4 million (around €260 million);
Support in the form of training aid and recruitment aid granted in connection and for the same purpose (i.e. ensuring the continuous provision of regional passenger rail services) de minimis aid, overall exceeding the threshold for de minimis aid under EU rules.

The Commission assessed the restructuring measures under Article 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU), which enables Member States to grant State aid to facilitate the development of certain economic activities or of certain economic areas, subject to certain conditions.
The Commission found that the measures were both proportionate and necessary to ensure the viability of Polish Regional Railways, and thus avoid the serious disturbance in the provision of an important service in Poland that the insolvency of the sole nationwide provider of regional passenger rail services would have caused.
In its assessment, the Commission took particularly into account the importance of a well-functioning regional railway service for the Polish population. In this respect, railway services are essential to ensure connectivity (such as enabling commuting). It also considered that the Polish regional passenger rail transport sector is, in certain respects, different from other economic sectors, in particular because it provides an important public service on a market that is generally underfinanced and not yet fully open to competition in Poland and at EU level.
Furthermore, the Fourth Railway Package establishes that Member States will have to terminate the practice of directly and unconditionally awarding public service contracts in the regional passenger rail transport sector by 25 December 2023. In addition, such directly awarded contracts may, in principle, have a length of maximum 10 years.
In order to limit the possible negative effects of the aid on competition, Poland committed to accelerate the shift away from this practice and to complete this process earlier than required by the Railway Package. Furthermore, Poland has committed to already start gradually opening the market via public tendering. In practice this is possible by not renewing certain existing contracts or by not making use of the maximum possible contract length, before the end date for directly awarding public service contracts.
On this basis, the Commission considered that the positive effects of the measure outweigh its possible negative effects on competition and approved the measures under EU State aid rules.
Background
Given the specificities of the Polish regional passenger rail transport sector, which is generally and structurally underfinanced, the Commission assessed the aid measures directly under Article 107 (3)(c) of the Treaty on the Functioning of the EU (TFEU), rather than under the Commission’s State aid Guidelines on rescuing and restructuring.
The non-confidential version of the decision will be made available under the case numbers SA.43127 in the State aid register on the Commission’s  competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-news.
Compliments of the European Commission.
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Current account recorded €26 billion surplus in February 2021, down from €35 billion in previous month

Current account surplus amounted to €259 billion (2.3% of euro area GDP) in 12 months to February 2021, down from €263 billion (2.2%) one year earlier
In financial account, euro area residents’ net acquisitions of foreign portfolio investment securities totalled €804 billion and non-residents’ net sales of euro area portfolio investment securities totalled €21 billion in 12 months to February 2021

Chart 1
Euro area current account balance
(EUR billions unless otherwise indicated; working day and seasonally adjusted data)
The current account of the euro area recorded a surplus of €26 billion in February 2021, decreasing by €9 billion from the previous month (see Chart 1 and Table 1). Surpluses were recorded for goods (€32 billion) and services (€11 billion). These were partly offset by deficits for secondary income (€16 billion) and primary income (€2 billion).

Table 1
Current account of the euro area
(EUR billions unless otherwise indicated; transactions; working day and seasonally adjusted data)
Source: ECB.
Note: Discrepancies between totals and their components may be due to rounding.

Data for the current account of the euro area
In the 12 months to February 2021, the current account recorded a surplus of €259 billion (2.3% of euro area GDP), compared with a surplus of €263 billion (2.2% of euro area GDP) in the 12 months to February 2020. This decline was driven by a reduction in the surplus for primary income (down from €48 billion to €18 billion) and an increase in the deficit for secondary income (up from €151 billion to €167 billion). These developments were partly offset by larger surpluses for services (up from €36 billion to €58 billion) and for goods (up from €330 billion to €350 billion).

Chart 2
Selected items of the euro area financial account
(EUR billions; 12-month cumulated data)
Source: ECB.
Notes: For assets, a positive (negative) number indicates net purchases (sales) of non-euro area instruments by euro area investors. For liabilities, a positive (negative) number indicates net sales (purchases) of euro area instruments by non-euro area investors.

In direct investment, euro area residents made net disinvestments of €16 billion in non-euro area assets in the 12-month period to February 2021, compared with net disinvestments of €10 billion in the 12 months to February 2020 (see Chart 2 and Table 2). Non-residents’ net investments in euro area assets increased to €168 billion in the 12-month period to February 2021, up from €107 billion in the 12 months to February 2020.
In portfolio investment, net purchases of foreign debt securities by euro area residents increased to €443 billion in the 12-month period to February 2021, following net purchases of €390 billion in the 12 months to February 2020. Over the same period, euro area residents’ net purchases of foreign equity increased to €361 billion from €81 billion in the 12 months to February 2020. Non-residents made net disposals of euro area debt securities amounting to €119 billion in the 12 months to February 2021, following net purchases of €230 billion in the 12 months to February 2020. Over the same period, non-residents’ net purchases of euro area equity decreased to €97 billion from €344 billion in the 12 months to February 2020.

Table 2
Financial account of the euro area
(EUR billions unless otherwise indicated; transactions; non-working day and non-seasonally adjusted data)
Source: ECB.
Notes: Decreases in assets and liabilities are shown with a minus sign. Net financial derivatives are reported under assets. “MFIs” stands for monetary financial institutions. Discrepancies between totals and their components may be due to rounding.

Data for the financial account of the euro area
In other investment, euro area residents recorded net disposals of foreign assets amounting to €63 billion in the 12 months to February 2021 (following net purchases of €549 billion in the 12 months to February 2020), while their net incurrence of liabilities increased to €255 billion from €187 billion.

Chart 3
Monetary presentation of the balance of payments
(EUR billions; 12-month cumulated data)
Source: ECB.
Notes: “MFI net external assets (enhanced)” incorporates an adjustment to the MFI net external assets (as reported in the consolidated MFI balance sheet items statistics) based on information on MFI long-term liabilities held by non-residents, available in b.o.p. statistics. B.o.p. transactions refer only to transactions of non-MFI residents of the euro area. Financial transactions are shown as liabilities net of assets. “Other” includes financial derivatives and statistical discrepancies.

The monetary presentation of the balance of payments (see Chart 3) shows that the net external assets (enhanced) of euro area MFIs decreased by €78 billion in the 12-month period to February 2021. This decrease was mainly driven by euro area non-MFIs’ net outflows in portfolio investment equity and portfolio investment debt. These developments were partly offset by the current and capital accounts surplus and, to a lesser extent, euro area non-MFIs’ net inflows in direct investment and other flows.
In February 2021 the Eurosystem’s stock of reserve assets decreased to €848.6 billion, down from €880.2 billion in the previous month (see Table 3). This decrease was driven by negative changes in the price of gold (€29.4 billion) and to a lesser extent by net disposals of assets (€1.6 billion).

Table 3
Reserve assets of the euro area
(EUR billions; amounts outstanding at the end of the period, flows during the period; non-working day and non-seasonally adjusted data)
Source: ECB.
Note: “Other reserve assets” comprises currency and deposits, securities, financial derivatives (net) and other claims. Discrepancies between totals and their components may be due to rounding.

Data for the reserve assets of the euro area
Data revisions
This press release incorporates revisions to the data for January 2021, which mainly affect direct investment. In addition, it includes revisions to the seasonally adjusted current account components from January 2008 onwards due to the incorporation of newly estimated seasonal and calendar factors. These latter revisions did not significantly alter the figures previously published.
Next releases:

Monthly balance of payments: 20 May 2021 (reference data up to March 2021)
Quarterly balance of payments and international investment position: 5 July 2021 (reference data up to the first quarter of 2021)

Notes

Current account data are always seasonally and working day-adjusted, unless otherwise indicated, whereas capital and financial account data are neither seasonally nor working day-adjusted.
Hyperlinks in this press release lead to data that may change with subsequent releases as a result of revisions.

Contacts:

Philippe Rispal | philippe.rispal[at]ecb.europa.eu, tel.: +49 69 1344 5482

Compliments of the European Central Bank.
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The Executive Board of the Conference on the Future of Europe, comprising representatives from the European Parliament, the Council of the European Union and the European Commission, is launching the multilingual digital platform for the Conference on the Future of Europe inviting all EU citizens to contribute to shaping their own future and that of Europe as a whole. The platform is available in 24 languages, allowing citizens from across the Union to share and exchange their ideas and views through online events.
The Joint Presidency of the Conference welcomed the launch of the platform.
European Parliament President, David Sassoli, said: “The platform represents a key tool to allow citizens to participate and have a say on the Future of Europe. We must be certain that their voices will be heard and that they have a role in the decision-making, regardless of the COVID-19 pandemic. European democracy, of the representative and participatory kind, will continue to function no matter what, because our shared future demands it.”
Prime Minister of Portugal António Costa, on behalf of the Presidency of the Council, said: “The time has come for our citizens to actively share their greatest concerns and their ideas. This discussion couldn’t happen at a more relevant time. We have to prepare now, so that we come out of this crisis even stronger and when we overcome the pandemic we stand ready for the future. We hope to continue to build the Europe of the future together, a fairer, greener and more digital Europe that responds to our citizens’ expectations.”
European Commission President, Ursula von der Leyen, said: “Health, climate change, good and sustainable jobs in a more and more digital economy, the state of our democratic societies: We are inviting Europeans to speak up, to address their concerns and tell us what Europe they want to live in. With this citizens’ platform, we are giving everyone the opportunity to contribute to shaping the future of Europe and engage with other people from across Europe. This is a great opportunity to bring Europeans together virtually. Join the debate! Together, we can build the future we want for our Union.”
The Conference on the Future of Europe is an unprecedented, open and inclusive exercise in deliberative democracy. It seeks to give people from all walks of life, across Europe, a greater say on what they expect from the European Union, which should then help guide the EU’s future direction and policymaking. The Joint Presidency has committed to follow up on the outcome of the Conference.
Background
The multilingual digital platform is fully interactive and multilingual: people can engage with one another and discuss their proposals with fellow citizens from all Member States, in the EU’s 24 official languages. People from all walks of life and in numbers as large as possible are encouraged to contribute via the platform in shaping their future, but also to promote it on social media channels, with the hashtag #TheFutureIsYours
The platform will ensure full transparency – a key principle of the Conference – as all submissions and event outcomes will be collected, analysed, monitored, and made publicly available. The key ideas and recommendations from the platform will be used as input for the European citizens’ panels and the Plenaries, where they will be debated to produce the Conference’s conclusions.
All Conference-related events that will be registered on the platform will be visualised on an interactive map, enabling citizens to browse and sign up online. Organisers can use the toolkit available on the platform to help organise and promote their initiatives. All participants and events must respect the Charter of the Conference on the Future of Europe, which lays down standards for a respectful pan-European debate.
The platform is organised around key topics: climate change and the environment; health; a stronger and fairer economy; social justice and jobs; EU in the world; values and rights, rule of law, security; digital transformation; European democracy; migration; and education, culture, youth and sport. These topics are complemented by an ‘open box’ for cross-cutting and other topics (‘other ideas’), as citizens remain free to raise any issue that matters to them, in a truly bottom-up approach.
The platform also provides information on the Conference’s structure and work. It is open to all EU citizens, as well as EU institutions and bodies, national Parliaments, national and local authorities and civil society. It will fully respect users’ privacy, and EU data protection rules.
Compliments of the European Commission.
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The European Committee of the Regions and the European Commission’s Joint Research Centre organized a joint online workshop on 15 April to underline the role of regional Smart Specialisation Strategies as a cornerstone of EU policies, from the post-pandemic recovery plans to the delivery of the European Green Deal, digital transition and the Sustainable Development Goals.
Smart Specialisation is an essential part of EU’s cohesion policy: a place-based approach characterised by the identification of the strengths and assets of each region and on an Entrepreneurial Discovery Process with wide stakeholder involvement.
Elisa Ferreira, Commissioner for Cohesion and Reforms, underlined in her speech the close link between growth and R&I and emphasized that the EU’s cohesion policy and smart specialisation are key tools to tackle Europe’s innovation divide and avoid a “K shaped” recovery, where some regions recover fast and others risk stagnating or falling behind.
“Over the 2014-2020 programming period, more than €65 billion of cohesion policy funds were invested in R&I. While the new programmes are still in preparation, it is likely that at least half of new cohesion policy investment will target smart and green projects. Innovation is place-based and smart specialisation strategies help regions build their capacities around their assets. We are aiming to further strengthen links between our investments and smart specialisation strategies, to improve synergies with Horizon Europe and to simplify procedures”, Commissioner Ferreira said.
This view was shared by the representative from Commissioner Mariya Gabriel’s cabinet, who underlined that “smart specialisation will continue playing a major role supporting research and innovation to ensure sustainable and resilient development of all regions in Europe over the next programming period 2021-2027. In the light of the challenges posed by the COVID-19 pandemic, this helps consolidating a sustainable, smart and inclusive Europe”.
Apostolos Tzitzikostas, President of the European Committee of the Regions, stated that “overcoming the crisis triggered by the pandemic requires unprecedented cooperation and innovation capacities. Building efficient partnerships to deliver inclusive innovation processes is the essence of Smart Specialisation. This is why in the current scenario, Smart Specialisation is not a luxury or a best practice, but a powerful method to mobilise available investment.”
Bernard Magenhann, Deputy Director General of the European Commission’s Joint Research Centre, spoke about the concept of S4 – Smart Specialisation Strategy for Sustainability and inclusiveness – “an innovation-driven policy for competitive sustainability leaving no place and no one behind. It builds on the Smart Specialisation approach that we have developed over the past years, adapting it to the new context.”
SEDEC chair Anne Karjalainen (FI/PES), Member of Kerava City Council, underlined that “Smart Specialisation Strategies empower regions and cities to take responsibility for their own development potential, including the attainment of the Sustainable Development Goals, and to effectively build much-needed social resilience at local and regional level.”
Mayor of Seville Juan Espadas (ES/PES), who chairs the CoR’s ENVE Commission and the Green Deal Working Group, concluded that “Smart specialisation is an excellent tool to assist policy-makers in guiding the resources to the projects offering the best opportunities for jobs and growth in the post-pandemic recovery. Strategies must be oriented towards sustainable development to improve citizens’ quality of life, for instance through new models for energy and mobility at local and regional level. In this regard, the Joint Research Centre, which has one of its seats in Seville, is doing an important work to reach out to every corner of Europe and provide information about all available tools.”
Watch the recording of the event (agenda)
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Regular format
International meetings
The President of the Eurogroup, Paschal Donohoe, informed the Eurogroup about the discussions at the spring meetings of the World Bank Group and the International Monetary Fund, in which he represented the euro area.
Thematic discussion on insolvency frameworks
The Eurogroup held a thematic discussion on insolvency frameworks based on a technical note prepared by the Commission.
Effective and efficient insolvency frameworks are very important for achieving a quicker recovery as well as more robust growth and deeper financial integration within the euro area in the future.
The euro as digital currency
Finance ministers took stock of ongoing work on the euro as a digital currency. The discussion was based on a report by the ECB outlining the results of the consultation on a digital euro that was launched on 12 October 2020.

The digital euro is an important project, not just technically, but also politically, and I expect that Eurogroup ministers will play an important role in considering the case for and the political dimensions of a digital currency.
Paschal Donohoe, President of the Eurogroup

Digital finance (background information)
A digital euro (European Central Bank)

Eurogroup transparency initiative
Ministers reviewed the Eurogroupʼs current practices on transparency.
In recent years, the Eurogroup has made significant progress in improving the transparency of its work and enhancing its public communication. It reviews its transparency policy regularly.
Inclusive format (EU27)
Banking union
The chair of the High-Level Working Group on a European Deposit Insurance Scheme (EDIS), Tuomas Saarenheimo, informed ministers about progress made on the consensus-based preparation of a stepwise and time-bound work plan on all outstanding elements needed to complete the banking union. The report was requested by the Euro Summit in December 2020.

Our banking system has proven its resilience to date during the era of Covid-19, and this is the result of our common efforts over the past decade in building up and in strengthening the banking union to this point. So we have achieved much, but today there was commitment from all to look at how we can achieve more.
Paschal Donohoe, President of the Eurogroup

Compliments of the European Council.
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This article argues that European Central Bank (ECB) and Federal Reserve System (Fed) monetary policy spill over to other countries asymmetrically. At the bilateral level, the Fed’s impact on the euro area is material to firms’ financial conditions and economic activity. Conversely, the impact of the ECB’s actions on the US economy is minimal. On a global scale, both central banks’ monetary policies matter for other countries, but the Fed’s monetary policy has a more sizeable impact, particularly on foreign financial variables, such as corporate bond spreads.
Monetary policy in a globalised world
International trade and financial globalisation have made economies more interdependent and more exposed to each other’s domestic shocks. Economic theory suggests that globalisation affects the transmission mechanism of monetary policy and that its spillovers could strengthen the international dimension of monetary policy.[2] When monetary policy actions spill over abroad, this might at times complement policy choices in other countries and thus be a welcome externality. But at other times this might confront these countries with unfavourable policy choices. For example, they may find it harder to reconcile macroeconomic and financial stability without resorting to an enlarged set of policy tools. Only by exploring data can we shine a light on the extent to which monetary policy has acquired a global dimension.
Comparing spillovers originating from different central banks based on previous research is difficult. In past approaches, the estimation methodology, identification approach and sample period have differed widely. In what follows we summarise the findings of our recent paper (Ca’ Zorzi et. al, 2020), where we carefully disentangle the effects of ECB and Fed monetary policy. We compare the impact of each central bank’s monetary policy – both on the other’s economy and worldwide – using a unified and consistent methodological framework.
Identifying international spillovers
Spillovers are a potential side effect of monetary policy. Our identification approach disentangles the exogenous or “surprise” variation in monetary policy from the systematic response of monetary policy to economic developments, such as the latest inflation readings. During a sufficiently narrow time window around monetary policy announcements it is unlikely that events or news besides the policy announcement drive financial markets. The movement in interest rates during this short period therefore represents an exogenous effect of the monetary policy announcement – a surprise, unanticipated by financial markets given all available information, including the most recent economic developments. Additionally, our identification separates such exogenous monetary policy shocks from what the literature refers to as “central bank information” shocks.[3]
We estimate the impact of ECB and Fed monetary policy based on Bayesian vector-autoregression (BVAR) models for the years 1999 to 2018.[4] Our estimates represent the average effects of monetary policy over this period. Therefore, they encompass the effects of both conventional policies (e.g. setting interest rates) and unconventional policies (e.g. adding purchase programmes or broadening the range of eligible collateral).[5]
Bilateral spillovers between the euro area and the United States
Even in a highly globalised world, both ECB and Fed monetary policies have a sizeable impact on domestic financial conditions, real activity and inflation. Surprise monetary policy tightening by either the ECB or the Fed raises domestic government and corporate bond yields, depresses domestic equity markets, and triggers an appreciation of the domestic currency as well as a fall in inflation and real activity. In Chart 1, below, the dotted lines show this strong effect on domestic real activity, measured here by industrial production.

Chart 1: Bilateral spillovers from a monetary policy tightening to real activity
Industrial production(100 x log)
Notes: The left-hand panel shows the impulse response to an ECB tightening, and the right-hand panel the response to a Federal Reserve tightening, each over a period of 36 months. Quantities for the United States are plotted in red, quantities for the euro area in blue. The dotted lines show the response of domestic industrial production, with diamonds symbolising significance at the one-standard deviation level. The solid line shows the median impulse response of the corresponding spillover with a one-standard-deviation band. Sources: SDW, FRED.

The solid line with the blue confidence band in the right-hand panel highlights the impact of US monetary on the euro area: a Fed tightening leads to a reduction of euro area industrial production. Conversely, the impact of ECB monetary policy on the US economy in the left-hand panel is insignificant. There are two possible explanations: either the Fed has been able and quite determined to fully offset spillovers from ECB monetary policy; or, alternatively, the ECB’s monetary policy did not give rise to significant spillovers in the first place.

Chart 2 : Bilateral financial spillovers from a monetary policy tightening
Corporate bond spreads
(below investment grade, all maturities, percentage points)
Notes: The left-hand panel shows the impulse response to an ECB tightening, and the right-hand panel the response to a Federal Reserve tightening, each over a period of 36 months. Quantities for the United States are plotted in red, quantities for the euro area in blue. The dotted lines show the response of domestic corporate bond spreads, with diamonds symbolising significance at the one-standard-deviation level. The solid line shows the median impulse response of the corresponding spillover with a one-standard-deviation band. The corporate bond spread is the option-adjusted spread between a corporate bond with a BBB or below investment grade rating and a government bond. Source: FRED.

By contrast, Fed monetary policy spillovers to the euro area are much larger. They significantly affect euro area financial conditions, especially corporate bond rates (Chart 2). This suggests that financial channels play a prominent role in Fed spillovers to the euro area.
Global effects of ECB and Fed monetary policy
This asymmetry between the ECB and Fed monetary policy goes beyond the bilateral transatlantic spillovers. It is evident also in their cross-border impact on emerging market economies (EMEs). Consistent with the dominant role of the US dollar in the international monetary system, Fed monetary policy elicits large spillovers to both financial conditions and real activity in EMEs (Chart 3). By contrast, spillovers from ECB monetary policy are largely confined to trade.[6] Unlike the bilateral spillovers between the euro area and the United States, our findings suggest that ECB and Fed monetary policy actions may give rise to policy trade-offs in EMEs if the policy cycles are not in sync.

Chart 3 : Effects of a monetary policy tightening on EMEs
Real GDP of EMEs
(USD, 100 x log)
Notes: The solid line shows the median impulse response surrounded by a one-standard-deviation band over a period of 36 months. In the left-hand panel are the responses to an ECB tightening, in the right-hand panel the responses to a Fed tightening. GDP is shown measured at prices and exchange rates in 2010, seasonally adjusted, in US dollars, based on a cubic spline interpolation from quarterly data, including the countries: Bolivia, Botswana, Brazil, Chile, China, Costa Rica, Ecuador, El Salvador, Hong Kong, India, Indonesia, Israel, Jordan, Kazakhstan, South Korea, Malaysia, Mexico, Paraguay, Peru, the Philippines, Poland, Russia, Singapore, South Africa, Taiwan, Thailand, Turkey, Uruguay. Sources: Haver Analytics, ECB calculations.

Our findings suggest a key role for financial channels as a conduit of US monetary policy spillovers, especially towards EMEs. Fed monetary policy actions can have major implications for global financial markets (Chart 4). Both the central role of US financial markets and the dominant role of the US dollar amplify the global effects of Fed monetary policy.

Chart 4 : Effects of a monetary policy tightening on global financial markets
Syndicated loans outside denomination currency area
(new loan issue volume, 100 x log)
Notes: The solid line shows the median impulse response surrounded by a one-standard-deviation band over a period of 36 months. In the left-hand panel these are the responses to an ECB tightening, in the right-hand panel the responses to a Fed tightening. Sources: Dealogic, ECB calculations.

Dealing with foreign spillovers
Unlike the limited bilateral spillovers between the euro area and the United States, the spillovers to the rest of the world suggest that both ECB and Fed monetary policy actions are relevant for the policy choices of EMEs. In periods of unfavourable spillovers, EME policy trade-offs could arise as a result of more widespread and more pronounced frictions in local financial and product markets, for example due to a less developed local banking sector or rigidly regulated industries. Our empirical perspective does not rule out possible gains from monetary policy co-ordination between advanced and emerging economies. But it might also be possible to mitigate trade-offs locally, for example by assigning a greater role to macroprudential policies, such as regulating the leverage in the financial system (Rey 2016). This might help EME policymakers to preserve financial stability without compromising their intended monetary policy targets.
Authors:

Michele Ca’ Zorzi, Lead Economist, ECB

Luca Dedola, Senior Adviser, ECB

Georgios Georgiadis, Senior Economist, ECB

Marek Jarociński, Principal Economist, ECB

Livio Stracca, Economist, ECB

Georg Strasser, Principal Economist, ECB

References
Ca’ Zorzi, M., Dedola, L., Georgiadis, G., Jarociński, M., Stracca, L. and Strasser, G. (2020), “Monetary policy and its transmission in a globalised world”, Discussion Papers, ECB Working Paper Series, No 2407, ECB, Frankfurt am Main, May.
Dedola, L., Rivolta, G. and Stracca, L. (2017), “If the Fed sneezes, who catches a cold?”, Journal of International Economics, Vol. 108, Supplement 1, pp. S23-S41.
Gerko, E. and Rey, H. (2017), “Monetary policy in the capitals of capital”, Journal of the European Economic Association, Vol. 15 No 4, pp. 721-745.
Iacoviello, M. and Navarro, G. (2019), “Foreign effects of higher U.S. interest rates”, Journal of International Money and Finance, Vol. 95(C), pp. 232-250.
Jarociński, M. and Karadi, P. (2020), “Deconstructing monetary policy surprises – the role of information shocks”, American Economic Journal: Macroeconomics, Vol. 12, No 2, pp. 1-43.
Melosi, L. (2017), “Signalling effects of monetary policy”, Review of Economic Studies, Vol. 84, No 2, pp. 853-884.
Nakamura, E. and Steinsson, J. (2018), “High-frequency identification of monetary non-neutrality: The information effect”, Quarterly Journal of Economics, Vol. 133, No 3, pp. 1283-1330.
Rey, H. (2016), “International channels of transmission of monetary policy and the Mundellian trilemma”, IMF Economic Review, Vol. 64, No 1, pp. 6-35.

1. This article was written by Michele Ca’ Zorzi, Georgios Georgiadis and Livio Stracca (all Directorate General International and European Relations, ECB) and Luca Dedola, Marek Jarociński and Georg Strasser (all Directorate General Research, ECB). The authors gratefully acknowledge comments from Michael Ehrmann, Alexander Popov and Zoë Sprokel. The views expressed here are those of the authors and do not necessarily represent the views of the ECB.2. See,for example, Dedola et al. (2017), Gerko and Rey (2017), or Iacoviello and Navarro (2019).3. These are fluctuations in interest rates which reflect changes in the perceived central bank assessment of the economic outlook (see Melosi, 2017; Nakamura and Steinsson, 2018; Jarociński and Karadi 2020). Such shocks have been shown to play a role in driving the business cycle.4. The estimation approach and technical details are described in Ca’ Zorzi et. al. (2020).5. Estimates for shorter periods, such as the period of the expanded asset purchase programme, would not be reliable with the methodology used. Using longer-term swaps for recent years to try to better capture the effect of unconventional monetary policy does not change the results.6. Impulse responses for trade and other variables can be found in Ca’ Zorzi et. al. (2020).

Compliments of the European Central Bank.
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Citizens and professionals alike value privacy most for possible future digital euro
Preference for a digital euro being integrated into existing banking and payment systems
Public consultation provides valuable input for Eurosystem’s decision in mid-2021 on starting formal investigation on digital euro

The European Central Bank (ECB) has published today a comprehensive analysis of its public consultation on a digital euro. The analysis confirms, by and large, our initial findings: what the public and professionals want the most from such a digital currency is privacy (43%), followed by security (18%), the ability to pay across the euro area (11%), no additional costs (9%) and offline usability (8%).
“A digital euro can only be successful if it meets the needs of Europeans,” says ECB Executive Board member Fabio Panetta. “We will do our best to ensure that a digital euro meets the expectations of citizens highlighted in the public consultation.”
Privacy is the most important feature of a digital euro for both the public and professionals, especially merchants and other companies. Both groups support requirements to avoid illicit activities, with fewer than one in ten responses from members of the public showing support for full anonymity.
More than two-thirds of respondents acknowledge the importance of intermediaries providing innovative services that allow access to a digital euro and indicate that it should be integrated into existing banking and payment systems. They would like additional services provided on top of basic digital euro payments.
Around a quarter of respondents take the view that a digital euro should make cross-border payments faster and cheaper. They want the digital euro to be usable outside the euro area, though with limits.
The ECB received many technical suggestions from the respondents. According to a quarter of individual respondents, end-user solutions comprising (smart) cards or a secure element in smartphones would be preferred to facilitate cash-like features. Almost half mention a need for holding limits, tiered remuneration, or a combination of the two, to manage the amount of digital euro in circulation. A similar share of professional respondents agree.
The consultation was launched on 12 October 2020 and concluded on 12 January 2021, receiving over 8,200 responses – a record participation for an ECB public consultation. A large majority of respondents were private citizens (94%). The remaining participants were professionals, including banks, payment service providers, merchants and tech companies.
Most responses came from Germany (47%), Italy (15%) and France (11%). The answers are not necessarily representative of the views of the EU population as the consultation was open to everyone, and respondents participated on their own initiative. Still, they provide important input into the ECB’s analytical and experimental work and into the upcoming decision of the Governing Council on whether to launch a formal investigation phase in view of the possible issuance of a digital euro.
REPORT on the public consultation on a digital euro
Contact:

Alexandrine Bouilhet, tel.: +49 172 174 93 66.

Compliments of the European Central Bank.
The post ECB publishes the results of the public consultation on a digital euro first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The Commission has today taken steps to ensure that borrowing under the temporary recovery instrument NextGenerationEU will be financed on the most advantageous terms for EU Member States and their citizens. The Commission will use a diversified funding strategy to raise up to around €800 billion in current prices until 2026. This approach, which will be in line with the best practices of sovereign issuers, will enable the Commission to raise the needed volumes in a smooth and efficient way. This will also attract investors to Europe and strengthen the international role of the euro.
Johannes Hahn, Commissioner in charge of Budget and Administration, said: “NextGenerationEU is a game changer for European capital markets. Today, we are unveiling the engine that will pump the fuel to power NextGenerationEU. The funding strategy will operationalise the NextGenerationEU borrowing, so we will have all necessary tools in place to kick-start the social and economic recovery and promote our green, digital and resilient growth. The message is clear: as soon as the Commission has been legally enabled to borrow, we are ready to get going!”
Borrowing to finance the recovery
NextGenerationEU – at the heart of the EU’s response to the coronavirus pandemic – will be funded by borrowing on the capital markets. We will raise up to around €800 billion between now and end-2026.
This will translate into borrowing volumes of on average roughly €150 billion per year, which will make the EU one of the largest issuers in euro. All borrowing will be repaid by 2058.
While the Commission has been borrowing before – to support EU Member States and third countries – the volumes, frequency and complexity of the NextGenerationEU borrowing have called for a fundamental change in the approach to capital markets.
A diversified funding strategy will respond to these new funding needs. It will enable the Commission to mobilise all funds when required on the most advantageous terms for the EU Member States and their citizens.
Diversified funding strategy: a snapshot
A diversified funding strategy combines the use of different funding instruments and funding techniques with an open and transparent communication to the market participants.
The Commission’s diversified funding strategy would combine:

Annual decision on borrowing volumes and 6-monthly communication on the funding plan’s key parameters, to offer transparency and predictability to investors and other stakeholders;
Structured and transparent relationships with banks supporting the issuance programme (via a Primary Dealer Network);
Multiple funding instruments (medium and long-term bonds, some of which will be issued as NextGenerationEU green bonds, and EU-Bills) to maintain flexibility in terms of market access and to manage liquidity needs and the maturity profile;
A combination of auctions and syndications, to ensure cost efficient access to the necessary funding on advantageous terms.

The borrowing operations will be embedded in a robust governance framework, which will ensure coherent and consistent execution.
In its work, the Commission will continue to coordinate with other issuers, including the EU Member States and supranationals.
The added value of a diversified funding strategy
The diversified funding strategy will help the Commission to achieve two main objectives: address the large funding needs of NextGenerationEU and obtain the desired low cost and low execution risk in the interest of all Member States and their citizens:

By using a wide range of maturities and instruments and by making funding operations more predictable, the Commission will ensure a larger market absorption capacity. The ability to auction debt will make the funding operations even more efficient. This will help address the large funding needs.
By allowing flexibility to decide when to execute funding operations and which funding techniques or instruments to use, the Commission will obtain the desired low cost and low execution risk in the interest of all Member States.

Next steps
Following today’s package, the Commission will proceed with a series of steps to operationalise the diversified funding strategy. Among them:

Setting up a Primary Dealer Network. In line with practices of comparable issuers, the Commission will set up a Primary Dealer Network to facilitate the efficient execution of auctions and syndicated transactions, support liquidity in the secondary markets, and ensure the placement of our debt with the widest possible investor base. The application form and the General Terms and Conditions for participation will be published shortly.

Publish the first annual Borrowing Decision (and accompanying Financing Decision) and first NextGenerationEU funding plan. To ensure transparent communication with the markets, the Commission will adopt its first annual borrowing decision and communicate the information related to its first funding plan before the start of the NextGenerationEU borrowing, expected this summer (timing being dependent on the approval of the Own Resources Decision by all Member States which will empower the Commission to borrow for NextGenerationEU). The borrowing operations can then start as soon as the Own Resources Decision will enter into force. Funding plans will then be updated semi-annually.

Background
NextGenerationEU
NextGenerationEU is at the heart of the EU response to the coronavirus crisis and aims to support the economic recovery and build a greener, more digital and more resilient future. The EU agreed this instrument as part of an over €2 trillion (in current prices) or €1.8 trillion (in 2018 prices) stimulus package, which also comprises the 2021-2027 long-term budget.
The centrepiece of NextGenerationEU is the Recovery and Resilience Facility – an instrument to offer grants and loans to support reforms and investments in the EU Member States with a total value of €723.8 billion in current prices.
In addition, NextGenerationEU will reinforce several EU programmes. To finance NextGenerationEU, the EU will borrow on the capital markets. Repayment will take place over a long-time horizon, until 2058. This will avoid immediate pressure on Member States’ national finances and enable EU Member States to focus their efforts on the recovery.
To help repay the borrowing, the EU will look into introducing new own resources (or sources of revenue) to the EU budget, on top of the already existing ones.
The EU as a borrower
The European Commission, on behalf of the EU, is a well-established participant in the capital markets. Over a period of 40 years, the European Commission has run several lending programmes to support EU Member States and third countries.
Last year, the Commission also started borrowing for SURE – the up to €100 billion instrument – to help protect jobs and keep people in employment. So far, 3/4ths of the EU SURE funds have been raised in six very successful issuances, which has made it possible to finance loans to Member States on very advantageous terms.
All of these lending operations were financed on a back-to-back basis, mainly through syndicated bond issuances.
Compliments of the European Commission.
The post NextGenerationEU: Commission gets ready to raise up to €800 billion to fund the recovery first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.