The right rules could provide a safe space for innovation
Crypto assets have been around for more than a decade, but it’s only now that efforts to regulate them have moved to the top of the policy agenda. This is partly because it’s only in the past few years that crypto assets have moved from being niche products in search of a purpose to having a more mainstream presence as speculative investments, hedges against weak currencies, and potential payment instruments.
The spectacular, if volatile, growth in the market capitalization of crypto assets and their creep into the regulated financial system have led to increased efforts to regulate them. So too has the expansion of crypto’s many different products and offerings and the evolving innovations that have facilitated issuance and transactions. The failures of crypto issuers, exchanges, and hedge funds—as well as a recent slide in crypto valuations—have added impetus to the push to regulate.
Applying existing regulatory frameworks to crypto assets, or developing new ones, is challenging for several reasons. For a start, the crypto world is evolving rapidly. Regulators are struggling to acquire the talent and learn the skills to keep pace given stretched resources and many other priorities. Monitoring crypto markets is difficult because data are patchy, and regulators find it tricky to keep tabs on thousands of actors who may not be subject to typical disclosure or reporting requirements.
Playing catch-up
To complicate matters, the terminology used to describe the many different activities, products, and stakeholders is not globally harmonized. The term “crypto asset” itself refers to a wide spectrum of digital products that are privately issued using similar technology (cryptography and often distributed ledgers) and that can be stored and traded using primarily digital wallets and exchanges.
The actual or intended use of crypto assets can attract at once the attention of multiple domestic regulators—for banks, commodities, securities, payments, among others—with fundamentally different frameworks and objectives. Some regulators may prioritize consumer protection, others safety and soundness or financial integrity. And there is a range of crypto actors—miners, validators, protocol developers—that are not easily covered by traditional financial regulation.
Entities operating in financial markets are typically authorized to undertake specified activities under specified conditions and defined scope. But the associated governance, prudence, and fiduciary responsibilities do not easily carry over to participants, who may be hard to identify because of the underlying technology or who may sometimes play a casual or voluntary role in the system. Regulation may also have to reckon with the unwinding of conflicting roles that have become concentrated in some centralized entities, such as crypto exchanges.
Finally, in addition to developing a framework that can regulate both actors and activities in the crypto ecosystem, national authorities may also have to take a position on how the underlying technology used to create crypto assets stacks up against other public policy objectives—as is the case with the enormous energy intensity of “mining” certain types of crypto assets.
In essence, crypto assets are merely codes that are stored and accessed electronically. They may or may not be backed by physical or financial collateral. Their value may or may not be stabilized by being pegged to the value of fiat currencies or other prices or items of value. In particular, the electronic life cycle of crypto assets amplifies the full range of technology-related risks that regulators are still working hard to incorporate into mainstream regulations. These include predominantly cyber and operational risks, which have already come to the fore through several high-profile losses from hacking or accidental loss of control, access, or records.
Some of these might have been lesser concerns if the crypto asset system had remained closed. But this is no longer the case. Many functions in the financial system, such as providing leverage and liquidity, lending, and storing value, are now emulated in the crypto world. Mainstream players are competing for funding and clamoring for a piece of the action. This is all leading to greater calls for the “same activity, same risk, same rule” principle to be applied, with the necessary changes, to the crypto world—piling pressure on regulators to act. It is posing another conundrum for public policy, too. How closely can the two systems be integrated before there is a call for the same central bank facilities and safety nets in the crypto world?
Contrasting national approaches
It’s not that national authorities or international regulatory bodies have been inactive—in fact, a lot has been done. Some countries (such as Japan and Switzerland) have amended or introduced new legislation covering crypto assets and their service providers, while others (including the European Union, United Arab Emirates, United Kingdom, and United States) are at the drafting stage. But national authorities have, on the whole, taken very different approaches to regulatory policy for crypto assets.
At one extreme, authorities have prohibited the issuance or holding of crypto assets by residents or the ability to transact in them or use them for certain purposes, such as payments. At the other extreme, some countries have been much more welcoming and even sought to woo companies to develop markets in these assets. The resulting fragmented global response neither assures a level playing field nor guards against a race to the bottom as crypto actors migrate to the friendliest jurisdictions with the least regulatory rigor—while remaining accessible to anyone with internet access.
The international regulatory community has not been sitting idle either. In the early years, the major concern was preserving financial integrity by minimizing the use of crypto assets to facilitate money laundering and other illegal transactions. The Financial Action Task Force moved quickly to provide a global framework for all virtual asset service providers. The International Organization of Securities Commissions (IOSCO) also issued regulatory guidance on crypto exchanges. But it was the announcement of Libra, touted as a “global stablecoin,” that grabbed the world’s attention and added a greater impetus to these efforts.
The Financial Stability Board began monitoring crypto asset markets; released a set of principles to guide the regulatory treatment of global stablecoins; and is now developing guidance for the broader range of crypto assets, including unbacked crypto assets. Other standard-setters are following suit, with work on the application of principles for financial market infrastructures to systemically important stablecoin arrangements (Committee on Payments and Market Infrastructures and IOSCO) and on the prudential treatment of banks’ exposures to crypto assets (Basel Committee on Banking Supervision).
The regulatory fabric is being woven, and a pattern is expected to emerge. But the worry is that the longer this takes, the more national authorities will get locked into differing regulatory frameworks. This is why the IMF is calling for a global response that is (1) coordinated, so it can fill the regulatory gaps that arise from inherently cross-sector and cross-border issuance and ensure a level playing field; (2) consistent, so it aligns with mainstream regulatory approaches across the activity and risk spectrum; and (3) comprehensive, so it covers all actors and all aspects of the crypto ecosystem.
A global regulatory framework will bring order to the markets, help instill consumer confidence, lay out the limits of what is permissible, and provide a safe space for useful innovation to continue.
Authors:

ADITYA NARAIN is deputy director of the IMF’s Monetary and Capital Markets Department.
 

MARINA MORETTI is assistant director of the IMF’s Monetary and Capital Markets Department.

Compliments of the IMF.
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Every year at this time, world leaders gather in New York for the United Nations (UN) General Assembly. This year, however, there will be nothing routine about this diplomatic set-piece. 77 years after the UN was created to save humanity “from the scourge of war”, Europe is once again on the front line and crises are affecting many regions. UNGA offers a unique chance for countries to come together, to work out solutions to global problems. And after two years of pandemic disruption, this General Assembly brings determination to face enormous challenges.

The EU and the UN are the world’s leading proponents and defenders of rules-based multilateralism. As humankind was beginning to heal from the pandemic, Russia’s unjustifiable war of aggression against Ukraine broke up into already uncertain times. Now more than ever it is time to demonstrate solidarity to the many in need around the world and to show that multilateralism works times of crisis. Promoting effective multilateral governance and upholding the UN Charter is at the heart of the EU’s priorities for the 77th session of the UN General Assembly.
As of today, High Representative for Foreign Affairs and Security Policy/Vice-President of the European Commission, Josep Borrell will be in New York to participate in a range of high-level events and meetings with world leaders at opening of the 77th United Nations General Assembly. The EU will also be represented by the President of the European Council Charles Michel, President of the European Commission Ursula von der Leyen, Executive Vice-President Frans Timmermans, and Commissioners Jutta Urpilainen (INTPA) and Janez Lenarčič (ECHO).
During the week, High Representative Borrell will be meeting with UN Secretary-General António Guterres, chairing the Informal EU Foreign Ministers Meeting, attending the Opening of the UN General Debate, hosting the Western Balkans Lunch, participating in the 12th Global Counterterrorism Forum Ministerial Plenary, the GCC-EU Ministerial meeting, and the Transatlantic Foreign Ministers Dinner hosted by the U.S. Secretary of State. He will have also several bilateral meetings with leaders from Asia, Africa, Middle East, Southern Neighbourhood and Latin America.
EU’s strategic priorities @UNGA77
Upholding the UN Charter and the rule of law is at the heart of the EU’s priorities. The world is facing yet another challenge to global peace and security in decades – Russia’s war of aggression against Ukraine. This adds to existing geopolitical fractures and crises, including those caused by COVID-19 and climate change. The EU will therefore take every opportunity to underline the binding character of the UN Charter in its entirety – peace and security, human rights, gender equality, human dignity, equal rights of large and small nations – and to emphasise the universality of the UN’s founding principles.
Russia’s aggression against Ukraine is not only damaging the rules-based international order, but is disrupting the global economy and global food security in ways that harm all countries. Addressing the global food crisis and other consequences of the Russian aggression is a key concern for all responsible members of the international community. This is why the EU is working actively with the UN’s Global Crisis Response Group on Food, Energy and Finance (GCRG). The EU and its Member States have taken multiple initiatives aiming at mitigating the severe effects of the global food crisis and will continue to engage with all partners to help alleviate the consequences, in particular to address food insecurity, malnutrition and increasing humanitarian needs. Looking to the future, the transformation of global food systems, in line with commitments from the UN Food Systems Summit, is key.
The 2030 Agenda remains the EU’s roadmap, as it has been since it was agreed. In promoting sustainable development and human rights our top priority is to strengthen resilience against future shocks and to ensure a sustainable, equitable and inclusive recovery. And to empower youth. In the European Year for Youth, the EEAS has launched the #OurVoiceOurFuture campaign to raise awareness among young people on the meaning and the value of multilateralism.
Access to quality education for all carries tremendous transformative power for a sustainable, just, inclusive, more equal and resilient world. We must ensure that the Transforming Education Summit during the High-Level Week will be truly transformative in order to promote equitable access to quality education for current and future generations.
The key lesson learned from the pandemic is that we need to invest considerably in strengthening global health security and preparedness. Beyond fighting the current pandemic, the EU’s ultimate goal is to advance Universal Health Coverage and build strong and resilient health systems in partner countries in line with the One Health approach.
The “triple planetary crisis” of climate change, biodiversity loss and pollution constitutes an existential threat for the people and the planet and must be tackled with the strongest sense of urgency. It is imperative that we accelerate our efforts for a resilient and just green energy transition worldwide.
The digital space is rich in opportunities, but also carries risks. Shaping the global digital agenda to make the digital transformation work for all is essential. This includes protecting the digital commons as a global public good, to achieve affordable, meaningful connectivity and digital inclusion, to close the digital divide, and to ensure respect and protection of human rights online – as we do offline.
The EU will also seek to harness the historic opportunity provided by the UN process on “Our Common Agenda” to introduce global governance reforms, so that the multilateral system – centred on the UN – is fit for tomorrow’s world and delivers better on our shared global commitments. The EU will partner with all relevant actors to this end, in the spirit of a truly inclusive and networked multilateralism and towards a reformed UN 2.0. The EU will engage constructively on a New Agenda for Peace, a Global Digital Compact, and an Emergency Platform to allow for a better response to complex global crises.

Compliments of the EU Delegation to the United States
The post EU@UNGA77: Multilateralism at work in times of crisis first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The EU Commission is proposing an emergency intervention in Europe’s energy markets to tackle recent dramatic price rises. The EU is confronted with the effects of a severe mismatch between energy demand and supply, due largely to the continued weaponisation by Russia of its energy resources. To ease the increased pressure this puts on European households and businesses, the Commission is now taking a next step in tackling this issue by proposing exceptional electricity demand reduction measures, which will help reduce the cost of electricity for consumers, and measures to redistribute the energy sector’s surplus revenues to final customers. This follows on from previously agreed measures on filling gas storage and reducing gas demand to prepare for the upcoming winter. The Commission is also continuing its work to improve liquidity for market operators, bring down the price of gas, and reform the electricity market design for the longer term.
The first response to tackle high prices is to reduce demand. This can impact electricity prices and achieve an overall calming effect on the market. To target the most expensive hours of electricity consumption, when gas-fired power generation has a significant impact on the price, the Commission proposes an obligation to reduce electricity consumption by at least 5% during selected peak price hours. Member States will be required to identify the 10% of hours with the highest expected price and reduce demand during those peak hours. The Commission also proposes that Member States aim to reduce overall electricity demand by at least 10% until 31 March 2023. They can choose the appropriate measures to achieve this demand reduction, which may include financial compensation. Reducing demand at peak times would lead to a reduction of gas consumption by 1.2bcm over the winter. Increasing energy efficiency is also a key part of meeting our climate commitments under the European Green Deal.
The Commission is also proposing a temporary revenue cap on ‘inframarginal’ electricity producers, namely technologies with lower costs, such as renewables, nuclear and lignite, which are providing electricity to the grid at a cost below the price level set by the more expensive ‘marginal’ producers. These inframarginal producers have been making exceptional revenues, with relatively stable operational costs, as expensive gas power plants have driven up the wholesale electricity price they receive. The Commission proposes to set the inframarginal revenue cap at €180 EUR/MWh. This will allow producers to cover their investment and operating costs without impairing investment in new capacities in line with our 2030 and 2050 energy and climate goals. Revenues above the cap will be collected by Member State governments and used to help energy consumers reduce their bills. Member States trading electricity are encouraged, in a spirit of solidarity, to conclude bilateral agreements to share part of the inframarginal revenues collected by the producing State for the benefit of end-users in the Member State with low electricity generation. Such agreements shall be concluded by 1 December 2022 where a Member State’s net imports of electricity from a neighbouring country are at least 100%.
Thirdly, the Commission is also proposing a temporary solidarity contribution on excess profits generated from activities in the oil, gas, coal and refinery sectors which are not covered by the inframarginal revenue cap. This time-limited contribution would maintain investment incentives for the green transition. It would be collected by Member States on 2022 profits which are above a 20% increase on the average profits of the previous three years. The revenues would be collected by Member States and redirected to energy consumers, in particular vulnerable households, hard-hit companies, and energy-intensive industries. Member States can also finance cross-border projects in line with the REPowerEU objectives or use part of the revenues for the common financing of measures protecting employment or promoting investments in renewables and energy efficiency.
In a further intervention in the electricity market rules, the Commission is also proposing to expand the Energy Prices Toolbox available to help consumers. The proposals would allow below cost regulated electricity prices for the first time, and expand regulated prices to also cover small and medium-sized enterprises. 
As Commission President von der Leyen announced on Wednesday 7 September, the Commission will also continue to pursue other avenues to bring down prices for European consumers and industry, and ease pressure on the market. The Commission will deepen its discussion with Member States about the best ways to reduce gas prices, also analysing various ideas for price caps and enhancing the role of the EU Energy Platform in facilitating lower price agreements with suppliers through voluntary joint purchasing. The Commission will also keep working on tools to improve liquidity on the market for energy utilities, and review the Temporary State aid Crisis Framework to ensure that it continues to enable Member States to provide necessary and proportionate support to the economy while ensuring a level playing field. At the Extraordinary Energy Council on 9 September, Energy Ministers of Member States endorsed the Commission’s ongoing work in these areas.
Background
The Commission has been tackling the issue of rising energy prices for the past year, and Member States have deployed many measures at national level which the Commission provided through the Energy Prices Toolbox adopted in October 2021 and expanded in Spring 2022 with the Communication on short-term market interventions and long-term improvements to the electricity market design and the REPowerEU Plan. The energy market situation has worsened considerably since Russia’s invasion of Ukraine and its further weaponisation of its energy resources to blackmail Europe, which exacerbated an already tight supply situation after the COVID-19 pandemic. The Commission has already proposed new minimum gas storage obligations and demand reduction targets to ease the balance between supply and demand in Europe, and Member States swiftly adopted these proposals before the summer.
As Russia has continued to manipulate gas supplies, cutting off deliveries to Europe for unjustified reasons, markets have become tighter and more nervous. Prices increased further over the summer months, which have also been marked by extreme weather conditions caused by climate change. In particular, droughts and extreme heat have had an impact on electricity generation by hydropower and nuclear, further reducing supply. That is why the Commission, in the form of a Council Regulation based on Article 122 of the Treaty, is now proposing an emergency intervention in the electricity market, with common European tools to tackle high prices and address imbalances in the system between suppliers and end-users of electricity, while preserving the overall functioning of the internal energy market and preventing security of supply risks.
Quotes by Members of the College of Commissioners
President Ursula von der Leyen said: “Russian aggression and manipulation is affecting global and European energy markets, and we need to be resolute in our response. Today, the Commission is bringing further proposals to the table which Member States can swiftly adopt and implement, to ease the pressure on households and businesses. We continue to stand united in the face of Putin’s weaponisation of gas and ensure we minimise the impact of high gas prices on our electricity costs in these exceptional times.”
Executive Vice-President Frans Timmermans said: “These unprecedented measures are a necessary response to the energy supply shortages and high energy prices affecting Europe. Demand reduction is fundamental to the overall success of these measures: it lowers energy bills, ends Putin’s ability to weaponise his energy resources, reduces emissions and helps rebalance the energy market. A cap on outsize revenues will bring solidarity from energy companies with abnormally high profits towards their struggling customers. Above all, however, this crisis underlines that the era of cheap fossil fuels is over and that we need to accelerate the switch towards homegrown, renewable energy.”
Commissioner for Energy Kadri Simson said: “We are making an emergency intervention in the design of our power market today, capping revenues for lower cost electricity producers, and allowing exceptional measures on regulation of prices for businesses and households. This will enable Member States to raise and redirect revenues to those in need in this difficult time, without undermining the long-term functioning of the market”
Commissioner for Economy Paolo Gentiloni said: “Our proposal for a solidarity contribution from fossil-fuel industries will ensure that we tackle the current energy crisis in a spirit of fairness. In these extraordinarily difficult times for so many, fossil-fuel companies have been enjoying abnormally high rents. So it is essential that they pay their fair share to supporting vulnerable households and hard-hit sectors, as well as towards the mountain of investments before us in renewables and energy efficiency. Because in the face of Putin’s weaponisation of energy, we need a collective effort of solidarity in order to build a more secure and sustainable Europe.”
Compliments of the European Commission.
The post Energy prices: EU Commission proposes emergency market intervention to reduce bills for Europeans first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

“Democratic institutions must constantly gain and regain the citizens’ trust. We must live up to the new challenges that history always puts before us. Just like Europeans did when millions of Ukrainians came knocking on their door. This is Europe at its best. A Union of determination and solidarity.”

Ursula von der Leyen, President of the European Commission

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Charting the course for the year ahead
In her State of the Union address on 14 September 2022, President of the European Commission Ursula von der Leyen outlined flagship initiatives which the Commission plans to undertake in the coming year. Many of them are made in response to recommendations citizens made through the Conference on the Future of Europe.
The initiatives among others include:

Continuing to strongly support Ukraine and its people, including by mobilising the full power of the EU’s Single Market
Putting in place measures to support Europeans in weathering the energy crisis
Supporting the business environment, particularly small and medium enterprises, to strengthen Europe’s future competitiveness
Cutting the EU’s dependency on Russian fossil fuels, and working closely with reliable suppliers
Investing further in renewable energy and hydrogen in particular
Leading globally on climate adaptation and protecting our nature
Continuing to stand up for democracy, at home and across the world, and for the rule of law

Compliments of the European Commission.
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Women and men shop differently and have different perceptions of prices and inflation. This ECB Blog post examines how inflation expectations are formed and revised across gender and why that matters for central banks.
Women tend to have higher inflation expectations than men. As these differences are well documented across the world, we have used results from the ECB’s new Consumer Expectations Survey (CES) to shed light on certain factors which can explain some of the gender inflation gap. And this gap is quite substantial: the inflation expectations of women and men participating in the CES differed by almost one percentage point.
So, what factors did we find which could explain this gender gap? First, on average, women place more emphasis on perceived food inflation. Second, men are more confident about their inflation expectations. However, when women and men receive new information regarding price changes, while that may differ depending on personal experiences, they will both adjust their inflation expectations at a similar rate and in a similar pattern to each other. As humans we absorb news the same way regardless of our gender, whereas gaps result from different information sets.
But let’s take a step back and look at how we form expectations. Our inflation perception often starts with personal experience in everyday life situations. As consumers, we observe and focus on prices we encounter in our daily routines. We extrapolate these to broader inflation perceptions and eventually shape our expectations for future inflation.[1] This is why our heterogeneous preferences and shopping habits influence the way we perceive and expect inflation to develop. And it might shape perceptions and expectations for women and men differently, also depending on their age.[2]
Food prices have biggest effect on inflation expectations
This pattern is also represented in our findings from the CES. An analysis conducted on the results of the CES shows that the inflation expectations of the average euro area consumer depend on how she or he perceives inflation in all main spending categories: food, health, clothing, transport, utilities and housing services. All of them matter, but perception of food inflation matters the most .[3]
The predominant role of perceived food inflation holds for both women and men but is especially true for women.[4] Moreover, the gender gap in the influence of perceived food inflation on inflation expectations does not exist in consumers aged below 34 and is highest for women aged 35-49. It is estimated that a one-percentage-point increase in perceived food inflation will raise women’s short-term (one-year ahead) inflation expectations by 0.40 percentage points. By contrast, the impact on men’s expectations is 0.26 percentage points – see Chart 1. In reality, the share of food, beverages and tobacco in the price index is actually only 21 percent.[5] When thinking about future inflation, men seem to be more influenced by perceptions of transport, clothing and housing inflation developments. This divide could reflect the allocation of household chores between men and women. And indeed single men and single women aged 35-49 do not substantially differ in the extent to which their perceived food, transport and housing inflation carries on their inflation expectations whereas the divergence is confirmed in couples aged 35-49.[6]

Impact of perceived inflation in single spending category on inflation expectations one-year ahead

Percentage points

Sources: ECB Consumer Expectations Survey (CES).
Notes: The chart shows how much impact a one percentage point higher perception of inflation in different spending categories has on one-year ahead inflation expectations for females and males aged 35-49 years old

Women are also more likely to report round numbers in their inflation expectations. Reiche and Meyler (2022) show that people who are more uncertain about the quantitative level of inflation typically report round figures as their inflation expectations.[7] Women are more likely than men to report multiples of 10 or of 5, whereas men are more likely to report either single non-rounded digits or even decimal places. There is also evidence that those who have a negative attitude about the economy tend to be more uncertain about the inflation outlook and to report rounded and higher inflation expectations.
Reassuringly for economic forecasters, the CES also provides data that indicates some interesting ways in which women and men can be predicted to behave in a similar manner. The participants in the survey were asked, on two occasions, about how they perceive inflation in the different spending categories and were also asked for the inflation rate they expected in the future. Their answers show that changes in inflation perceptions move inflation expectations when food, transport and utilities are concerned. Most interestingly, inflation expectations change to the same extent for women and men and in line with these categories’ weight in households’ consumption baskets.[8] In other words: following a similar change of perceived inflation, men and women, regardless of their age, tend to revise their inflation expectations in a similar fashion.
Why does this all matter for monetary policy? Gender indicates our inflation perceptions and perceptions influence behaviours in a myriad of different ways. Related to the different expectations of women and men, there are consequences in real life, for example, how we behave when economic circumstances or financing conditions change. Women might be less prone than men to cancelling, postponing or reducing their holiday plans when energy prices spike or be less influenced by a similar spike when planning to purchase a car. The fallout on aggregate economic activity are self-evident.
Enhancing central bankers’ understanding of how consumers form and update their inflation expectations is important in several ways. It helps identify what type of inflation matters for consumers. It enhances the analysis of the macroeconomic implications of monetary policy decisions and thus ultimately it builds up central banks’ credibility. Gender differences underscore the need for a differentiated communication strategy which can speak to specific experiences. Recently, the Eurosystem has undertaken several initiatives aimed at promoting financial literacy generally and the understanding of inflation specifically. Such initiatives could overcome the cognitive inattention of consumers by stimulating both women and men to broaden the information set upon which their beliefs and actions are grounded. Ultimately, better-informed evaluations of inflation and real interest rate would enable households to take better informed consumption and investment decisions.
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Compliments of the European Central Bank.

1. Inflation perceptions and expectations are highly influenced by personal experiences, see de Bruin B., W., W. van der Klaauw and G. Topa G, 2011, “Expectations of Inflation: The Biasing Effect of Thoughts about Specific Prices.” Journal of Economic Psychology 32(5): 834-845; Cavallo, A., G. Cruces and R. Perez-Truglia. 2017, “Inflation Expectations, Learning, and Supermarket Prices: Evidence from Survey Experiments” American Economic Journal: Macroeconomics 9(3): 1-35. Conrad C., Enders Z., Glas A., 2021, “The role of information and experience for households‘ inflation expectations”, Bundesbank Discussion Paper; D’Acunto F., Malmendier U., Ospina J., Weber M., 2021 “Exposure to Grocery Prices and Inflation Expectations”, Journal of Political Economy, Vol. 129, N. 5;
2. For a further discussion of the gender gap in inflation perceptions and expectations see Jonung L.,1981, Perceived and Expected Rates of Inflation in Sweden”, American Economic Review (Vol. 71, Issue 5); and Arioli et al., 2016, “EU consumers’ quantitative inflation perceptions and expectations: an evaluation”, European Economy – Discussion Papers 2015 – 038, DG ECFIN European Commission.
3. Consumers are asked about perceived changes in the price level over the previous 12 months (perceived inflation) and those expected over the next 12 months (inflation expectations) every month. In December 2021 and March 2022, they were also asked to report perceived price changes over the same horizon in single spending categories. The empirical evidence is obtained estimating inflation expectations 12 months ahead to perceived inflation in the six main spending groupings (three years ahead inflation expectations confirm main findings) and separately revisions in inflation expectations to revisions in perceived inflation in the six spending categories. Effects due to structural factors encompassing time, country, gender, age, attained education, income are controlled for. For further information visit here.
4. Men and women report about the same spending allocation across categories, women perceive higher inflation in each spending category and overall. See also, D’Acunto F. Malmendier U., Weber M.,2021, “Gender roles produce divergent economic expectations”, Proceeding of National Academy of Sciences, Vol. 118, N.21.
5. For weights of main components of the euro area HICP inflation in 2022 see here.
6. See. Flagg, L., Sen, B., Kilgore, M., & Locher, J. (2014). “The influence of gender, age, education and household size on meal preparation and food shopping responsibilities”. Public Health Nutrition, 17(9), 2061-2070
7. The rounding to multiples of 10 or 5 by both males and females is one reason why mean inflation expectations tend to be systematically higher than actual inflation. Reiche, L. and A. Meyler (2022) “Making sense of consumer inflation expectations: the role of uncertainty”, ECB Working Paper Series No 2642, February.
8. See also, Armantier O., Nelson S., Topa G., van der Klaauw W., Zafar B., 2016, “The Price Is Right: Updating Inflation Expectations in a Randomized Price Information Experiment”, The Review of Economics and Statistics (2016) 98 (3): 503–523;.

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Financing of unprecedented EUR 1 billion built-to-sell construction facility including one of the biggest loans ever granted by the European Investment Bank (EIB) under a Project Finance structure
EIB loan backed by the EU’s new InvestEU programme
Further loans from seven commercial banks
More than EUR 2 billion project volume in total for entire renewable energy pipeline in Spain and Portugal with over 50 projects

Aquila Clean Energy EMEA, the clean energy development platform in Europe of Aquila Capital, has closed a EUR 1 billion construction facility, supported by the InvestEU programme. The financing will support the development and construction of Aquila Clean Energy’s entire renewable energy pipeline in Spain and Portugal over the next three years. The projects will be implemented in regions like Castilla y León, Comunidad Valenciana, Andalucía, Cantabria, Castilla-La Mancha and Murcia, in Spain, and Setúbal, Coimbra, Evora, Leiria, in Portugal.
The pipeline consists of more than 50 projects of predominately solar photovoltaics (PV) and onshore wind assets, with a total electricity generation capacity of 2.6 giga watts (GW), a volume equivalent to the annual consumption of around 1.4 million households. These projects will have an estimated yield of 5.3 Terawatt-hours per year.
The operation is aligned with the EU’s renewable energy targets and supports Spain and Portugal in meeting their commitments to reduce greenhouse gas emissions. In addition, the vast majority of investments are expected to be located in the EIB’s cohesion priority regions (91 % according to the project pipeline), thus supporting the economic recovery in these regions which were particularly affected by the COVID-19 pandemic.
For the construction facility, Santander acted as the Facility and Security Agent. NatWest acted as Documentation Agent and KfW IPEX-Bank as Hedging Documentation Agent. BNP Paribas, ING, Intesa SanPaolo and Banco Sabadell further supported the facility. The debt was significantly oversubscribed, confirming lenders’ strong interest in the financing.
CMS and White & Case (both Hamburg) acted as borrowers’ and lenders’ legal counsel, respectively. Glas SAS in Frankfurt is acting as Administration Agent.
For the EIB, this short-term construction financing is breaking new ground, as the development bank had mainly acted as long-term lender in the infrastructure space in the past. This project was made possible because of an EU budget guarantee under the InvestEU programme, which allows the EIB to increase its risk taking capacity and in this particular case, to assume electricity merchant risk under a non-recourse financing structure as the transaction does not involve any price hedge mechanism such as PPA.
The InvestEU programme follows up on the success of the Investment Plan for Europe and aims to facilitate investments in the EU. The landmark transaction announced today not only increases the renewable energy generation capacity on the Iberian Peninsula significantly, but also contributes to the objectives of the European Green Deal.
A bespoke EUR 1 billion construction facility consists of EUR 400 million credit from EIB – supported by an EU budget guarantee under InvestEU – and EUR 600 million from the consortium of the commercial banks. For the total project volume of over EUR 2 billion, the remaining amount of more than EUR 1 billion comes from funds managed by Aquila Capital.
Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, said: “Developing the infrastructure that will secure the objectives of the European Green Deal will require significant financial support. InvestEU will play an important role in mobilising the financing. I am delighted that this programme is facilitating a €2 billion investment that will help Spain and Portugal fulfil their green energy potential.”
Susanne Wermter, CEO of Aquila Clean Energy EMEA, emphasises: “We are extremely pleased being able to secure this landmark financing in a market environment which is marked by high inflation, rising interest rates, supply chain issues and the war in the Ukraine. This transaction constitutes the largest financing in the history of Aquila Clean Energy and Aquila Capital. It demonstrates the creditability and appeal of our clean energy assets that aim to actively shape the European energy transition. With the financing now secured, we are opening up additional growth for our company and with the planned assets we will be able to offer our investors further interesting opportunities. I would like to thank all parties involved for their dedication and effort shown over the past twelve months to make this deal work.”
Ricardo Mourinho Félix, EIB Vice-President, highlights: “This construction facility is the first of its kind and a landmark transaction for the EIB. As the EU climate bank, we put sustainable development at the heart of our activities. We are therefore extremely proud of financing this project, through a Green Loan that contributes substantively to Europe’s energy transition and the security of energy supply.”
About Aquila Clean Energy
Aquila Clean Energy EMEA is Aquila Capital´s clean energy platform in Europe. Aquila Clean Energy develops, realizes and operates clean energy assets in the technologies solar, wind, hydropower and battery storage. Currently, Aquila Clean Energy manages a portfolio with a total capacity of more than 8.2GW.
With a local approach and through local teams of experts, Aquila Clean Energy initiates, develops, realizes and operates what we identify as essential assets along the entire value chain and lifetime. Aquila Clean Energy has built a permanent presence in 7 countries with 140 employees, believing that local, on-site management teams are key to the company’s operations.
Aquila Clean Energy is part is part of Aquila Capital, an investment and asset development company focused on generating and managing essential assets on behalf its clients. Currently, Aquila Capital manages nearly 14 billion euros on behalf of institutional investors worldwide. The company has been carbon neutral since 2006 and aims to act carbon negative.
Further information: https://www.aquila-capital.de/en/
About the European Investment Bank
The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It provides long-term financing for sound investments that contribute to EU policy. The Bank finances projects in four priority areas: infrastructure, innovation, climate and environment, and small and medium-sized enterprises (SMEs). The EIB recently adopted its Climate Bank Roadmap to deliver on its ambitious agenda to support €1 trillion of climate action and environmental sustainability investments in the decade to 2030 and to allocate more than 50% of its financing to climate action and environmental sustainability by 2025. As part of the roadmap, all new EIB Group operations have been aligned with the goals and principles of the Paris Agreement since 2021.
About the InvestEU Programme
The InvestEU Programme provides the EU with crucial long-term funding by leveraging substantial private and public funds in support of a sustainable recovery. It also helps mobilise private investments for the EU’s policy priorities, such as the European Green Deal and the digital transition. The InvestEU Programme brings together under one roof the multitude of EU financial instruments currently available to support investment in the EU, making funding for investment projects in Europe simpler, more efficient and more flexible. The programme consists of three components: the InvestEU Fund, the InvestEU Advisory Hub, and the InvestEU Portal. The InvestEU Fund is implemented through financial partners who will invest in projects using the EU budget guarantee of €26.2 billion. The entire budgetary guarantee will back the investment projects of the implementing partners, increase their risk-bearing capacity and thus mobilise at least €372 billion in additional investment.
Further information: http://investeu.europa.eu
Compliments of the European Commission.
The post Aquila Clean Energy raises financing for 2.6 GW capacity renewable energy projects in Southern Europe with the support of InvestEU first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) issued today their Autumn 2022 joint risk report. The report highlights that the deteriorating economic outlook, high inflation and rising energy prices have increased vulnerabilities across the financial sectors. The ESAs advise national supervisors, financial institutions and market participants to prepare for challenges ahead.
The post-pandemic economic recovery in Europe has dwindled as a result of the Russian invasion of Ukraine. Russia’s war on Ukraine and the disruptions in trade caused a rapid deterioration of the economic outlook. It adds to pre-existing inflationary pressures by strongly raising energy- and commodity prices, exacerbates imbalances in supply and demand, and weakens the purchasing power of households. The risk of persistent inflation and stagflation has risen.
These factors, coupled with the deteriorated economic outlook, have significantly impacted the risk environment of the financial sector. Financial market volatility has increased across the board given high uncertainties. After a long period of low interest rates, central banks are tightening monetary policy. The combination of higher financing costs and lower economic output may put pressure on government, corporate and household debt refinancing while also negatively impacting the credit quality of financial institutions’ loan portfolios. The reduction of real returns through higher inflation could lead investors to higher risk-taking at a time when rate rises are setting in motion a far-reaching rebalancing of portfolios.
Financial institutions also face increased operational challenges associated with heightened cyber risks and the implementation of sanctions against Russia. The financial system has to date been resilient despite the increasing political and economic uncertainty.
In light of the above risks and vulnerabilities, the Joint Committee of the ESAs advises national competent authorities, financial institutions and market participants to take the following policy actions:

Financial institutions and supervisors should continue to be prepared for a deterioration in asset quality in the financial sector and monitor developments including in assets that benefitted from temporary measures related to the pandemic and those that are particularly vulnerable to a deteriorating economic environment, to inflation as well as to high energy and commodity prices.
The impact of further increases in policy rates and of potential sudden increases in risk premia on financial institutions and market participants at large should be closely monitored.
Financial institutions and supervisors should closely monitor the impact of inflation risks.
Supervisors should continue to monitor risks to retail investors, in particular with regard to products where consumers may not fully realise the extent of the risks involved, such as crypto-assets.
Financial institutions and supervisors should continue to carefully manage environmental risks and cyber risks to address threats to information security and business continuity.

Contact:

Solveig Kleiveland, Acting Team Leader | press@esma.europa.eu

Compliments of the European Securities and Markets Authority.
The post ESAs warn of rising risks amid a deteriorating economic outlook first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

OECD labour markets bounced back strongly from the COVID-19 pandemic, but the global employment outlook is now highly uncertain according to a new OECD report.
Russia’s war of aggression against Ukraine has caused lower global growth and higher inflation, with negative impacts on business investment and private consumption.
The OECD Employment Outlook 2022 says that while labour markets remain tight in most OECD countries, lower global growth means employment growth is also likely to slow, while major hikes in energy and commodity prices are generating a cost of living crisis.
Since the low point of the pandemic in April 2020, OECD countries have created about 66 million jobs, 9 million more than those destroyed in a few months at the onset of the pandemic.
The OECD unemployment rate stabilised at 4.9% in July 2022, 0.4 points below its pre-pandemic level recorded in February 2020 and at its lowest level since the start of the series in 2001.
The number of unemployed workers in the OECD continued to fall in July and reached 33.0 million, 2.4 million less than before the pandemic.
Looking at individual countries however, the unemployment rate in July remained higher than before the pandemic in one fifth of OECD countries. In a number of countries, labour force participation and employment rates are also still below pre-crisis levels. Moreover, employment is growing more strongly in high pay service industries, while it remains below pre-pandemic levels in many low pay, contact-intensive industries.
“Rising food and energy prices are taking a heavy toll, in particular on low income households,” OECD Secretary-General Mathias Cormann said. “Despite widespread labour shortages, real wages growth is not keeping pace with the current high rates of inflation. In this context, governments should consider well targeted, means-tested and temporary support measures. This would help cushion the impact on households and businesses most in need, while limiting inflation impacts and fiscal cost of that policy support,” he said.

Graph is courtesy of the OECD.
Tight labour market conditions mean that companies across the OECD are confronted with unprecedented labour shortages. In the European Union, almost three in ten manufacturing and service firms reported production constraints in the second quarter of 2022 due to a lack of labour.
Nominal wages are not keeping pace with the rapid rise in inflation. The real value of wages is expected to decline over the course of 2022, as inflation is projected to remain high and generally well above the level expected at the time of relevant collective agreements for 2022. The cost of living crisis is affecting lower-income households disproportionally. They have to devote a significantly larger share of their incomes on energy and food than other groups and were also the population segment falling behind in the jobs recovery from the COVID-19 pandemic.
In these circumstances, supporting real wages for low-paid workers is essential, according to the report. Governments should consider ways to adjust statutory minimum wages to maintain effective purchasing power for low paid workers. Targeted, means-tested, and temporary social transfers to people most affected by energy and food price hikes would also help support the living standards of the most vulnerable.
In the current circumstances, active discussions between governments, workers and firms on wages will also be key. None of them can absorb the full cost associated with the hike in energy and commodity prices alone. This calls for giving new impetus to collective bargaining, and for rebalancing bargaining power between employers and workers, enabling workers to bargain their wage on a level playing field.
Countries should step up their efforts to reconnect the low-skilled and other vulnerable groups to available jobs. About two thirds of OECD countries have increased their budget for public employment services since the onset of the COVID 19 crisis. However, more funding is not enough: employment and training services need to be integrated, comprehensive and effective in reaching out to employers and job seekers.
Improving job quality for frontline jobs should be an urgent priority for governments. More than half of OECD countries set up one-time rewards to compensate workers in the long-term care sector for extra work during the pandemic. Yet less than 30% of countries have increased pay on an ongoing basis.
Contact:

Spencer Wilson | spencer.wilson@oecd.org

Compliments of the OECD.
The post OECD | Jobs outlook highly uncertain in the wake of Russia’s war of aggression against Ukraine first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Thank you minister, good afternoon everyone.
It is a pleasure to be back in Prague.
Thank you for hosting us in this beautiful city.
As the minister already outlined, today’s discussions in Ecofin focused on two main topics: financial support for Ukraine and our economic policy response to the war in Ukraine and its economic implications.
As regards financial support for Ukraine, it is excellent news that ministers have endorsed the next part of our exceptional macro-financial assistance programme and agreed to provide national guarantees required to make a further €5 billion available in concessional loans to Ukraine.
This is part of the overall €9 billion exceptional macro-financial assistance package for Ukraine. Its first part of €1 billion was already paid out in early August and we are now working on operationalising the remaining amount in this package.
Obviously, we need to think how we further support Ukraine because Ukraine is an economy at war.
Its economic situation has deteriorated dramatically due to Russia’s protracted war of aggression.
There are estimates that Ukraine’s GDP is set to fall by up to 15% this year. So clearly, Ukraine needs short-term financial assistance to keep the country running on a daily basis and to maintain essential services.
For this year alone, the International Monetary Fund estimates its balance of payments gap at $39 billion.
That does not include costs for the country’s longer-term reconstruction.
Since the invasion began, the EU, its Member States and financial institutions – like the EIB and EBRD – have mobilised €9.5 billion to support Ukraine. But still, more short-term financial assistance will also be needed.
And we will need to look beyond immediate needs.
The long-term costs for Ukraine’s reconstruction are likely to keep growing as long as war continues.
So today ministers also discussed options for funding the long-term reconstruction of Ukraine.
Apart from this, we discussed the policy implications of the war in Ukraine on the EU and our economy, and the necessary policy response.
Clearly, we see a marked economic slowdown in the second half of the year, and we see surging inflation.
So we need to find a delicate balance between promoting growth, controlling inflation and protecting the most vulnerable.
We also see tighter financing conditions and rising borrowing costs – which all reduces governments’ room for policy manoeuvre. And it’s also clear that fiscal support measures should not contradict the ECB’s efforts to reduce inflation.
When we discussed the support measures, these should be targeted and temporary, compatible with the green transition.
One of the major implications of the war in Ukraine is surging energy prices. Correspondingly, the issue of how to address them is very much on everyone’s minds.
This week, the European Commission came with a set of policy proposals – or options – for how we can respond to the situation in energy markets.
I will not go into detail on these measures because they were not part of today’s Ecofin agenda.
In parallel in Brussels, there was an Energy Council which was discussing exactly these energy issues. Thank you.
Compliments of the European Commission.
The post Statement by Executive Vice-President Dombrovskis at the ECOFIN Press conference first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.