The Commission has today adopted its second annual Strategic Foresight Report – “The EU’s capacity and freedom to act”*. This Communication presents a forward-looking and multidisciplinary perspective on the EU’s open strategic autonomy in an increasingly multipolar and contested global order. The Commission has identified four main global trends, affecting the EU’s capacity and freedom to act: climate change and other environmental challenges; digital hyperconnectivity and technological transformation; pressure on democracy and values; and shifts in the global order and demography. It has also set out 10 key areas of action where the EU can seize opportunities for its global leadership and open strategic autonomy. Strategic foresight thereby continues to inform the Commission’s Work Programmes and priority-setting.
European Commission President Ursula von der Leyen said: “European citizens experience almost on a daily basis that global challenges such as climate change and digital transformation have a direct impact on their personal lives. We all feel that our democracy and European values are being put into question, both externally and internally, or that Europe needs to adapt its foreign policy due to a changing global order. Early and better information about such trends will help us tackle such important issues in time and steer our Union in a positive direction.”
Vice-President Maroš Šefčovič, in charge of interinstitutional relations and foresight, said: “While we cannot know what the future holds, a better understanding of key megatrends, uncertainties and opportunities will enhance the EU’s long-term capacity and freedom to act. This Strategic Foresight Report therefore looks into four megatrends with a major impact on the EU, and identifies ten areas of action in order to boost our open strategic autonomy and cement our global leadership towards 2050. The pandemic has only strengthened the case for ambitious strategic choices today and this report will help us keep an eye on the ball.”
Ten strategic areas of policy action

Ensuring sustainable and resilient health and food systems;
Securing decarbonised and affordable energy;
Strengthening capacity in data management, artificial intelligence and cutting-edge technologies;
Securing and diversifying supply of critical raw materials;
Ensuring first-mover global position in standard setting;
Building resilient and future-proof economic and financial systems;
Developing and retaining skills and talents matching EU ambitions;
Strengthening security and defence capacities and access to space;
Working with global partners to promote peace, security and prosperity for all; and
Strengthening the resilience of institutions

Next Steps
The Commission will continue to implement its Strategic Foresight Agenda for this policy cycle, informing Work Programme initiatives for next year. On 18-19 November, it will host the annual European Strategy and Political Analysis System (ESPAS) conference to discuss the topic of next year’s Strategic Foresight Report – the twinning of the green and digital transitions, i.e. how they can mutually reinforce each other, including by using emerging technologies. Furthermore, the EU-wide Foresight Network of the “Ministers for the Future” in all Member States will continue to build foresight capacity in EU Member State administrations. Later this month, the Commission will also finalise a public consultation on its resilience dashboards, a new tool to assess resilience in a more holistic manner, in the EU and its Member States. This will contribute to measuring social and economic wellbeing by going beyond GDP. A public consultation on the Commission’s draft resilience dashboards is ongoing until 30 September.
Background
Strategic foresight supports the Commission on its forward-looking and ambitious path towards achieving President von der Leyen’s six headline ambitions. Beginning in 2020, annual Strategic Foresight Reports are prepared, based on full foresight cycles, to inform the priorities of the annual State of the Union speech, the Commission Work Programme and multi-annual programming.
This year’s report builds on the 2020 Strategic Foresight Report, which introduced resilience as a new compass for EU policymaking. The megatrends and policy actions laid out in the 2021 Strategic Foresight Report were identified through an expert-led, cross-sectoral foresight exercise conducted by the Commission services, with broad consultations of Member States, and other EU institutions in the framework of the European Strategy and Policy Analysis System (ESPAS). The results of the foresight exercise are presented in a Joint Research Centre Science for Policy report: Shaping and securing the EU’s Strategic Autonomy by 2040 and beyond.
To support building foresight capacities across the EU, the Commission established the EU-wide Foresight Network, including 27 Ministers for the Future from all Member States. This network shares best practices and informs the Commission’s strategic foresight agenda by discussing key issues of relevance for Europe’s future.
Compliments of the European Commission.
The post 2021 Strategic Foresight Report: Enhancing the EU’s long-term capacity and freedom to act first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Keynote speech by President Charles Michel at the Tallinn Digital Summit |
Thank you for your invitation. It’s both a pleasure and a challenge to speak to you today. When it comes to digital, Estonia stands at the vanguard in Europe. And this Tallinn Digital Summit is the place to be. Estonia is geographically on the periphery of the EU, but you have positioned yourself at the very heart of our Digital Revolution.
Today I’d like to outline the role that Digital must play in the overall strategy of the European Union. Our guiding principles, our goals, and the concrete action we are taking in this field.
A global transformation
Our Strategic Agenda centres on our twin transitions: climate and digital. The European Council took this decision before Covid and before the “build back better” approach of our post-Covid world.  The pandemic has injected greater urgency, and more reasons, to pursue our transformational path to a more sustainable and fairer model.  We want to transform Europe, and we want a better world.  We need more prosperity and more fairness.
Our main goals
Digital is one of the fastest growing sectors — it creates jobs and drives economic growth.  It brings new products and services to market and unleashes the full potential of innovation.  Digital is a cross-cutting tool that is revolutionising countless sectors and energising countless areas of our lives.  And most crucially, it is driving forward the green technologies that will protect our planet.  Data-driven climate decisions, for example, will be more precise and effective. And digital monitoring will allow for more efficient use of energy and resources.  And in healthcare, the data industry is already modernising public health management.
We want to make Europe more autonomous.  In our interconnected world, a certain amount of interdependence is normal, even desirable.  But dependency is not desirable.  Europe must strive for more influence, and less dependence.  That applies both to our digital strategy and our geopolitical strategy.
A few guiding principles
So how do we pursue these goals?  First, we must put them in our broader connectivity strategy. This strategy should be anchored in our values and reflected in our standards. This will bolster our autonomy and drastically reinforce our cybersecurity.
We must develop a common view and an ambitious EU vision on connectivity. Kaja Kallas has just outlined a number of inspiring ideas on this topic.  Connectivity refers not only to physical infrastructure and networks. It encompasses a wide range of ventures and policies aimed at bringing people and societies closer together.  This is what Europe’s engagement with the world is all about.
But on the other hand, some blocs are working on connectivity to create deep dependencies.  They are not waiting for us.  Their connectivity offers are already on the table, according to their economic and political interests.  So we need to up our game.  We are already forging broad connectivity partnerships with like-minded countries such as India, Japan, the US and Canada. And we are tailoring our offer to meet the specific needs and expectations of our partners around the world.
We want to develop greater cooperation. This is true not just for the Western Balkans or the Eastern Partners but equally for our Central Asian partners, Africa, and elsewhere.  But we must do more — be more strategic, be more streamlined — and better market and brand our offer. This is trusted connectivity.  And most importantly, it should reflect our European vision of what a partnership should be — fair, balanced, and human-centred.  There is still work to strengthen such an offer. It will require leadership and collective action. The European Council is ready to play its key role.
Our digital strategy must be based on our values: human rights and fundamental freedoms in human-centred societies. Our standards should be based on trust and transparency. Transparency does not only mean that people must know how their personal data is used. Transparency must also apply to finance, taxes, or the way in which algorithms are deployed.  Fairer taxation of international business is a key topic in the eyes of the public. Integrating the price of carbon in international trade is a matter of fairness in the fight against climate change.
Trust also means accountability. Citizens want to know the State’s budget is well spent. They want to know that new development projects respect their health and their environment.  We in the EU have a powerful tool: our regulatory power.  The famous “Brussels effect”.  We are the leading standard setter in the world.
Digital sovereignty is key to our strategic autonomy. And we are working hard to make this happen, for instance, moving from 5G to 6G and advancing the idea of a low earth orbit satellite.  In the area of semiconductors, Commissioner Breton is driving forward the European alliance on microprocessors.  I am confident that the E-identity will be another step in promoting our overall digital sovereignty.
This brings me to the critical topic of security, which relates to the “trust” factor, I mentioned earlier.  Cyber-security is a key condition for greater influence on the global scene. The latest high profile cyberattacks in Europe have shone a spotlight on the urgency of building a sound cybersecurity system.   This domain is basically a national competence. But the threats are global, and the attackers are global. That’s why a proper response should lie in the EU’s overall cyber resilience.  Such an approach could include promoting greater collaboration among Member States, boosting national capacities and European industries, and launching ambitious education and training programmes across the EU.
The leaders’ digital agenda of the next months
So where do we stand concretely on our digital strategy?  First, several major legislative proposals are now on the table: the Data Governance Act, the Digital Services Act, the Digital Markets Acts, the Artificial Intelligence Act and the E-identity bill. These proposals are currently being discussed by legislators, Council, and Parliament. And we will give fresh impetus to this at our next regular meeting of the European Council in October.  The Digital Compass, requested by the European Council, with key targets for 2030, will also be on the agenda for this meeting.
We have a clear vision for our digital future.  It is anchored in concrete goals and ambitious targets.  And most importantly, it is a digital future that serves our people and builds inclusive societies.  Today’s digital revolution is a massive opportunity to improve our quality of life across countless areas of our societies.  It is a cornerstone of the EU’s strategy for more prosperity, more well-being, more freedom and more autonomy.  Our digital model will offer inspiration far beyond our borders — of European openness and confidence. Thank you.
Compliments of the European Council.
The post Speech: “EU’s Digital Revolution: fueling our connectivity strategy” first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Contribution by Isabel Schnabel, Member of the Executive Board of the ECB, to the International Monetary Fund’s magazine Finance and Development |
Central banks must do their part in fighting global warming
The devastating effects of climate change are becoming increasingly evident.[1] Temperature records are being shattered again this year—in Canada, the United States, arctic Russia and central Asia. Globally, the past six years have been the hottest six on record, and temperatures in 2020 exceeded the 1850-1900 average by 1.25°C (2.25°F).
Exactly how climate change will affect the economy and the financial system is uncertain. The European Central Bank (ECB) is currently trying to quantify the consequences of climate change on companies and banks through an economy-wide stress test. The exercise, the results of which will be published soon, draws on a range of climate scenarios developed by the Network for Greening the Financial System (NGFS), a global association of central banks and supervisory authorities advocating a more sustainable financial system. These scenarios are used to assess the potential impact of climate change on roughly four million companies worldwide and nearly 2,000 banks in the euro area.
Preliminary results show that without further mitigation policies physical risks from climate change—heat waves, windstorms, floods, droughts, and the like—will probably increase substantially (Alogoskoufis and others, 2021). The average default probability of the credit portfolios of the 10 percent of euro area banks most vulnerable to climate risks could rise substantially—up 30 percent by 2050. Firms across Europe are exposed to physical risks from climate change, although risks are distributed unevenly (see Chart 1).

Chart 1
Corporate exposures to physical risks within Europe
(Maximum risk level of each firm)

Source: Alogoskoufis and others, (2021).
Note: Green represents no significant exposure. Color shifts as exposure increases to red, which represents high present / projected exposure. Gray indicates no information is available.

Compared with these risks, the costs of transitioning to a carbon-neutral economy appear relatively contained (de Guindos, 2021). There are clear benefits to acting early. The transition may be costly in the short run, but upfront investment will likely be more than offset over the long run as firms avoid the aggravation of physical risks and reap the economic rewards of mitigation. Based on a range of different models, recent IMF research echoes these findings (Barrett and others, 2020). The resulting message is simple: now is the time to undertake ambitious and broad-based action to ensure an orderly transition and mitigate the effects of climate change.
The existential threat posed by climate change implies that all policymakers must contemplate how to contribute to the fight against global warming. While governments are the primary actors, a consensus is building that central banks cannot stand on the sidelines. The NGFS, established with eight members in 2017, now has 95 members and 15 observers, including all major central banks. In 2019, the IMF joined as an observer.
The main reason that central banks should increase their attention to climate change is the likelihood it will affect their ability to achieve their mandates. The ECB’s primary mandate is price stability, an objective shared by most central banks. Evidence suggests that climate change has crucial implications for price stability and also affects other areas of central bank competence, such as financial stability and banking supervision.
Climate change affects price stability through at least three channels.
First, the consequences of climate change might impair the transmission of central banks’ monetary policy measures to the financing conditions faced by households and firms, and hence to consumption and investment. Losses from materializing physical risks or stranded assets (such as oil reserves that will not be tapped as the world moves away from fossil fuels) could weigh on financial institutions’ balance sheets, reducing the flow of credit to the real economy. In addition, the longer climate change is insufficiently addressed, the greater the risks to policy transmission from a sharp and abrupt rise in credit risk premiums. Central banks themselves are exposed to potential losses—from securities acquired in asset purchase programs and on the collateral provided by counterparties in monetary policy operations.
Second, climate change could further diminish the space for conventional monetary policy by lowering the equilibrium real rate of interest, which balances savings and investment. For example, higher temperatures might impair labor productivity or increase rates of morbidity and mortality. Productive resources might be reallocated to support adaptation measures, while climate-related uncertainty may increase precautionary savings and reduce incentives to invest. Collectively, these factors can reduce the real equilibrium interest rate and therefore increase the likelihood that a central bank’s policy rate will be constrained. But this is far from certain; equilibrium rates might instead rise because of green innovation and investment and chart a path out of the current low-inflation, low-interest-rate environment.
Third, both climate change and policies to mitigate its effects can have a direct impact on inflation dynamics. Recent history confirms that a greater incidence of physical risk can cause short-term fluctuations in output and inflation that amplify longer-term macroeconomic volatility. Unless mitigation policies are more forceful, the risk of even larger climate shock grows, with more persistent consequences for prices and wages. In addition, even mitigation policies, such as carbon pricing programs, can affect price stability, potentially precipitating large and long-lasting trends in relative prices and driving a wedge between headline and core measures of inflation.
As a result of these factors, central banks are starting to integrate climate-related risks into their monetary policy operations.
Toward carbon neutrality
Climate change considerations formed an integral part of the ECB’s monetary policy strategy review that concluded in July 2021. We published an ambitious action plan and a detailed roadmap confirming our strong commitment to further incorporating climate change considerations into our monetary policy framework. Our comprehensive strategy review demonstrated that there are many areas in which central banks can contribute to the fight against global warming, and further areas may open up in the future.
By thoroughly analyzing potential actions and developing ways to make them operational, for example regarding the classification of more or less “green” activities, the ECB and other central banks can act as catalysts for promoting a more sustainable financial system. Moreover, by pre-announcing changes to our operational framework, we can encourage market participants to speed up the transition to carbon neutrality.
As part of its action plan, the ECB will embed climate change considerations into its monitoring of the economy—for example by bolstering analytical capacity in climate-related macroeconomic modelling and forecasting.
As part of its statistical function, the ECB will develop new climate-related statistical indicators, for example regarding the classification of green instruments, the carbon footprint of financial institutions’ portfolios and their exposures to climate-related physical risks.
In addition, the ECB is advocating climate disclosures that are internationally consistent and auditable. The ECB will introduce disclosure requirements for private sector assets, either as a new eligibility criterion or as basis for differentiated treatment for collateral purposes and asset purchases, which could help to speed up disclosure in the corporate sector. The ECB will start disclosing climate-related information on its non-monetary policy portfolios, and its corporate sector purchase program (CSPP) by the first quarter of 2023.
Starting in 2022, the ECB will conduct climate stress tests of the Eurosystem balance sheet, using the methodology of its ongoing economy-wide climate stress test. The ECB will further perform a review to gauge the extent to which credit ratings and asset valuations under our collateral framework reflect climate-related risk exposures.
The ECB will also incorporate climate-related criteria into its corporate bond purchases. In the past, allocations of private sector bonds have generally been guided by the principle of market neutrality—in which purchases reflect the composition of the overall market— to avoid relative price distortions.
However, emission-intensive sectors tend to have large fixed long-term capital investment needs and generally issue bonds more frequently. As a result, CSPP-eligible debt and the ECB’s portfolio exhibit high emission intensity (Papoutsi and others, 2021). In other words, adherence to the market neutrality principle is likely to perpetuate pre-existing market failures or even exacerbate market inefficiencies that give rise to a suboptimal allocation of resources.
It seems appropriate, then, to replace the market neutrality principle with one of market efficiency that more fully incorporates the risks and societal costs associated with climate change (Schnabel, 2021), taking into account the alignment of issuers with EU legislation implementing the Paris Agreement.
With its new strategy and action plan, the ECB acknowledges that climate change is a global challenge that requires an urgent policy response, including from central banks. Within our mandate, we are determined to contribute to accelerating the transition to a carbon-neutral economy.
References:
– Alogoskoufis, S. et al. (2021), “Climate-related risks to financial stability”, Financial Stability Review, ECB, May.
– Barrett, P. et al. (2020), “Mitigating climate change – growth- and distribution-friendly strategies”, World Economic Outlook, Chapter 3, International Monetary Fund, October.
– de Guindos, L. (2021), “Shining a light on climate risks: the ECB’s economy-wide climate stress test”, The ECB Blog, March.
– Papoutsi, M., Piazzesi, M. and Schneider, M. (2021) “How unconventional is green monetary policy?”, JEEA-FBBVA Lecture at ASSA (January 2021), Working paper.
– Schnabel, I. (2021), “From market neutrality to market efficiency”, Welcome address at the ECB DG-Research Symposium “Climate change, financial markets and green growth”, Frankfurt am Main, 14 June.
Compliments of the European Central Bank.
The post ECB | Central banks have to play their part: Climate change and monetary policy first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Interview with Luis de Guindos, Vice-President of the ECB, conducted by Miquel Roig and Jorge Zuloaga on 26 August and published on 1 September 2021 |

You are almost halfway through your term as Vice-President of the ECB. How would you assess your term so far, and what aims do you have for the second half?
These three years have been extremely interesting, and they have been marked, above all else, by the pandemic – an extraordinary event that has sparked an enormous health crisis. It had an extremely severe economic impact in a short space of time, which required an unprecedented economic and monetary policy response. The next 18 to 24 months will be defined by attempts to leave the economic consequences of the pandemic behind us and to minimise its structural impact. That will be the main objective.
I thought you might be a little more optimistic, but it seems you are happy with mitigating the consequences and going back to where we were before.
Some of the short-term impact has been successfully mitigated, but the pandemic will have had structural effects on the European and world economies. The fiscal effects will be the most apparent, with the euro area’s average debt-to-GDP ratio 20 percentage points higher and more pronounced structural deficits. There is also other scarring, which could be structural, in the job market, as well as greater inequality between advanced and emerging economies. The pandemic has had a greater impact on small and medium-sized enterprises, low-income workers and women.
In such an environment, do you think the economy is ready for a gradual withdrawal of asset purchases?
I was talking about the medium term in what I just said. The ECB’s primary response to the crisis consisted of action in three different areas. The first focused on liquidity, through the targeted longer-term refinancing operations, or TLTROs, supporting banks’ credit provision to households and firms. The second focused on asset purchases through our emergency [purchase] programme. And the third focused on changes in the field of banking supervision to enable banks to free up capital and increase their lending capacity. These measures were crucial to averting a debt crisis. Bond market fragmentation has been avoided, and we have ensured that financing conditions remain favourable. Future monetary policy decisions will essentially depend on how the economy and inflation develop in the coming months.
But with that in mind, is it not too early to determine whether or not the European economy is ready for the emergency purchases to be withdrawn?
The monetary policy measures were intended to limit the impact of the pandemic on the economy, maintain favourable financing conditions and ensure we met our inflation target. Looking at the European economy, you can see that the recovery was very strong in the second quarter, and we believe it will continue to be fairly strong in the third and fourth quarters. Our emergency [purchase] programme is linked to the pandemic and its economic consequences. But one thing is clear: recent data are very positive. The European economy will be able to recover its pre-pandemic income levels by the end of this year or the beginning of next year. We will have new projections in the coming days and will take our decisions accordingly. In September we will also have to decide on the volume of purchases for the last quarter of this year. If inflation and the economy recover, then there will logically be a gradual normalisation of monetary policy, and of fiscal policy too.
Up until now, you have said that we would reach pre-COVID income levels in the first quarter of 2022. Is it the improving economic forecasts that are now leading you to say this could happen by the end of the year?
It is a nuanced issue – we are talking about just a few months. The economy is performing better in 2021 than we expected, and this will be reflected in the projections that will be published in the coming days. The leading indicators are positive, and in the coming days we will see the actual figures. The main uncertainty was the impact the Delta variant would have. What we are seeing is that it is not having as great an impact as we projected four months ago. This is mainly because governments have responded with fewer restrictions on economic activity than we had anticipated.
Does this improvement in the projections also apply to Spain?
The Spanish economy shrunk by 10.8% in 2020, more than any other euro area economy. So it should logically experience a stronger-than-average recovery. A country’s economic development during the pandemic should be assessed in terms of when it recovers its previous income levels.
What are your expectations for inflation growth?
Inflation will continue to pick up in 2021. Our baseline scenario is that it will fall back in 2022. We have to check that there are no second-round effects, because that would mean this temporary impact would become structural.
What is the ECB’s assessment of the measures governments have taken to soften the impact of the crisis? Did they get it right, or have they gone too far?
In terms of fiscal policy, governments acted in a very similar manner. First, they provided public guarantees, so credit continued to flow. Second, they granted moratoria, which have also had a positive impact. And third, the temporary layoff schemes that have been introduced in various countries have also been very effective. These measures have taken the sting out of the crisis, the impact of which has been greater on GDP than on employment. In Europe, GDP fell by 7%, but employment by just 2%. However, if we look at the figures for hours worked, the fall was greater.
Were any measures missing? Or do you maybe think some measures went too far, like public borrowing?
The measures were appropriate. The rise in the debt-to-GDP ratio was inevitable. Significant action was needed in the realm of fiscal policy. The alternative would have been worse. And at the European level, this time there was a response that stood out: Next Generation EU. European funds, if used well, will be crucial to the recovery.
With the worst of the pandemic over, should steps now be taken to reduce public debt and correct the deficit?
The premature withdrawal of stimulus should be avoided given that the economic situation is still fragile. Some measures are being gradually withdrawn, such as temporary layoff schemes, debt moratoria and loan guarantee schemes. In that respect, we are seeing how fiscal measures are starting to adjust to a certain degree of normalisation. The withdrawal should be prudent, while also avoiding leaving measures in place for too long leading to the creation of moral hazard or the zombification of the European economy.
Nobody is saying that adjustments won’t be necessary, but there are two schools of thought: one is in favour of starting to talk about them already, while the other would prefer to put it off until later. Which do you most identify with?
Once the pandemic and its effects are over, countries are going to find themselves with higher deficits and, more importantly, with much higher levels of public debt. Once the effects of the pandemic are behind us, credible budgetary plans will be required. It will be up to the European Commission to set the pace in this area, since this is a fiscal policy issue. The general escape clause will apply next year, but once pre-pandemic income levels are reached, the Stability and Growth Pact will once again be taken into consideration.
Although fiscal policy is the European Commission’s responsibility, are you not afraid that this increase in public debt could once again raise the issue of the link between sovereign risk and the banking sector?
The pandemic has brought about an increase in budget deficits and debt-to-GDP ratios. It has also led to greater divergence between countries. Those with a debt-to-GDP ratio higher than the European average will have to make a greater effort to rectify this situation through a credible budgetary plan. It’s that simple. The European Commission will decide on the exact form, and in any case, any plan must be implemented gradually and cautiously.
At the start of the crisis, one of our main concerns was the risk of a “doom loop”, i.e. the interconnectedness of firms, banks and sovereigns and the risks that could arise from it. Fortunately, these risks did not materialise. The non-performing loan ratio has continued to fall, it has not had an impact on bank balance sheets and credit did not dry up, which would have made the economic situation worse. And this occurred thanks to the fiscal policy measures, the debt moratoria, the government loan guarantee schemes, the liquidity we have provided to banks and the fact that the ECB’s actions have ensured that financing conditions remain favourable.
This is the negative link that has been avoided and that we must continue to avoid. How can we do this? By withdrawing stimulus gradually. There must first be an economic recovery before monetary policy and fiscal policy can return to normal. But obviously we will not always have emergency programmes, since that would mean that we had not put the pandemic and related costs behind us.
All of the ECB’s actions have contributed towards eliminating these negative links. But its actions carry risks as well as benefits. For example, the more stimulus there is, the more difficult it is to withdraw. How dangerous an obstacle is this?
Withdrawal of the extraordinary stimulus measures should be aligned with changes in economic activity levels. If things start to return to normal, as is currently the case, the extraordinary measures will have to be gradually withdrawn. We should monitor economic developments, inflation and economic projections. We will analyse upside and downside risks, then make a decision. We rely on the data. At the end of 2019, before the pandemic, the ECB had its monetary policy and governments had their fiscal policy. When the pandemic is over, we will have to return to using the economic, fiscal and monetary stimulus measures that correspond to a normal economy. We are not there yet, but we are gradually and continually moving towards that point.
The Bundesbank recently renewed its criticism of the ECB’s ultra-loose policy. In the current climate, does this stance worry you?
In a very high percentage of cases, the ECB’s monetary policy was adopted unanimously. This was the case for the pandemic emergency purchase programme. Different points of view do of course exist; there are 25 of us on the Governing Council. Sometimes we take decisions unanimously and other times with a large majority. The strategy review, for example, was adopted unanimously.
We wanted to ask you about that. Some say it is a missed opportunity, others that it goes too far. Do you think it will still be around in another 20 years?
I wouldn’t dare make forecasts for the next 20 years. Besides, we have said that the Governing Council intends to assess periodically the appropriateness of its strategy, and the next assessment will take place in 2025.
But do you see signs that the market thinks that the ECB will be more tolerant about inflation?
It’s not a question of being more tolerant. We have changed the definition of price stability, but that doesn’t mean that in general we will accept a much higher rate of inflation. We have set our target based on a logical development. The inflation target is now 2% over the medium term and not “below, but close to, 2%”, as it was before. That’s not revolutionary. We continue to be fully committed to price stability.
But the definition is more tolerant.
Yes, but that’s a marginal issue. We have said that our target is symmetric, meaning that any negative or positive deviations from the 2% target are equally undesirable. This is important because up until now, the perception was that the ECB acted more forcefully when inflation overshot the target. But we’re not like the Federal Reserve System and we don’t accept inflation compensation. What we have said is that inflation can be temporarily and moderately higher than 2% because current interest rates are zero or close to zero. But that does not mean that in general we have raised our level of acceptance of high inflation.
One of the risks of monetary policy is the development of bubbles in assets such as real estate, which has continued to increase considerably in Spain. Do you see a risk of overheating?
There are certain sectors in the European real estate market, such as residential real estate, where we are seeing prices rising and which we are therefore monitoring. These cases of very specific sectors, which are nevertheless starting to become more common, have to be addressed through macroprudential policy. Monetary policy is not the appropriate tool because it cannot differentiate in that regard.
And, in your view, have the conditions been met for macroprudential buffers to be activated in certain countries?
There were some countries, like Germany or France, which had taken measures such as activating the additional capital buffer. But they deactivated it when the pandemic hit, which makes sense. Once things return to normal, it would also make sense to take measures of this kind if there are instances of overheating.
There have been quite a lot of mergers in Spain. When you were a minister you worked with the idea of there being fewer banks. Do you think there is still scope to work along these lines?
The context is one of low profitability in the banking sector, and consolidation is a tool that can be used to improve profitability through cost savings. But it is a tool and not an end in itself. It’s the market, not the ECB, that takes decisions about bank consolidation. What the ECB has identified – in Europe, not just in Spain – is an environment of low profitability. This has now improved because the level of provisioning hasn’t been as high as it initially might have needed to be. From the structural perspective, Europe is facing a situation of overcapacity and excess costs. And consolidation is a tool that can be used to bring about improvements in those areas.
And in this context of overcapacity and the need to improve profitability, what are your views on the debate in Spain about bank redundancies? Could it get in the way of the improvements needed in terms of profitability?
As ECB Vice-President I can’t comment on that kind of domestic matter. In general, bank consolidation is one of the methods that can help to improve profitability. This sometimes means making adjustments, which can be painful in the short term. But if the adjustments are not made, there’s the possibility of a crisis. Moreover, bank profitability is not only a medium-term problem. It has implications for banks’ ability to generate capital now, and it even ends up affecting their lending capacity. Of course, we must think about measures that might minimise the downside of the necessary adjustments. But, if nothing is done, over time that low profitability ends up becoming a much more structural crisis.
Following the controversy surrounding [the asset management company] Sareb, would you change anything from the 2012 bailout?
The bank bailout allowed Spain to grow [at a rate] above the European average for years and has made it easier for Spanish banks to face the stress tests and the crisis with sufficient levels of solvency. Having said that, there is always room for improvement.
During the latest round of earnings announcements, the banks have been clear that current provisions are more than sufficient, and some even see the right conditions to start releasing some, which goes against the ECB’s message. Have the banks won the battle with the supervisor?
It’s not a matter of battles. A wave of corporate bankruptcies, as was feared in March or April last year, has been successfully averted. But the fact that developments in non-performing loans lag behind economic developments must be taken into account. And this is particularly true in the current circumstances, when there have been moratoria and government guarantees. The current low levels of non-performing loans don’t appropriately reflect what might happen in the coming months. Non-performing loans are going to rise. So from the financial stability and supervisory perspectives, caution is the best approach. Banks will have to adjust those provisions to an increase in non-performing loans due to the significant time lags. The “fallen angels” situation has been avoided, but that doesn’t mean that there won’t be an increase in non-performing loans in the coming quarters. And if that happens, provisions will have to be adjusted.
Despite all the attention the ECB has given to stopping reputational issues in the banking sector, they are still very much present, at least in Spain with cases like Villarejo. Does it worry you that there is no end to such cases?
A bank’s main asset is its reputation. The banks themselves have the greatest interest in their reputation being spotless, since their credibility and business depend crucially on the trust that is placed in them.
Compliments of the European Central Bank.

The post ECB Interview | Tackling the fallout from the pandemic first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Today, the EU has reached a crucial milestone with 70% of the adult population now fully vaccinated. In total, over 256 million adults in the EU have now received a full vaccine course. Seven weeks ago already, the Commission’s delivery target was met, ahead of time: to provide Member States, by the end of July, with enough vaccine doses to fully vaccinate 70% of the adult EU population.
The President of the European Commission, Ursula von der Leyen, said:  “The full vaccination of 70% of adults in the EU already in August is a great achievement. The EU’s strategy of moving forward together is paying off and putting Europe at the vanguard of the global fight against COVID-19.  But the pandemic is not over. We need more. I call on everyone who can to get vaccinated. And we need to help the rest of the world vaccinate, too. Europe will continue to support its partners in this effort, in particular the low and middle income countries.”
Stella Kyriakides, Commissioner for Health and Food Safety, said:  “I am very pleased that as of today we have reached our goal to vaccinate 70% of EU adults before the end of the summer. This is a collective achievement of the EU and its Member States that shows what is possible when we work together with solidarity and in coordination. Our efforts to further increase vaccinations across the EU will continue unabated. We will continue to support in particular those Member States that are continuing to face challenges. We need to close the immunity gap and the door for new variants and to do so, vaccinations must win the race over variants.”
Global cooperation and solidarity
The rapid, full vaccination of all targeted populations – in Europe and globally – is key to controlling the impact of the pandemic. The EU has been leading the multilateral response. The EU has exported about half of the vaccines produced in Europe to other countries in the world, as much as it has delivered for its citizens.  Team Europe has contributed close to €3 billion for the COVAX Facility to help secure at least 1.8 billion doses for 92 low and lower middle-income countries. Currently, over 200 million doses have been delivered by COVAX to 138 countries.
In addition, Team Europe aims to share at least 200 million more doses of vaccines secured under the EU’s advance purchase agreements to low and middle-income countries until the end of 2021, in particular through COVAX, as part of the EU sharing efforts. 
Preparing for new variants
Given the threat of new variants, it is important to continue ensuring the availability of sufficient vaccines, including adapted vaccines, also in the coming years. That is why the Commission signed a new contract with BioNTech-Pfizer on 20 May, which foresees the delivery of 1.8 billion doses of vaccines between the end of the year and 2023. For the same purpose, the Commission has also exercised the option of 150 million doses of the second Moderna contract. Member States have the possibility to resell or donate doses to countries in need outside the EU or through the COVAX Facility, contributing to a global and fair access to vaccines across the world. Other contracts may follow. This is the EU’s common insurance policy against any future waves of COVID-19.
Background
A safe and effective vaccine is our best chance to beat coronavirus and return to our normal lives. The European Commission has been working tirelessly to secure doses of potential vaccines that can be shared with all.
The European Commission has secured up to 4.6 billion doses of COVID-19 vaccines so far and negotiations are underway for additional doses. The Commission is also working with industry to step up vaccine manufacturing capacity.
At the same time, the Commission has started work to tackle new variants, aiming to rapidly develop and produce effective vaccines against these variants on a large scale. The HERA Incubator helps in responding to this threat.
Compliments of the European Commission.
The post Coronavirus: 70% of the EU adult population fully vaccinated first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The system for protecting EU businesses from dumped and subsidised imports continued to function well in 2020 thanks to the EU’s robust and innovative ways of using trade defence instruments (TDI), despite the practical challenges presented by the COVID-19 pandemic. This is part of the European Commission’s new trade strategy, whereby the EU takes a more assertive stance in defending its interests against unfair trade practices.
Executive Vice-President and Commissioner for Trade Valdis Dombrovskis said: “The EU needs effective tools to defend ourselves when we face unfair trade practices. This is a key pillar of our new strategy for an open, sustainable and assertive trade policy. We have continued to use our trade defence instruments effectively during the COVID-19 pandemic, improved their monitoring and enforcement, and tackled new ways of giving subsidies by third countries.  We will not tolerate the misuse of trade defence instruments by our trading partners and we will continue to support our exporters caught up in such cases. It is crucial that our companies and their workers can continue to rely on robust trade defence instruments that protect them against unfair trade practices.”
At the end of 2020, the EU had 150 trade defence measures in force, in line with previous years’ activity levels with an increase in the number of cases lodged towards the end of 2020. In addition, for the first time, the Commission addressed a new type of subsidy given by third countries in the form of cross-border financial support that was a serious challenge for EU companies.
The following are the main trade-defence highlights of 2020:
Continued high level of EU trade defence activity
Due to the COVID-19 pandemic, the Commission had to swiftly introduce temporary changes to its work practices, especially concerning on-the-spot verification visits. This allowed the Commission to continue applying the instruments at the highest standards without a drop in the levels of activity. At the end of 2020, the 150 trade defence measures that the EU had in place – 10 more than at the end of 2019 – included 128 anti-dumping, 19 anti-subsidy and 3 safeguard measures.
In 2020, the Commission launched:

15 investigations, compared to 16 in 2019, and imposed 17 provisional and definitive measures, compared to 15 in 2019;
28 reviews, compared to 23 the previous year.

The highest number of EU trade defence measures concerns imports from:

China (99 measures);
Russia (9 measures);
India (7 measures);
The United States (6 measures).

Tackling new types of subsidies
In 2020, the Commission strengthened its action against subsidies granted by third countries. In particular, the Commission imposed countervailing duties on cross-border financial support given by China to Chinese-owned companies manufacturing glass fibre fabrics and continuous filament glass fibre products based in Egypt for export to the EU.
This means that, for the first time, the Commission addressed cross-border subsidies given by a country to enterprises located in another country for exports to the EU.
Support to, and defence of, EU exporters facing trade defence investigations in export markets
The importance of monitoring trade defence action taken by third countries was again evident in 2020. The number of trade defence measures in force by third countries affecting EU exporters reached its highest level since the Commission started this monitoring activity, with 178 measures in place. In addition, the number of cases initiated also increased in 2020, with 43 compared to 37 the previous year.
The report outlines the Commission’s activities to ensure that WTO rules are correctly applied and procedural errors and legal inconsistencies are addressed in order to avoid any misuse of trade defence instruments by third countries. The Commission’s interventions yielded success in some cases where measures were not ultimately imposed, affecting important EU export products such as ceramic tiles and fertilisers.
Strong focus on monitoring and enforcement
There was a renewed focus on the monitoring of measures in place in 2020, including changes to surveillance practices to ensure the ongoing effectiveness of the trade defence instruments. This also involved customs authorities, EU industry, and in certain instances, the European Anti-Fraud Office (OLAF). Continuing its efforts to address instances where exporters tried to avoid measures, the Commission initiated three anti-circumvention investigations in 2020 and completed five such investigations during the year, where measures were extended in four cases to also address imports from third countries where transhipment was found to have taken place.
The report also recalls the findings of the European Court of Auditors from July 2020, which confirmed the successful enforcement of the EU’s trade defence instruments by the Commission. The report made a number of recommendations to further strengthen the Commission’s response to the challenges posed by unfairly traded imports that the Commission has started to implement in 2020, such as improving monitoring to ensure the effectiveness of measures.
Compliments of the European Commission.
The post An assertive trade policy: EU’s defence measures against unfair trade practices remained effective in 2020 first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Value of G20 merchandise trade at new high in Q2 2021 but signs of easing growth
The second quarter of 2021 saw international merchandise trade for the G20, as measured in seasonally adjusted current US dollars, reach a new high following the record levels already posted in Q1 2021. G20 merchandise exports and imports increased by 4.1% and 6.4% in Q2 2021 compared to the previous quarter, showing a slowdown compared with the rates posted in Q1 2021 (8.6% and 8.5% for exports and imports, respectively). Like in the previous quarter, rising commodity prices explain a large part of the increase, as congestion in international shipping and supply issues around semiconductors placed further pressure on the price of traded goods.
The G20 economies more reliant on exports of primary commodities saw strong export growth in Q2 2021, a combination of increasing prices, limited global supply (e.g. copper) and strong demand (particularly from China, Japan and Korea). Australia’s exports increased 10.0% in Q2 2021, on the back of rising sales of cereals, metals and coal. Brazilian exports rose by 29.4%, driven by iron ores and soybeans. Russian exports grew 30.7% in Q2 2021, mostly benefiting from increasing energy prices.
Merchandise trade values in North America reached an all-time high in Q2 2021. Canada’s exports were up 4.7%, driven by energy and forestry products. Imports rose by 3.6%, with metals and pharmaceutical products playing a large part. Mexico also recorded solid growth in the quarter, exports up 3.3% and imports up 5.1%. The United States recorded growth of 6.8% for exports in Q2 2021, led by aircraft, pharmaceuticals and semiconductors and with strong demand from Canada and Mexico. Imports in the quarter rose 4.2%, with robust imports of mobile phones and despite sluggish purchases of vehicles.
European G20 economies saw international trade increase notably in aircraft, agriculture products and pharmaceuticals, fuelled in particular by demand from China and the United States. In Q2 2021 the European Union recorded export growth of 2.8% and import growth of 5.7% (France 1.3% and 2.9%, Germany 1.3% and 6.3%, and Italy 4.0% and 6.4%). In the United Kingdom, exports rose 12.3% and imports 11.3% in Q2 2021, a strong rebound following the Q1 slowdown.
The rise in commodity prices was a factor in imports increasing faster than exports in the East Asian G20 economies in Q2 2021. Exports from Japan and Korea grew by 2.7% and 2.2%, while imports rose by 7.4% and 11.8%, respectively, with trade in vehicles and parts driving the increase in particular for Korea. Following the staggering (18.6%) growth in the previous quarter, Chinese exports declined by 2.5% in Q2. Imports, instead, continued to expand (up 10.9%), with purchases of agricultural products, metals and semiconductors remaining strong.
G20 trade in services growth gaining pace in Q2 2021
Q2 2021 growth in services exports and imports for the G20 aggregate is estimated (based on preliminary information available for a subset of the G20 economies) at around 4.5% and 4.0%, respectively, compared to the previous quarter and measured in seasonally adjusted US dollars. This compares to the slower rate recorded in Q1 (2.9% for exports and imports).
The further surge in shipping costs in Q2 2021 continued to boost trade in transport services across most G20 economies, while trade in digitally deliverable services, such as telecommunications, computer and business services, remained strong. Travel, although still severely affected by the COVID-19 containment measures and threatened by the emergence of variants, showed an uptick in Q2.
Exports of services from the United States and Canada grew by 3.6% and 1.7%, respectively, in Q2 2021. Imports recorded faster growth (7.2% and 8.0%), driven by travel in the UnitedStates and by financial services in Canada. Services trade in Brazil also experienced strong growth, with exports and imports expanding by 6.8% and 5.5%, respectively.
In Europe, both exports and imports of services picked up in Germany in Q2, up by respectively 4.2% and 5.4%, with imports fuelled by a nearly 30% increase in travel expenditure. Travel and financial services also boosted French exports of services (up 5.6%), while imports remained almost flat (up 0.4%) on lower purchases of transport services. Conversely, trade in services contracted in the United Kingdom (minus 0.4% and minus 2.2% for exports and imports). Russian exports rose 5.7% while imports contracted by 7.3% (due to a slowdown in purchases of business services). Turkey’s exports and imports increased by 5.8% and 2.3%.
With the exception of Australian exports (down 0.5%), trade in services continued to expand markedly in Asia‑Pacific. Exports and imports increased by 8.1% and 15.9%, respectively, in Korea, with a jump in travel imports (up 20.1%) adding to the continuing growth in business, telecommunication and computer services. Similarly, Japanese exports and imports rose by 4.7% and 8.4%, with travel and business services expanding at a faster rate on the import side. Chinese exports increased by 7.4%, largely driven by soaring transport receipts, while imports rose 2.3% on higher purchases of business and transport services. A partial and temporary border opening boosted Australia’s travel imports (4.5 times higher than in the previous quarter, but still at very low levels), which contributed to the 8.9% increase in imports of total services.
Compliments of the OECD.
The post Value of G20 merchandise trade at new high in Q2 2021, trade in services growth gaining pace first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Carla Neuhaus on 17 August and published on 20 August 2021 |
Ms Schnabel, do you see the images of the catastrophic floods in Germany or the forest fires in Greece as a sign that the ECB should also do something to counter climate change?
For me, the latest events have confirmed that we are doing the right thing with our new strategy. Only recently we decided to give more consideration to climate protection in our monetary policy. Climate change is the greatest challenge of the 21st century. Unfortunately, we will likely see extreme weather events, such as those we have just experienced, more frequently in future.
But why is that a topic for a central bank?
Climate change has far-reaching effects on economic developments and therefore also on price stability – which is our main task. For example, it exposes the economy to more frequent macroeconomic shocks, which has an impact on growth and inflation.
Critics say that it is up to governments to respond to that, not the ECB…
Of course governments are primarily responsible for taking action. But we as the central bank cannot just stand on the sidelines and do nothing. Our primary objective is to keep prices stable in the euro area. And climate change has large implications for price stability. That is why we are obliged to act in order to fulfil our mandate.
Does climate change push up prices?
That can happen if firms pass on to customers the higher costs they incur by having to become more environmentally friendly or having to adapt their business models. Think of the transition from combustion engines to electromobility or the energy sector’s changeover to renewable energy sources. Added to that is the increasing price of carbon. Food prices may rise, too, if droughts or floods occur more frequently in the future. Nonetheless, it’s not certain that climate change and the transition to a climate-neutral economy lead to higher inflation.
But rather?
Countervailing effects are also conceivable. For example, the prices for sustainable energy sources may decline if more efficient technologies are developed. It may then become cheaper to generate electricity from renewable energy sources. We will therefore have to see which effects ultimately prevail.
What does that mean for the work of the ECB?
We will need to incorporate climate change considerations into all of our future activities. That starts with us having to redesign the models underlying our forecasts and monetary policy. To do so we need new data that we will have to collect. Climate change will in the future play just as much of a role in banking supervision as in our monetary policy measures, such as our asset purchases.
The ECB is still buying particularly high amounts of bonds from firms with high carbon emissions.
That’s true. When purchasing corporate bonds, we have up to now been guided by the bonds available in the market. That automatically results in us holding a relatively large number of bonds issued by firms with high carbon emissions as part of our portfolio, because such firms usually have considerable financing needs and issue large amounts of bonds. We therefore need to reconsider the principle of market neutrality that we have adhered to up to now. However, it would not make sense to completely exclude climate offenders.
Why not?
We have to focus on accelerating the transition to a climate-neutral economy. Excluding certain sectors or firms from our asset purchase programme would be counterproductive. In order to lower emissions, firms with high levels of carbon emissions are extremely important because they offer scope for making the most progress. If these firms want to become climate-neutral, they are dependent on favourable financial conditions.
But how do you intend to ensure that the firms actually put the funds raised by issuing bonds towards revamping their business model?
To that end we need to draw up new criteria for selecting bonds. For example, we could in the future buy more bonds from firms that commit to the goals of the Paris climate agreement and thus show that they are willing to adapt their business model.
So is exclusively purchasing green bonds not an option?
No, a purely green asset purchase programme would not be realistic at present in any case. Even though the market is growing rapidly, there would still be far too few green bonds. And let’s not forget: we are already buying almost a quarter of eligible outstanding green bonds.
As a central banker you also need to keep an eye on financial stability. Could the climate crisis become a financial crisis?
Climate change is also an unprecedented risk for the financial system – and it is not limited to one country but has a global effect. This is what we call a systemic risk.
What does that mean in practice?
Around a third of the loans that euro area banks have granted to firms are – to a significant or increasing degree − exposed to climate risks from extreme weather events. That emerged from our macroeconomic stress test, for which we recently evaluated data from 2,000 banks and four million firms. We took into account the effects of natural catastrophes such as floods, forest fires and droughts, which entail huge losses for firms and thus also for banks and insurance companies. In addition, the climate transition measures pose a threat to many firms’ business models.
What conclusion can be drawn from your results?
Above all, they tell us that the earlier we react, the better. We can then still shape the transition to climate neutrality in a way that allows firms to adapt. The longer we wait, the faster and more radically we will have to respond. If the transition comes too late and too fast, many firms could become insolvent and banks could face high loan defaults.
Are these climate risks factored in at all right now? Do rating agencies take them into account when assessing the creditworthiness of firms, for example?
Currently, climate-related risks are presumably not yet appropriately reflected in prices. However, rating agencies are aware of the problem and are working hard to take better account of climate-related risks when assessing credit quality.
What is the situation like for banks?
The ECB as European banking supervisor has already made it very clear to banks that they need to consider climate-related risks. However, initial analyses show that not a single credit institution is fully compliant with the outlined requirements. The progress made by individual banks varies greatly: while some have made significant headway, others still have a long way to go. That needs to change.
Isn’t it in the banks’ best interest to know their risks?
Indeed it is; that is why banks are keen to tackle this issue. As early as next year there will be a comprehensive supervisory review of how banks account for climate-related risks in their balance sheets.
Will climate considerations play a role in banks’ future lending decisions?
Yes, it is safe to assume so. Climate-related risks will weigh more heavily in future decisions whether, for example, a company will be granted a loan and at what terms. Climate may also play a role in real estate lending: it might become easier to borrow money to build an energy-efficient property. This would set incentives, making energy-efficient buildings more attractive. This is why banks play a key role in the green transformation.
To what extent is inflation affected by climate policy measures, for example the introduction of a new carbontax in Germany?
At the beginning of the year, prices went up following the introduction of the carbontax in Germany. For now, these are one-off effects. Nevertheless, a gradual increase in carbon prices may well lead to higher inflation rates in the coming years.
In Germany, the inflation rate is already 3.8%. Are you not worried?
We are faced with a very unusual situation and the current high inflation figures are largely due to transitory effects. At the beginning of the pandemic, inflation decreased significantly starting with the first lockdown. This was mostly due to the fall in energy prices and the policy reactions to the crisis – such as the VAT cut in Germany. Now that we are seeing the economy reopen, these effects are reversing. Energy prices are rising, the VAT rate has gone back to its original level, and all of that automatically pushes inflation much higher. In part, this is simply because the high prices of today are set against the very low prices of last year – the inflation rate always shows the change in consumer prices year-on-year.
So the high inflation rate doesn’t bother you?
No, but I do understand why people might be worried. However, if you compare today’s prices with those before the pandemic, it doesn’t look all that dramatic. While we expect inflation to continue rising until the end of this year, especially in Germany, our estimate is that it will fall significantly as of next year.
Does this mean that you see no reason to change your loose monetary policy any time soon?
That’s right, because monetary policy looks at inflation developments in the medium term. And on that horizon, we expect inflation in the euro area to be below our target of two per cent. As surprising as it may sound to some – we are more worried about the inflation rate being too low in the medium term rather than too high. This may change, of course, for example if trade unions were to negotiate higher wages. But appropriate wage adjustments would also be a good sign from our point of view. Increased demand on the back of higher real wages would bring us closer to our inflation target – which we have been falling short of for years – and help us escape the low interest rate environment.
Why exactly did the ECB change its inflation target? It used to be “below, but close to, two per cent”, now the inflation rate is also allowed to moderately exceed it.
The old wording was less clear and had occasionally been misinterpreted. Some had seen it as a ceiling, assuming that while inflation must not exceed it, undershooting it would not be a problem. That is why we made it clear: the target for us is two per cent. And it is symmetric, meaning that too low inflation is considered equally undesirable as too high inflation.
What’s next for the economy? Are we going to see the strong recovery we’re hoping for?
We continue to expect to see a strong recovery. Given the high level of vaccinations, another hard lockdown is unlikely, despite the current rise in incidence rates. The supply-side bottlenecks in some products, such as microchips, are currently the major constraint. This has hit German manufacturers particularly hard. To solve the problem, it would be important for the international community to support developing countries in boosting their vaccination rates in order to successfully contain the virus.
Compliments of the European Central Bank.
The post ECB Interview | The greatest challenge of the 21st century first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Agency’s amended complaint details how the monopolist survived existential threats by illegally acquiring innovative competitors and burying successful app developers
Today, the Federal Trade Commission filed an amended complaint against Facebook in the agency’s ongoing federal antitrust case. The complaint alleges that after repeated failed attempts to develop innovative mobile features for its network, Facebook instead resorted to an illegal buy-or-bury scheme to maintain its dominance. It unlawfully acquired innovative competitors with popular mobile features that succeeded where Facebook’s own offerings fell flat or fell apart. And to further moat its monopoly, Facebook lured app developers to the platform, surveilled them for signs of success, and then buried them when they became competitive threats. Lacking serious competition, Facebook has been able to hone a surveillance-based advertising model and impose ever-increasing burdens on its users.
“Facebook lacked the business acumen and technical talent to survive the transition to mobile. After failing to compete with new innovators, Facebook illegally bought or buried them when their popularity became an existential threat,” said Holly Vedova, FTC Bureau of Competition Acting Director. “This conduct is no less anticompetitive than if Facebook had bribed emerging app competitors not to compete. The antitrust laws were enacted to prevent precisely this type of illegal activity by monopolists. Facebook’s actions have suppressed innovation and product quality improvements. And they have degraded the social network experience, subjecting users to lower levels of privacy and data protections and more intrusive ads. The FTC’s action today seeks to put an end to this illegal activity and restore competition for the benefit of Americans and honest businesses alike.”
The FTC filed the amended complaint today in the U.S. District Court for the District of Columbia, following the court’s June 28 ruling on the FTC’s initial complaint. The amended complaint includes additional data and evidence to support the FTC’s contention that Facebook is a monopolist that abused its excessive market power to eliminate threats to its dominance.
According to the amended complaint, a critical transition period in the history of the internet, and in Facebook’s history, was the emergence of smartphones and the mobile Internet in the 2010s. Facebook’s CEO, Mark Zuckerberg, recognized at the time that “we’re vulnerable in mobile” and a major shareholder worried that Facebook’s mobile weakness “ran the risk of the unthinkable happening – being eclipsed by another network[.]”
After suffering significant failures during this critical transition period, Facebook found that it lacked the business talent and engineering acumen to quickly and successfully integrate its outdated desktop-based technology to the new era of mobile-first communication. Unable to maintain its monopoly or its advertising profits by fairly competing, Facebook’s executives addressed this existential threat by buying up the new mobile innovators, including its rival Instagram in 2012 and mobile messaging app WhatsApp in 2014, who had succeeded where Facebook had failed. The company supplemented its anticompetitive shopping spree with an open-first-close-later scheme that helped cement its monopoly by severely hampering the ability of rivals and would-be rivals to compete on the merits. By anticompetitively cementing its personal social networking monopoly, Facebook has harmed the competitive process and limited consumer choice.
As described in the amended complaint, after starting Facebook Platform as an open space for third party software developers, Facebook abruptly reversed course and required developers to agree to conditions that prevented successful apps from emerging as competitive threats to Facebook. By pulling this bait and switch on developers, Facebook insulated itself from competition during a critical period of technological change. Developers that had relied on Facebook’s open-access policies were crushed by new limits on their ability to interoperate. Facebook’s conduct not only harmed developers such as Circle and Path, but also deprived consumers of promising and disruptive mavericks that could have forced Facebook to improve its own products and services.
The amended complaint bolsters the FTC’s monopoly power allegations by providing detailed statistics showing that Facebook had dominant market shares in the U.S. personal social networking market. The suit also provides new direct evidence that Facebook has the power to control prices or exclude competition; significantly reduce the quality of its offering to users without losing a significant number of users or a meaningful amount of user engagement; and exclude competition by driving actual or potential competitors out of business.
Facebook’s dominant position is also protected by significant barriers to entry, including high switching costs.  Over time, users of a personal social network build more connections and develop a history of posts and shared experiences, which they cannot easily transfer to another personal social networking provider.
Other significant barriers to entry include user-to-user effects, known as network effects, which make a personal social network more valuable as more users join the service. As the amended complaint notes, it is very difficult for a new entrant to displace an established personal social network in which users’ friends and family already participate.
According to the amended complaint, Facebook continues to monitor the industry for competitive threats to its personal social networking monopoly. Facebook is likely to impose anticompetitive conditions on access to its platform and seek to acquire companies it perceives as potential threats, especially when it next faces “acute competitive pressures from a period of technological transition,” the amended complaint alleges.
The FTC’s Office of General Counsel carefully reviewed Facebook’s petition to recuse Chair Lina M. Khan. As the case will be prosecuted before a federal judge, the appropriate constitutional due process protections will be provided to the company. The Office of the Secretary has dismissed the petition.
The Commission vote to authorize staff to file the amended complaint in the U.S. District Court for the District of Columbia was 3-2. Commissioner Christine Wilson also issued a dissenting statement.
Compliments of the Federal Trade Commission.

The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about how competition benefits consumers or file an antitrust complaint. Like the FTC on Facebook(link is external), follow us on Twitter(link is external), read our blogs, and subscribe to press releases for the latest FTC news and resources.

The post FTC Alleges Facebook Resorted to Illegal Buy-or-Bury Scheme to Crush Competition After String of Failed Attempts to Innovate first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.