The European Committee of the Regions and the European Commission’s Joint Research Centre organized a joint online workshop on 15 April to underline the role of regional Smart Specialisation Strategies as a cornerstone of EU policies, from the post-pandemic recovery plans to the delivery of the European Green Deal, digital transition and the Sustainable Development Goals.
Smart Specialisation is an essential part of EU’s cohesion policy: a place-based approach characterised by the identification of the strengths and assets of each region and on an Entrepreneurial Discovery Process with wide stakeholder involvement.
Elisa Ferreira, Commissioner for Cohesion and Reforms, underlined in her speech the close link between growth and R&I and emphasized that the EU’s cohesion policy and smart specialisation are key tools to tackle Europe’s innovation divide and avoid a “K shaped” recovery, where some regions recover fast and others risk stagnating or falling behind.
“Over the 2014-2020 programming period, more than €65 billion of cohesion policy funds were invested in R&I. While the new programmes are still in preparation, it is likely that at least half of new cohesion policy investment will target smart and green projects. Innovation is place-based and smart specialisation strategies help regions build their capacities around their assets. We are aiming to further strengthen links between our investments and smart specialisation strategies, to improve synergies with Horizon Europe and to simplify procedures”, Commissioner Ferreira said.
This view was shared by the representative from Commissioner Mariya Gabriel’s cabinet, who underlined that “smart specialisation will continue playing a major role supporting research and innovation to ensure sustainable and resilient development of all regions in Europe over the next programming period 2021-2027. In the light of the challenges posed by the COVID-19 pandemic, this helps consolidating a sustainable, smart and inclusive Europe”.
Apostolos Tzitzikostas, President of the European Committee of the Regions, stated that “overcoming the crisis triggered by the pandemic requires unprecedented cooperation and innovation capacities. Building efficient partnerships to deliver inclusive innovation processes is the essence of Smart Specialisation. This is why in the current scenario, Smart Specialisation is not a luxury or a best practice, but a powerful method to mobilise available investment.”
Bernard Magenhann, Deputy Director General of the European Commission’s Joint Research Centre, spoke about the concept of S4 – Smart Specialisation Strategy for Sustainability and inclusiveness – “an innovation-driven policy for competitive sustainability leaving no place and no one behind. It builds on the Smart Specialisation approach that we have developed over the past years, adapting it to the new context.”
SEDEC chair Anne Karjalainen (FI/PES), Member of Kerava City Council, underlined that “Smart Specialisation Strategies empower regions and cities to take responsibility for their own development potential, including the attainment of the Sustainable Development Goals, and to effectively build much-needed social resilience at local and regional level.”
Mayor of Seville Juan Espadas (ES/PES), who chairs the CoR’s ENVE Commission and the Green Deal Working Group, concluded that “Smart specialisation is an excellent tool to assist policy-makers in guiding the resources to the projects offering the best opportunities for jobs and growth in the post-pandemic recovery. Strategies must be oriented towards sustainable development to improve citizens’ quality of life, for instance through new models for energy and mobility at local and regional level. In this regard, the Joint Research Centre, which has one of its seats in Seville, is doing an important work to reach out to every corner of Europe and provide information about all available tools.”
Watch the recording of the event (agenda)
Compliments of the European Committee of the Regions.
The post Smart specialisation strategies are a cornerstone of EU’s sustainable recovery first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Regular format
International meetings
The President of the Eurogroup, Paschal Donohoe, informed the Eurogroup about the discussions at the spring meetings of the World Bank Group and the International Monetary Fund, in which he represented the euro area.
Thematic discussion on insolvency frameworks
The Eurogroup held a thematic discussion on insolvency frameworks based on a technical note prepared by the Commission.
Effective and efficient insolvency frameworks are very important for achieving a quicker recovery as well as more robust growth and deeper financial integration within the euro area in the future.
The euro as digital currency
Finance ministers took stock of ongoing work on the euro as a digital currency. The discussion was based on a report by the ECB outlining the results of the consultation on a digital euro that was launched on 12 October 2020.

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

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

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

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

Compliments of the European Council.
The post Main Results from Video conference of the Eurogroup, 16 April 2021 first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

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

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

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

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

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

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

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

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

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

Michele Ca’ Zorzi, Lead Economist, ECB

Luca Dedola, Senior Adviser, ECB

Georgios Georgiadis, Senior Economist, ECB

Marek Jarociński, Principal Economist, ECB

Livio Stracca, Economist, ECB

Georg Strasser, Principal Economist, ECB

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

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

Compliments of the European Central Bank.
The post ECB | Making waves – Fed spillovers are stronger and more encompassing than the ECB’s first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

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

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

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

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

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

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

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

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

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

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

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

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

The COVID-19 pandemic has brought social and economic disruption worldwide, but is also providing governments with the opportunity to put economies on a more sustainable and inclusive growth path while addressing the underlying challenges, according to the OECD’s Going for Growth policy report.
Going for Growth 2021: Shaping a Vibrant Recovery analyses pre-existing weaknesses as well as those brought on by the pandemic, and offers policy makers country-specific advice to seize the opportunity for a fundamental reset.
OECD Secretary-General Angel Gurría and Italian Minister of Economy and Finance Daniele Franco launched the report shortly after the second meeting of G20 finance ministers and central bank governors under the Italian Presidency on 7 April. Its recommendations provide a basis for G20 discussions on strategies to push forward a vibrant economic recovery and promote higher-quality growth.
“The pandemic is a painful reminder that the nature of our past growth was often unsustainable and left many people behind,” Mr Gurría said. “The recovery is an opportunity to set our policies right, to achieve growth that is stronger, equitable, sustainable and more resilient. And for this to happen, governments have to act now.”
Going for Growth 2021: Shaping a Vibrant Recovery provides a framework for policy reform covering three key dimensions:

Building resilience and sustainability: Structural policies can improve the first line of defence to shocks (health care and social safety nets, critical infrastructure), improve public governance, and strengthen firms’ incentives to better take longer-term sustainability considerations into account.

Facilitating reallocation and boosting productivity growth. Steering growth in a more durable, resilient and inclusive direction requires structural policy action to increase job dynamism and support firms becoming more dynamic, more innovative and greener.

Supporting people through transitions. Policies should ensure that people are not left behind in transitions, so that reallocation is socially productive and builds resilience. This requires investments in skills, training and a big push for accessing quality jobs – particularly amongst vulnerable groups – as well as broad-based social safety nets, and better learning and support to access jobs.

Going for Growth policy advice includes short country notes for OECD members and a number of Partner countries (Argentina, Brazil, China, India, Indonesia and South Africa).
The report also highlights the crucial importance of countries acting together – in particular in the case of challenges that span borders. Going for Growth identifies a number of areas where international co-operation is needed to enhance the effectiveness of domestic policies and underpin the shift to more sustainable, resilient and equitable globalisation: healthcare, climate change, international trade and the taxation of multinational enterprises.
Key recommendations and individual country notes on OECD and key non-member countries are accessible at: https://www.oecd.org/economy/going-for-growth/. You are invited to include this link in media coverage of the report.
Contact:

Lawrence Speer | Lawrence.Speer[at]oecd.org

The OECD Media Office | news.contact[at]oecd.org

Compliments of the OECD.
The post OECD | Policy reset can deliver a stronger, more resilient, equitable and sustainable post-pandemic recovery first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The factors to consider on COVID-19 support measures, and a roadmap to address climate-related financial risks.
This letter from the FSB Chair, Randal K. Quarles, to G20 Finance Ministers and Central Bank Governors ahead of their virtual meeting on 7 April notes that, while progress is moving at different speeds across jurisdictions, the vaccine rollout heralds an inflection point in the COVID-19 pandemic. While it is sensible to keep measures that support financial system stability and financing of the real economy in place as long as needed, the factors to be considered in deciding whether to extend, amend and, eventually, end support measures are taking shape.
The FSB report on these factors notes that withdrawal of support measures before the macroeconomic outlook has stabilised could be associated with significant immediate risks to financial stability. But financial stability risks may gradually build if support measures remain in place for too long. On balance, most authorities currently believe that the costs of premature withdrawal of support could be more significant than maintaining support for too long. Overall, a flexible, state-contingent approach can help to minimise financial stability risks. FSB members have committed to coordinate on the unwinding of support measures and the FSB will continue to support that coordination.
The Chair’s letter applauds the significant progress made on too-big-to-fail (TBTF) reforms for banks. The evaluation of TBTF reforms for banks – the largest evaluation that the FSB has carried out so far – suggests that reforms have reduced systemic risks, enhanced the credibility of resolution and market discipline, and ultimately produced net benefits to society. Nevertheless, TBTF reforms can be developed further, notably on implementation of Total Loss Absorbing Capacity (TLAC) and transparency of resolution funding mechanisms.
Moreover, some risks have moved outside the banking system. The FSB’s Holistic Review of the March 2020 market turmoil examined the increasingly important role of – and vulnerabilities in – non-bank financial intermediation (NBFI). The FSB’s NBFI work programme seeks to address these vulnerabilities. A first deliverable will be to submit policy proposals to enhance money market fund resilience to the G20 in July.
Finally, the letter notes the importance of addressing issues related to climate change. Three climate-related workstreams are currently underway in the FSB, covering data, disclosures and regulatory and supervisory practices. In July, the FSB will provide the G20 with two reports, on ways to promote consistent, high-quality climate disclosures in line with the recommendations of the Task Force for Climate-related Financial Disclosures; and on the data necessary for the assessment of financial stability risks and related data gaps.
While the greater momentum in climate work by various bodies is welcome, it also increases the importance of strategic vision, good coordination, and clear communication to the G20 and the public. The FSB will present to the G20 a coordinated, forward-looking roadmap to address climate-related financial risk. This roadmap will be key to promoting rapid progress amongst jurisdictions. To enable better coordination, the FSB has invited the Network for Greening the Financial System (NGFS) to participate in FSB climate-related work, and the FSB will apply for observer status in the NGFS. The FSB will also coordinate closely with the G20 group on sustainable finance re-established by the Italian G20 Presidency as it develops its broader roadmap on sustainable finance, so that the FSB’s work dovetails with theirs.
READ FULL SPEECH HERE
Compliments of the Financial Stability Board.
The post FSB Chair’s letter to G20 Finance Ministers and Central Bank Governors: April 2021 first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Foreign aid from official donors rose to an all-time high of USD 161.2 billion in 2020, up 3.5% in real terms from 2019, boosted by additional spending mobilised to help developing countries grappling with the COVID-19 crisis, according to preliminary data collected by the OECD.
Within total Official Development Assistance (ODA) provided by members of the OECD’s Development Assistance Committee in 2020, initial estimates indicate that DAC countries spent USD 12 billion on COVID-19 related activities. Some of this was new spending and some was redirected from existing development programmes, according to an OECD survey carried out in April and May 2020. Most providers said they would not discontinue programmes already in place.
Total ODA equated to around 1% of the amount countries have mobilised over the past year in economic stimulus measures to help their own societies recover from the COVID crisis. Meanwhile the global vaccine distribution facility COVAX remains severely underfunded, OECD Secretary-General Angel Gurría said during a virtual presentation of the aid data.
“Governments globally have provided 16 trillion dollars’ worth of COVID stimulus measures yet we have only mobilised 1% of this amount to help developing countries cope with a crisis that is unprecedented in our lifetimes,” Mr Gurría said. “This crisis is a major test for multilateralism and for the very concept of foreign aid. We need to make a much greater effort to help developing countries with vaccine distribution, with hospital services and to support the world’s most vulnerable people’s incomes and livelihoods tobuild a truly global recovery.”

Foreign aid rose in a year that saw all other major flows of income for developing countries – trade, foreign direct investment and remittances – decline due to the pandemic, and domestic resources under increased pressure. Total external private finance to developing countries fell 13% in 2020 and trade volumes declined by 8.5%. (See the OECD’s Global Outlook on Financing for Sustainable Development 2021.)
The rise in 2020 ODA was also affected, however, by an increase in loans by some donors. Of gross bilateral ODA, 22% was in the form of loans and equity investments, up from around 17% in previous years, with the rest provided as grants.
The 2020 ODA total is equivalent to 0.32% of DAC donors’ combined gross national income, up from 0.30% in 2019 but below a target of 0.7% ODA to GNI. Part of the rise in the ratio was due to the fact that GNI fell in most DAC countries. Six DAC members – Denmark, Germany, Luxembourg, Norway, Sweden and the United Kingdom – met or exceeded the 0.7% target. Among non-DAC donors, whose assistance to developing countries is not included in the ODA total, Turkey provided aid equivalent to 1.12% of its GNI.
ODA rose in 16 DAC countries, with some substantially increasing their aid budgets to help developing countries respond to the pandemic. The largest increases were in Canada, Finland, France, Germany, Hungary, Iceland, Norway, the Slovak Republic, Sweden and Switzerland. ODA fell in 13 countries, most notably in Australia, Greece, Italy, Korea, Luxembourg, Portugal and the United Kingdom. G7 donors provided 76% of total ODA and DAC-EU countries 45%. ODA provided by EU Institutions jumped by 25.4% in real terms as they mobilised funds for COVID-19 related activities and increased sovereign lending by 136% over 2019.
Short-term support to help with the COVID-19 crisis focused on health systems, humanitarian aid and food security, according to the OECD survey. Aid providers indicated they would focus in the medium-term on making diagnostics and vaccines available to countries in need, as well as offering support to address the economic and social repercussions of the pandemic.
“At the outset of the pandemic, DAC donors said that they would strive to protect ODA volumes. I am grateful and proud to say that they have done that and more. Donor countries have stepped up to support developing countries struggling with the health and economic fallout of COVID-19, even as their own economies and societies have been battered,” said DAC Chair Susanna Moorehead. “The next few years will be tough and the finance we provide must work harder than ever. If we really are going to build forward better and greener, we must focus on the most vulnerable countries and the most vulnerable people in them, especially women and girls.”
Bilateral ODA to Africa and least-developed countries rose by 4.1% and 1.8% respectively. Humanitarian aid rose by 6%. Excluding aid spent on hosting refugees within donor countries – which was down 9.5% from 2019 to USD 9.0 billion and mainly concerned Canada, Iceland and the Netherlands – ODA rose by 4.4% in real terms in 2020.
ODA makes up over two thirds of external finance for least-developed countries. The OECD also monitors flows from some non-DAC providers and private foundations. Preliminary data released by the OECD each April is followed by final statistics published at the end of each year with a detailed geographic and sectoral breakdown. (See the 2019 ODA breakdown.)
Net ODA has risen for the most part steadily in volume terms from just below USD 40 billion (in 2019 prices) in 1960. It has more than doubled in real terms (up 110%) since 2000, when the Millennium Development Goals were agreed, despite the impact of the 2008 crisis on provider economies.
Contact:

Catherine Bremer, OECD Media Office | catherine.bremer[at]oecd.org (+33 1 4524 80 97.)

Compliments of the OECD.
The post OECD | COVID-19 spending helped to lift foreign aid to an all-time high in 2020 but more effort needed first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.