Speech by Chair Jerome H. Powell before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C. | December 01, 2020 |
Chairman Crapo, Ranking Member Brown, and other members of the Committee, thank you for the opportunity to update you on our ongoing measures to address the hardship wrought by the pandemic.
Our public health professionals continue to deliver our most important response, and we remain grateful for their service.
The Federal Reserve, along with others across government, is using its policies to help alleviate the economic burden. Since the pandemic’s onset, we have taken forceful actions to provide relief and stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.
Economic activity has continued to recover from its depressed second-quarter level. The reopening of the economy led to a rapid rebound in activity, and real gross domestic product, or GDP, rose at an annual rate of 33 percent in the third quarter. In recent months, however, the pace of improvement has moderated.
Household spending on goods, especially durable goods, has been strong and has moved above its pre-pandemic level. In contrast, spending on services remains low largely because of ongoing weakness in sectors that typically require people to gather closely, including travel and hospitality.
The overall rebound in household spending is due, in part, to federal stimulus payments and expanded unemployment benefits, which provided essential support to many families and individuals.
In the labor market, more than half of the 22 million jobs that were lost in March and April have been regained, as many people were able to return to work. As with overall economic activity, the pace of improvement in the labor market has moderated. Although we welcome this progress, we will not lose sight of the millions of Americans who remain out of work. The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit. In particular, the high level of joblessness has been especially severe for lower-wage workers in the services sector, for women, and for African Americans and Hispanics. The economic dislocation has upended many lives and created great uncertainty about the future.
As we have emphasized throughout the pandemic, the outlook for the economy is extraordinarily uncertain and will depend, in large part, on the success of efforts to keep the virus in check.
The rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months. A full economic recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities.
Recent news on the vaccine front is very positive for the medium term. For now, significant challenges and uncertainties remain, including timing, production and distribution, and efficacy across different groups. It remains difficult to assess the timing and scope of the economic implications of these developments with any degree of confidence.
The Federal Reserve’s response has been guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system. We have been taking broad and forceful actions to more directly support the flow of credit in the economy. Our actions, taken together, have helped unlock almost $2 trillion of funding to support businesses large and small, nonprofits, and state and local governments since April. This, in turn, has helped keep organizations from shuttering and has put employers in both a better position to keep workers on and to hire them back as the economy continues to recover.
These programs serve as a backstop to key credit markets and have helped restore the flow of credit from private lenders through normal channels. We have deployed these lending powers to an unprecedented extent. Our emergency lending powers require the approval of the Treasury and are available only in very unusual circumstances, such as those we find ourselves in today. Many of these programs have been supported by funding from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and I have included detailed information about those facilities in my written testimony.
The CARES Act assigns sole authority over its funds to the Treasury Secretary, subject to the statute’s specified limits. The Secretary has indicated that these limits do not permit the CARES Act-funded facilities to make new loans or purchase new assets after December 31 of this year. Accordingly, the Federal Reserve will return the unused portion of funds allocated to the lending programs that are backstopped by the CARES Act in connection with their termination at the end of this year. As the Secretary noted in his letter, non-CARES Act funds in the Exchange Stabilization Fund are available to support emergency lending facilities if they are needed.
Everything the Fed does is in service to our public mission. We are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible on behalf of communities, families, and businesses across the country.
Thank you. I look forward to your questions.
Summary of Section 13(3) Facilities Using CARES Act Funding
The Municipal Liquidity Facility
The Municipal Liquidity Facility (MLF) helps state and local governments better manage the extraordinary cash flow pressures associated with the pandemic, in which expenses, often for critical services, are temporarily higher than normal and tax revenues are delayed or temporarily lower than normal. This facility addresses these liquidity needs by purchasing the short-term notes typically used by these governments, along with other eligible public entities, to manage their cash flows. By addressing the cash management needs of eligible issuers, the MLF was also intended to encourage private investors to reengage in the municipal securities market, including across longer maturities, thus supporting overall municipal market functioning.
Under the MLF, the Federal Reserve Bank of New York lends to a special purpose vehicle (SPV) that will directly purchase up to $500 billion of short-term notes issued by a range of eligible state and local government entities. Generally speaking, eligible issuers include all U.S. states, counties with a population of at least 500,000 residents, cities with a population of at least 250,000 residents, certain multistate entities, and revenue-bond issuers designated as eligible issuers by their state governors. Notes purchased by the facility carry yields designed to promote private market participation—that is, they carry fixed spreads based on the long-term rating of the issuer that are generally larger than those seen in normal times. With funding from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Department of the Treasury has committed to make a $35 billion equity investment in the SPV.
The MLF was announced on April 9, 2020, and closed its first transaction on June 5. As of November 25, the facility had purchased two issues for a total outstanding amount of $1.7 billion.
The MLF has contributed to a strong recovery in municipal securities markets, which has facilitated a historic issuance of approximately $275 billion of bonds since late March. State and local governments and other municipal bond issuers of a wide spectrum of types, sizes, and ratings have been able to issue bonds, including long maturity bonds, with interest rates that are at or near historical lows. Those municipal issuers that do not have direct access to the Federal Reserve under the MLF have still benefited substantially from a better-functioning municipal securities market.
The Main Street Lending Program
The Federal Reserve established the Main Street Lending Program (Main Street) to support lending to small and medium-sized businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic. These businesses and nonprofits have good longer-term prospects but have encountered temporary cash flow problems due to the pandemic and, as a result, are not able to get credit on reasonable terms. In addition to providing loans for borrowers in current need of funds, Main Street offers a credit backstop for firms that do not currently need funding but may if the pandemic continues to erode their financial condition.
Under Main Street, the Federal Reserve Bank of Boston has set up one SPV to manage and operate five facilities: the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), the Main Street Expanded Loan Facility (MSELF), the Nonprofit Organization New Loan Facility (NONLF), and the Nonprofit Organization Expanded Loan Facility (NOELF). The SPV will purchase up to $600 billion in Main Street loan participations, while lenders retain a percentage of the loans. Main Street loans have a five-year maturity, no principal payments in the first two years, and no interest payments in the first year. Businesses with less than 15,000 employees or 2019 revenues of less than $5 billion are eligible to apply for Main Street loans. Available loan sizes span from $100,000 to $300 million across the facilities and depend on the size and financial health of the borrower. With funding from the CARES Act, the Department of the Treasury has committed to make a $75 billion equity investment in the SPV.
The business facilities (MSNLF, MSPLF, and MSELF) and nonprofit facilities (NONLF and NOELF) have broadly similar terms but differ in their respective underwriting standards. The business facilities use the same eligibility criteria for lenders and borrowers and have many of the same terms, while other features of the loans extended in connection with each facility differ. The loan types also differ in how they interact with the borrower’s outstanding debt, including with respect to the level of pre-crisis indebtedness a borrower may have incurred. Similarly, the nonprofit facilities have many of the same characteristics, but some features of the loans extended in connection with each facility differ. Eligible lenders may originate new loans under MSNLF, MSPLF, and NONLF or may increase the size of existing loans under MSELF and NOELF.
Main Street became operational on July 6, 2020. The Federal Reserve and the Department of the Treasury have modified the program several times to reflect extensive consultations with stakeholders, most recently by lowering the minimum loan threshold and adjusting fees to make the program more accessible. As of November 25, nearly 600 lenders representing more than half of U.S. banking assets have registered to participate in the program, and the program has purchased just under $6 billion in participations.
Since Main Street became operational, the number of registered lenders and the amount of loan participations continue to increase. Program usage will depend on the course of the economy, the demand for credit by small and medium-sized businesses, and the ability of lenders to meet credit needs outside the Main Street program. Demand for Main Street loans may increase over time if the pandemic continues to affect the ability of businesses and nonprofits to access credit through normal channels and as other support programs expire.
The Secondary Market Corporate Credit Facility
The Secondary Market Corporate Credit Facility (SMCCF) is designed to work alongside the Primary Market Corporate Credit Facility (PMCCF), discussed later, to support the flow of credit to large investment-grade U.S. companies so that they can maintain business operations and capacity during the period of dislocation related to COVID-19. The SMCCF supports market liquidity by purchasing, in the secondary market, corporate bonds issued by investment-grade U.S. companies, by U.S. companies that were investment grade before the onset of the pandemic and remain near investment grade, and by U.S.-listed exchange-traded funds (ETFs) whose investment objective is to provide broad exposure to the market for U.S. corporate bonds.
Under the SMCCF, the Federal Reserve Bank of New York lends to an SPV that purchases in the secondary market both corporate bond portfolios in the form of ETFs and individual corporate bonds to track a broad market index. The SMCCF purchases ETF shares and corporate bonds at fair market value in the secondary market and avoids purchasing shares of ETFs when they trade at prices that materially exceed the estimated net asset value of the underlying portfolio. The pace of purchases is a function of the condition of the U.S. corporate bond markets. With funding from the CARES Act, the Department of the Treasury has committed to make a $75 billion equity investment in the SPV for the PMCCF and SMCCF, with a $25 billion allocation toward the SMCCF.
The SMCCF staggered its launch of ETF and bond purchases in order to act as quickly and effectively as possible. Through ETF purchases beginning on May 12, 2020, the SMCCF provided liquidity to the corporate bond market relatively quickly. The Federal Reserve began direct corporate bond purchases under the broad market index purchase program on June 16. In its first week of bond purchases, the SMCCF was purchasing about $370 million per day. As of November 25, purchases have been slowed to a current daily pace of approximately $20 million of bonds and no ETFs, and the total SMCCF outstanding value has reached $13.6 billion.
The SMCCF’s announcement effect was strong, quickly improving market functioning and unlocking the supply of hundreds of billions of dollars of private credit. Since late March, more than $1.6 trillion in corporate bonds have been issued without direct government or taxpayer involvement. The SMCCF has materially reduced its pace of purchases over the past few months as a result of the substantial improvements in the functioning of the U.S. corporate bond markets. The pace of purchases going forward will continue to be guided by measures of market functioning, increasing when conditions deteriorate and decreasing when conditions improve.
The Primary Market Corporate Credit Facility
The Primary Market Corporate Credit Facility (PMCCF) is designed to work alongside the Secondary Market Corporate Credit Facility (SMCCF) to support the flow of credit to large investment-grade U.S. companies so that they can maintain business operations and capacity during the period of dislocation related to COVID-19. The PMCCF supports market liquidity by serving as a funding backstop for corporate debt.
Under the PMCCF, the Federal Reserve Bank of New York lends to an SPV. The SPV will purchase qualifying bonds and syndicated loans with maturities up to four years. With funding from the CARES Act, the Department of the Treasury has committed to make a $75 billion equity investment in the SPV for the PMCCF and SMCCF, with a $50 billion allocation toward the PMCCF.
The dual announcement of the PMCCF and SMCCF was well received by the market. Between March 23 and April 6, 2020, credit spreads for investment-grade bonds declined substantially. As of November 25, there have not been any PMCCF transactions, nor have any indications of interest been received. While the PMCCF has not purchased any bonds since it opened, it serves as a backstop should markets enter another period of stress.
The Term Asset-Backed Securities Loan Facility
The Term Asset-Backed Securities Loan Facility (TALF) supports the flow of credit to consumers and businesses by enabling the issuance of asset-backed securities (ABS) guaranteed by newly and recently originated consumer and business loans.
Under the TALF, the Federal Reserve Bank of New York lends to an SPV. The SPV will make up to $100 billion of three-year term loans available to holders of certain triple-A-rated ABS backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets. The Federal Reserve lends an amount equal to the market value of the ABS less a haircut, and the loan is secured at all times by the ABS. With funding from the CARES Act, Department of the Treasury has committed to make a $10 billion equity investment in the SPV.
As of November 25, the TALF has extended $3.8 billion in loans since its launch on May 20, 2020. Loans have been collateralized by SBA-guaranteed ABS, commercial mortgage-backed securities (CMBS), and ABS secured by insurance premium finance loans or student loans.
The announcement and presence of the TALF has substantially helped improve liquidity in the ABS markets, including those for CMBS and collateralized loan obligations, with spreads in some ABS sectors returning close to normal levels. The TALF interest rates are attractive to borrowers when market conditions are stressed but not under normal conditions. While the facility is authorized to extend up to $100 billion in loans, total take-up will likely be much less unless ABS market conditions worsen.
Compliments of the U.S. Federal Reserve.
The post U.S. FED | Speech on Coronavirus Aid, Relief, and Economic Security Act first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Speech by Fabio Panetta, Member of the Executive Board of the ECB, at the Rome Investment Forum 2020 | Rome, 14 December 2020 |
2020 has been a year like no other. We have faced an economic contraction without precedent in peacetime: in the first half of this year output in the euro area declined by more than 15%. But we have also seen a collective response that has no precedent in the history of our monetary union.
That response has protected our economy from a potentially catastrophic depression. And now, with positive news on vaccines, we are finally able to glimpse the light at the end of the tunnel.
But we still need to pass through the tunnel. 2021 will likely be a “pandemic year”, characterised by high uncertainty and widespread vulnerabilities among firms and households. How the European economy emerges from the crisis will depend on how we manage this transition.
So what I would like to argue today is that policymakers must commit to continue providing certainty to the economy. The end of the pandemic is now in sight, and we need to extend policy support in order to underpin the recovery.
But expansionary policies must not be wasted. Only by taking the opportunity to invest in Europe’s recovery can we re-emerge on the other side with a more dynamic economy and a more sustainable debt burden.
A common shock, a common response
The coronavirus (COVID-19) is a common shock that has had asymmetric effects[1], hurting some sectors and economies much more than others. But what has defined this crisis – and set it apart from previous ones – is the policy response at the European level and the recognition that a common shock requires a common response.[2]
From the outset, monetary and fiscal policies have reinforced each other. The ECB has taken forceful monetary policy measures to stabilise markets and prevent a tightening of financing conditions. And fiscal policy has empowered monetary policy by offsetting lost private sector income and enabling banks to support the real economy. European policies – the ECB’s monetary policy and the joint EU fiscal support – have generated a European dividend.
This was a step change in European crisis management. As a result, the euro area economy was able to stage a strong rebound over the summer, as containment measures were lifted.
However, the recovery has been temporarily suspended in recent months due to the resurgence of the pandemic. Eurosystem staff now project that the euro area economy will contract by more than 2% in the fourth quarter of this year, with GDP falling by 7.3% overall in 2020. Growth next year will be 3.9%, 1.1 percentage points lower than expected in September.
Inflation will remain subdued for a protracted period: it is currently negative and is projected to rise to just 1.1% in 2022 and 1.4% in 2023; excluding its more volatile components, it is expected to increase to only 1.2% in 2023. This inflation weakness reflects the significant demand gap that the economy will be facing in the next two years. And – of relevance to today’s forum – this has implications for business investment.
With high uncertainty compounding weak demand and financial vulnerability[3], it is not surprising that businesses today are reluctant to make irreversible decisions. According to a recent survey by the European Investment Bank, more than 80% of companies consider uncertainty the main barrier to investment – and this figure rises to 96% in Italy.[4] It is therefore little wonder that, at the end of the third quarter, total investment in the euro area was about 10% below its pre-pandemic level. Consumption and GDP were down 4.6% and 4.3%, respectively.

Chart 1 – Euro area business investment, private consumption and GDP
(index: Q4 2019 = 100)

Image courtesy of the ECB.Source: Eurostat.

So the question for policymakers is how to create certainty for businesses to invest once more.[5] We cannot provide clarity about when the vaccine will be widely available or even how people will respond when that day comes. But we can guarantee our commitment to support the recovery: the stabilisation effort should therefore continue until the economy is on a solid, durable recovery path.
Indeed, if firms are to invest more today, they must be confident that their financing costs will not rise prematurely and leave them with an unaffordable debt burden. For monetary policy, this means providing certainty about financing conditions well into the future.
Last week, the ECB’s Governing Council did just that.
The ECB’s contribution: preserving favourable financing conditions
Since the very beginning of this crisis, the ECB has taken forceful measures to ensure that all sectors can benefit from favourable financing conditions.
In March we launched the pandemic emergency purchase programme (PEPP), under which we had purchased €700 billion of private and public sector bonds by the end of November. Nearly all euro area sovereigns are now borrowing at negative rates up to five-year maturities, while corporate bond spreads have narrowed significantly.
Our purchases were complemented by a further easing of our targeted longer-term refinancing operations (TLTROs). Over the past six months, more than €1.3 trillion has been allotted to banks at very favourable rates on the condition that they continue providing financial support to the real economy. TLTROs are a powerful form of support to small and medium-sized enterprises, which mainly rely on bank lending.
Our measures are ensuring that households, firms and governments can benefit from very accommodative financing conditions throughout the euro area. And in order to provide the certainty that the economy needs, the ECB is committed to preserving favourable financing conditions well into the future. To this end, last week we decided to strengthen our monetary policy action.
We increased the envelope of the PEPP by €500 billion, to a total of €1.85 trillion, and extended the horizon for the net purchases until at least March 2022.[6] This large envelope gives us considerable firepower. It allows us to respond flexibly at any time and with the necessary force to resist a premature tightening of financing conditions that could jeopardise the return of inflation in a sustained way to our aim of 2% over the medium term.
We have also extended the most favourable conditions on our TLTROs until June 2022 and broadened their size, in terms of maximum borrowing allowance. This will help calm fears of a tightening of financing conditions in the coming months – fears which we saw emerging in our latest survey on the access to finance of small and medium-sized enterprises.[7]
The PEPP envelope can be further expanded and extended, if warranted by the inflation outlook. And we stand ready to adjust all our instruments if downside risks to the outlook materialise, including those stemming from exchange rate dynamics. Indeed, an appreciation of the euro could significantly affect euro area inflation.[8]
There should be no doubt here: the ECB will not accept inflation settling at levels that are inconsistent with its aim. This is why we took action, and why we will continue to provide the monetary accommodation that is necessary to support the convergence of inflation to 2% over the medium term.
Our commitment to preserve favourable financing conditions will support the strengthening of inflation dynamics in two main ways.
First, over the coming months, where uncertainty is still high and the private sector is reluctant to take risks, fiscal policy will remain the main actor in the stabilisation effort and, as such, a key channel for transmitting monetary policy to the real economy.[9] Confidence in future financing conditions will remove obstacles to fiscal policy playing this role in full.
And when uncertainty recedes, monetary transmission through the private sector will gain more traction. Firms will be able to take full advantage of favourable financing conditions and carry out their investment plans. This is the second expansionary effect – and, crucially, the ECB’s commitment to preserve favourable financing conditions makes this effect more powerful over time.
That commitment is linked to supporting the return of inflation to our aim over the medium term. Given our projections – which foresee that even in a mild scenario inflation would rise to only 1.5% in 2023 – this means that financing conditions will need to remain very supportive even as growth accelerates from next year onwards. As a result, monetary policy will become more accommodative relative to the growth outlook.
Also in the light of the prolonged deviations of inflation below our aim over a number of years, a steady return to 2% is essential to anchor inflation expectations.
Investing in Europe’s recovery
But firms need certainty about more than just financing conditions. They also need reassurance about future demand and growth.
To lift the economy out of the crisis, governments need to wisely use the fiscal space created by our monetary policy and other key decisions at the European level – in particular joint EU borrowing. Next Generation EU (NGEU) alone will provide fiscal support amounting to about 5% of euro area GDP, focused in particular on those countries that have been hit hardest by the crisis, including Italy.
We will exit this crisis with higher public and private debt levels everywhere, so achieving growth rates that remain higher than interest rates will be crucial. For fiscal authorities, this means they should focus on high-quality, productive investment spending that lifts potential growth.
Many European economies have seen their growth capacity decline over recent decades. Capital deepening virtually stagnated, leading to lacklustre productivity performance.[10] Reversing this trend is necessary to ensure debt sustainability.[11]

Chart 2 – Labour productivity growth and decomposition
(period averages of annual percentage changes and percentage point contributions)

Image courtesy of the ECB.
Sources: The European Commission’s AMECO database and ECB staff calculations.Notes: Productivity is measured in terms of output per person employed. Percentage point contributions are computed using a Cobb-Douglas production function, with capital deepening contributions estimated using two-period average factor shares. The total factor productivity (TFP) contribution is taken as the residual.

NGEU spending should focus on investment in those areas with the greatest potential to boost productivity and labour participation. If this happens, the possible gains are large. According to ECB estimates, NGEU funds could increase real output in the euro area by up to 1.5% by 2026 relative to the baseline scenario. High efficiency and institutional quality will be key to maximising the benefits of NGEU.
For Italy, the possible gains are larger: up to 3.5% of GDP if funds are well invested. Moreover, NGEU grants could reduce public debt-to-GDP ratio by more than 5 percentage points by 2026.[12]
The gains will be highest if investment spending is targeted at the technologies and sectors that will drive the economy after the pandemic.[13] More than half of EU firms expect to increase their use of digital technologies in response to COVID-19.[14] This requires enhancing digital skills and infrastructure, in order to be ready to face the digital challenge. For example, in the euro area the share of individuals with at least basic digital skills ranges from 79% in the Netherlands to 42% in Italy.[15]
If spent wisely, NGEU funds will contribute to significantly improving technological capabilities. This would not only ensure that all our economies are ready to take advantage of this transformation. It would also reduce one of the differences in structural conditions that has contributed to divergences among European economies.[16]
NGEU funds can be directly used to accelerate digitalisation, for instance by increasing the use of e-government services. The fiscal space that NGEU creates in national budgets can also be reallocated towards digital training and education.
In the past, pandemics have sparked innovation in how economies are structured. Recent research shows that government interventions during the 1918 influenza pandemic helped spur innovation after the pandemic ended.[17] I see no reason why we cannot do the same.
However, we must also recognise that digitalisation tends to reward those with higher skills and so could exacerbate inequalities. Therefore, during the transition attention should be given to the social implications of reallocating resources towards more digitalised sectors.[18]
Investment to support the transition to a low-carbon economy will also be a key component of the recovery from the pandemic throughout the euro area. Italy should not be lagging behind in this area.
Conclusion
The coronavirus shock may be a turning point for Europe. The agreements reached by EU leaders in recent months show that we all understand that addressing challenges together brings benefits to everyone.
Our common response at the European level must now continue, in order to provide clarity on the policies that will be implemented to underpin and strengthen the recovery.
To put the economy on a solid, durable growth path consistent with the return of inflation to our aim, monetary and fiscal policy need to remain accommodative for an extended period of time.
Fiscal policy must focus on investment in order to boost potential growth. We must resist the temptation to take hazardous shortcuts. Only growth, not financial alchemy, can guarantee debt sustainability and pave the way for prosperity.
Compliments of the European Central Bank.
The post ECB | A commitment to the recovery first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Speech by President von der Leyen on 12 December 2020, Brussels |
“Check against delivery”
Dear guests of the Climate Ambition Summit!
55% – That is now indeed Europe’s calling card. I am glad that the 27 European Leaders have signed up to the European Commission’s proposal for taking climate action to a new level of ambition. Together with the agreement on our next 7-year-budget, the 55% agreement is the go-ahead for scaling up climate action across our economy and society.
We have already started. From boosting renewable energy, creating hydrogen valleys and producing the most sustainable batteries to launching a wave of building renovation, decarbonising transport and protecting and restoring our nature. We are serious about getting our economy on a more sustainable path.
But this is not a task for Europe alone. Europe only accounts for less than 10% of global emissions. Climate change is more than a European issue. It is a human issue. And today, there is a global movement for climate action. A movement that counts on powerful nations but also on countless cities, NGOs, people of good will. Europe wants to contribute to the movement and make it grow.
We want to work with all those who agree that we must put a price on carbon. We are ready for more ambitious commitments with like-minded countries. We are supporting developing countries, to help them decouple their emissions and their economic growth. Just like we are doing in Europe.
And it is more than cutting emissions. It is about green finance. It is about restoring biodiversity. It is about a new circular economy that creates jobs and prosperity while preserving nature. Many things have to change, so that our planet can remain the same for the next generation. 55% is Europe’s contribution on the road to Glasgow. Let us walk this road together!
Compliments of the European Commission.
The post Speech by President von der Leyen at the Climate Ambition Summit first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Central banks have played a pivotal role in easing financial conditions in response to the COVID-19 shock, and helped avert a catastrophic downturn. However, their work is far from done. Yet more monetary stimulus will be needed to support economic recovery, and central banks are implementing innovative new strategies to provide it.

Policymakers must weigh the pros of more stimulus today against the cons of higher financial stability risks in the future.

While the new approaches are both necessary and welcome, it is critical that policymakers weigh the pros of providing more stimulus today against the potential cons of higher financial stability risks down the road. In a new paper, I present a model for quantifying the tradeoff between support today and vulnerability tomorrow.
New strategies for new challenges
Even prior to the pandemic, central banks were struggling to boost economic activity and bring inflation to target . A range of policies, including forward guidance and asset purchases, was deployed to spur a strong recovery in employment after the Global Financial Crisis. But a sharp decline in the neutral rate of interest reduced the scope to counter low inflationary pressures. Even with interest rates very low out the yield curve, inflation remained chronically low and appeared to be pulling down long-run inflation expectations in many economies. This is a concern because it would put downward pressure on nominal yields and further erode policy space.
The COVID-19 crisis has greatly intensified these challenges. Employment has collapsed, threatening a major humanitarian crisis in many economies, and inflation has been further depressed by weak activity and falling commodity prices. While more stimulus is needed—along with better ways to anchor inflation expectations—the post-2008 playbook won’t suffice. Policy rates have already been pushed to zero or below, and very low yields on long-term government bonds limit the scope to provide stimulus through purchases of these instruments.
Last month, I joined a panel hosted by the IMF, New Policy Frameworks for a “Lower-for-Longer” World, to consider how some leading central banks are addressing these challenges. Richard Clarida (Federal Reserve), Philip Lane (European Central Bank), and Carolyn Wilkins (Bank of Canada) discussed the monetary policy frameworks reviews that their institutions have launched, focusing on new ways to boost employment and inflation in this very low-rate environment.
The Fed recently completed its review, adopting an innovative “make-up” strategy also being considered by other central banks: to allow inflation to overshoot its target to make up for a period in which it has run low, helping to better anchor inflation expectations around targets. The prospect that the central bank will allow the economy to run hot in the future—so that inflation can overshoot—may create more optimism today and fuel a stronger recovery.
Financial stability tradeoffs
Central banks are also exploring how unconventional policies already in use, such as purchases of sovereign bonds or corporate debt, can be used more aggressively. Combined with new approaches, this can play a critical role in speeding the recovery from COVID-19, as well as from future shocks hitting economies. But these even more accommodative policies may pose substantial risks down the road by encouraging excessive risk-taking and a build-up of vulnerabilities.
Ideally, financial regulation (macroprudential policies) should serve as the first line of defense in mitigating financial stability risks, consistent with Fund policy advice. But that may fall short, often reflecting the lack of tools to contain vulnerabilities such as in nonbank financial institutions, or implementation hurdles stemming from the political process.
Accordingly, it is crucial that monetary policymakers incorporate macro-financial stability considerations in their decision making, besides the path of output, unemployment, and inflation. At the “New Frameworks” event, I presented a “New Keynesian” modeling framework that allows central banks to quantify the tradeoff between boosting inflation and output in the near-term and increasing financial stability risks down the road.
In the framework, easy monetary policy stimulates aggregate demand not only through standard channels, but also through a risk-taking mechanism. Looser monetary policy today relaxes financial conditions and reduces near-term risks to both output and financial stability, but also cause financial fragilities to grow over time, increasing output risk in the medium term. The framework is designed to help policymakers balance this “intertemporal” tradeoff associated with “low-for-long” monetary policies, including those deployed in response to COVID-19.
Macroprudential policies may influence these tradeoffs, and the active deployment of tools to contain financial stability would allow more prolonged accommodation and promote faster recovery. It is also vital to consider how monetary policy easing by major central banks may affect financial stability in foreign economies through increased risk-taking and a buildup of leverage. The IMF’s efforts to develop an integrated policy framework in recent years—which considers how central banks can use macroprudential policies, capital flow management tools, and foreign exchange intervention to achieve their objectives—should be constructive in assessing how to mitigate such risks.
Conclusions
Central banks’ bold and innovative strategies to address the challenges of a “lower-for-longer” environment post-COVID-19 should provide additional firepower to support faster global recovery and help achieve their inflation targets. But central banks need to be vigilant in managing the risks to financial stability that may accompany these accommodative policies and should make the future consequences of their present actions a key part of their decision making.
Author:

Tobias Adrian, Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department

Compliments of the IMF.
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“In a changing global landscape, I believe it is time for a new transatlantic agenda fit for today’s world. And I believe it is Europe who should take the initiative.” President Ursula von der Leyen, November 2020
Following the election of President Biden and Vice-President Harris by the people of the United States of America, combined with a more assertive and capable European Union, and a new geopolitical and economic reality, the European Commission and the High Representative are putting forward a proposal for a new, forward-looking transatlantic agenda for global change.
This proposal is centred on areas where EU-US interests converge, our collective leverage can best be used and where global leadership is required. It has a united, capable and self-reliant EU at its core, which is good for Europe, good for the transatlantic partnership and good for the multilateral system.
THIS NEW TRANSATLANTIC AGENDA WILL BE GUIDED BY: Stronger multilateral action and institutions Pursuit of common interests and leveraging our collective strength Looking for solutions that respect our common values of fairness, openness and competition.
Click here to read the entire program the EU Commission outlined.
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While the Commission will continue to do its utmost to reach a mutually beneficial agreement with the UK, there is now significant uncertainty whether a deal will be in place on 1 January 2021.
The European Commission has today put forward a set of targeted contingency measures ensuring basic reciprocal air and road connectivity between the EU and the UK, as well as allowing for the possibility of reciprocal fishing access by EU and UK vessels to each other’s waters.
The aim of these contingency measures is to cater for the period during which there is no agreement in place. If no agreement enters into application, they will end after a fixed period.
President von der Leyen said: “Negotiations are still ongoing. However, given that the end of the transition is very near, there is no guarantee that if and when an agreement is found, it can enter into force on time. Our responsibility is to be prepared for all eventualities, including not having a deal in place with the UK on 1 January 2021. That is why we are coming forward with these measures today”.
The Commission has consistently called on all stakeholders in all sectors to prepare for all possible scenarios on 1 January 2021. While a “no-deal” scenario will cause disruptions in many areas, some sectors would be disproportionately affected due to a lack of appropriate fall-back solutions and because in some sectors, stakeholders cannot themselves take mitigating measures. The Commission is therefore putting forward today four contingency measures to mitigate some of the significant disruptions that will occur on 1 January in case a deal with the UK is not yet in place:

Basic air connectivity: A proposal for a Regulation to ensure the provision of certain air services between the UK and the EU for 6 months, provided the UK ensures the same.

Aviation safety: A proposal for a Regulation ensuring that various safety certificates for products can continue to be used in EU aircraft without disruption, thereby avoiding the grounding of EU aircraft.

Basic road connectivity: A proposal for a Regulation covering basic connectivity with regard to both road freight, and road passenger transport for 6 months, provided the UK assures the same to EU hauliers.

Fisheries: A proposal for a Regulation to create the appropriate legal framework until 31 December 2021, or until a fisheries agreement with the UK has been concluded – whichever date is earlier – for continued reciprocal access by EU and UK vessels to each other’s waters after 31 December 2020. In order to guarantee the sustainability of fisheries and in light of the importance of fisheries for the economic livelihood of many communities, it is necessary to facilitate the procedures of authorisation of fishing vessels.

The Commission will work closely with the European Parliament and Council with a view to facilitate entry into application on 1 January 2021 of all four proposed Regulations.
Readiness and preparedness for 1 January 2021 is now more important than ever. Disruption will happen with or without an agreement between the EU and the UK on their future relationship. This is the natural consequence of the United Kingdom’s decision to leave the Union and to no longer participate in the EU Single Market and Customs Union. The Commission has always been very clear about this.
Background
The United Kingdom left the European Union on 31 January 2020. At the time, both sides agreed on a transition period until 31 December 2020, during which EU law continues to apply to the UK. The EU and the UK are using this period to negotiate the terms of their future partnership. The outcome of these negotiations is uncertain.
The Withdrawal Agreement remains in force. It guarantees the rights of EU citizens in the UK, as well as our financial interests, and protects peace and stability on the island of Ireland, amongst many other things.
Public administrations, businesses, citizens and stakeholders on both sides need to prepare for the end of the transition period. The Commission has worked closely with EU Member States to inform citizens and businesses about the consequences of Brexit. It published almost 100 sectoral guidance notices – in all official EU languages – with detailed information on what administrations, businesses and citizens have to do to prepare for the changes at the end of the year.
Since July, the Commission has been carrying out a virtual “tour des capitales” to discuss Member States’ readiness plans.
The Commission has also launched a number of awareness-raising campaigns and intensified its stakeholder outreach over recent months. It provided training and guidance to Member State administrations, and will continue to organise sectoral seminars with all Member States at technical level, to help fine-tune the implementation of readiness measures, in particular in the areas of border checks for persons and goods.
Compliments of the European Commission.
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Today, the European Commission proposes to modernise EU legislation on batteries, delivering its first initiative among the actions announced in the new Circular Economy Action Plan. Batteries that are more sustainable throughout their life cycle are key for the goals of the European Green Deal and contribute to the zero pollution ambition set in it. They promote competitive sustainability and are necessary for green transport, clean energy and to achieve climate neutrality by 2050. The proposal addresses the social, economic and environmental issues related to all types of batteries.
Batteries placed on the EU market should become sustainable, high-performing and safe all along their entire life cycle. This means batteries that are produced with the lowest possible environmental impact, using materials obtained in full respect of human rights as well as social and ecological standards. Batteries have to be long-lasting and safe, and at the end of their life, they should be repurposed, remanufactured or recycled, feeding valuable materials back into the economy.
Promoting competitive sustainability in Europe
The Commission proposes mandatory requirements for all batteries (i.e. industrial, automotive, electric vehicle and portable) placed on the EU market. Requirements such as use of responsibly sourced materials with restricted use of hazardous substances, minimum content of recycled materials, carbon footprint, performance and durability and labelling, as well as meeting collection and recycling targets, are essential for the development of more sustainable and competitive battery industry across Europe and around the world.
Providing legal certainty will additionally help unlock large-scale investments and boost the production capacity for innovative and sustainable batteries in Europe and beyond to respond to the fast-growing market.
Minimising environmental impact of batteries
The measures that the Commission proposes will facilitate achieving climate neutrality by 2050. Better and more performant batteries will make a key contribution to the electrification of road transport, which will significantly reduce its emissions, increase the uptake of electric vehicles and facilitate a higher share of renewable sources in the EU energy mix.
With this proposal, the Commission also aims to boost the circular economy of the battery value chains and promote more efficient use of resources with the aim of minimising the environmental impact of batteries. From 1 July 2024, only rechargeable industrial and electric vehicles batteries for which a carbon footprint declaration has been established, can be placed on the market.
To close the loop and maintain valuable materials used in batteries for as long as possible in the European economy, the Commission proposes to establish new requirements and targets on the content of recycled materials and collection, treatment and recycling of batteries at the end-of-life part. This would make sure that industrial, automotive or electric vehicle batteries are not lost to the economy after their useful service life.
To significantly improve the collection and recycling of portable batteries, the current figure of 45% collection rate should rise to 65 % in 2025 and 70% in 2030 so that the materials of batteries we use at home are not lost for the economy. Other batteries – industrial, automotive or electric vehicle ones – have to be collected in full. All collected batteries have to be recycled and high levels of recovery have to be achieved, in particular of valuable materials such as cobalt, lithium, nickel and lead.
The proposed regulation defines a framework that will facilitate the repurposing of batteries from electric vehicles so that they can have a second life, for example as stationary energy storage systems, or integration into electricity grids as energy resources.
The use of new IT technologies, notably the Battery Passport and interlinked data space will be key for safe data sharing, increasing transparency of the battery market and the traceability of large batteries throughout their life cycle. It will enable manufacturers to develop innovative products and services as part of the twin green and digital transition.
With its new battery sustainability standards, the Commission will also promote globally the green transition and establish a blueprint for further initiatives under its sustainable product policy.
Members of the College said:
Executive Vice-President for the European Green Deal Frans Timmermans said: “Clean energy is the key to European Green Deal, but our increasing reliance on batteries in, for example, transport should not harm the environment. The new batteries regulation will help reduce the environmental and social impact of all batteries throughout their life cycle. Today’s proposal allows the EU to scale up the use and production of batteries in a safe, circular and healthy way”. 
Vice-President for Interinstitutional Relations Maroš Šefčovič said: “The Commission puts forward a new future-proof regulatory framework on batteries to ensure that only the greenest, best performing and safest batteries make it onto the EU market. This ambitious framework on transparent and ethical sourcing of raw materials, carbon-footprint of batteries, and recycling is an essential element to achieve open strategic autonomy in this critical sector and accelerate our work under the European Battery Alliance.”
Commissioner for Environment, Oceans and Fisheries Virginijus Sinkevičius said:”With this innovative EU proposal on sustainable batteries we are giving the first big push to the circular economy under our new Circular Economy Action Plan. Batteries are essential for crucial sectors of our economy and society such as mobility, energy and communications. This future-oriented legislative toolbox will upgrade the sustainability of batteries in each phase of their lifecycle. Batteries are full of valuable materials and we want to ensure that no battery is lost to waste. The sustainability of batteries has to grow hand in hand with their increasing numbers on the EU market.”
Commission for Internal Market Thierry Breton said: “Europe needs to increase its strategic capacity in new and enabling technologies, such as batteries, that are essential for our industrial competitiveness and to fulfil our green ambitions. With investment and the right policy incentives – including today’s proposal for a new regulatory framework – we are helping establish the full batteries value chain in the EU: from raw materials and chemicals via electric mobility all the way to recycling.”   
Background
Since 2006, batteries and waste batteries have been regulated at EU level under the Batteries Directive (2006/66/EC). A modernisation of the framework is necessary because of changed socioeconomic conditions, technological developments, markets, and battery uses.
Demand for batteries is increasing rapidly and is set to increase 14 fold by 2030. This is mostly driven by electric transport making this market an increasingly strategic one at the global level. Such global exponential growth in demand for batteries will lead to an equivalent increase in demand for raw materials, hence the need to minimise their environmental impact.
Compliments of the European Commissoin.
The post Green Deal: Sustainable batteries for a circular and climate neutral economy first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The European Commission presented today its ‘Sustainable and Smart Mobility Strategy‘ together with an Action Plan of 82 initiatives that will guide our work for the next four years. This strategy lays the foundation for how the EU transport system can achieve its green and digital transformation and become more resilient to future crises. As outlined in the European Green Deal, the result will be a 90% cut in emissions by 2050, delivered by a smart, competitive, safe, accessible and affordable transport system.
Frans Timmermans, Executive Vice-President for the European Green Deal, said: “To reach our climate targets, emissions from the transport sector must get on a clear downward trend. Today’s strategy will shift the way people and goods move across Europe and make it easy to combine different modes of transport in a single journey. We’ve set ambitious targets for the entire transport system to ensure a sustainable, smart, and resilient return from the COVID-19 crisis.”
Commissioner for Transport Adina Vălean said: “As the backbone that connects European citizens and business, transport matters to us all. Digital technologies have the potential to revolutionise the way we move, making our mobility smarter, more efficient, and also greener. We need to provide businesses a stable framework for the green investments they will need to make over the coming decades. Through the implementation of this strategy, we will create a more efficient and resilient transport system, which is on a firm pathway to reduce emissions in line with our European Green Deal goals.”
Milestones for a smart and sustainable future
All transport modes need to become more sustainable, with green alternatives widely available and the right incentives put in place to drive the transition. Concrete milestones will keep the European transport system’s journey towards a smart and sustainable future on track:
By 2030:

at least 30 million zero-emission cars will be in operation on European roads
100 European cities will be climate neutral.
high-speed rail traffic will double across Europe
scheduled collective travel for journeys under 500 km should be carbon neutral
automated mobility will be deployed at large scale
zero-emission marine vessels will be market-ready

By 2035:

zero-emission large aircraft will be market-ready

By 2050:

nearly all cars, vans, buses as well as new heavy-duty vehicles will be zero-emission.
rail freight traffic will double.
a fully operational, multimodal Trans-European Transport Network (TEN-T) for sustainable and smart transport with high speed connectivity.

10 key areas for action to make the vision a reality
To make our goals a reality, the strategy identifies a total of 82 initiatives in 10 key areas for action (“flagships”), each with concrete measures.
Sustainable
For transport to become sustainable, in practice this means:

Boosting the uptake of zero-emission vehicles, vessels and aeroplanes, renewable & low-carbon fuels and related infrastructure – for instance by installing 3 million public charging points by 2030.
Creating zero-emission airports and ports – for instance through new initiatives to promote sustainable aviation and maritime fuels.
Making interurban and urban mobility healthy and sustainable – for instance by doubling high-speed rail traffic and developing extra cycling infrastructure over the next 10 years.

Greening freight transport – for instance by doubling rail freight traffic by 2050.

Pricing carbon and providing better incentives for users – for instance by pursuing a comprehensive set of measures to deliver fair and efficient pricing across all transport.

Smart
Innovation and digitalisation will shape how passengers and freight move around in the future if the right conditions are put in place. The strategy foresees:

Making connected and automated multimodal mobility a reality – for instance by making it possible for passengers to buy tickets for multimodal journeys and freight to seamlessly switch between transport modes.
Boosting innovation and the use of data and artificial intelligence (AI) for smarter mobility – for instance by fully supporting the deployment of drones and unmanned aircraft and further actions to build a European Common Mobility Data Space.

Resilient
Transport has been one of the sectors hit hardest by the COVID-19 pandemic, and many businesses in the sector are seeing immense operational and financial difficulties. The Commission therefore commits to:

Reinforce the Single Market – for instance through reinforcing efforts and investments to complete the Trans-European Transport Network (TEN-T) by 2030 and support the sector to build back better through increased investments, both public and private, in the modernisation of fleets in all modes.
Make mobility fair and just for all – for instance by making the new mobility affordable and accessible in all regions and for all passengers including those with reduced mobility and making the sector more attractive for workers.
Step up transport safety and security across all modes – including by bringing the death toll close to zero by 2050.

Background
With transport contributing around 5% to EU GDP and employing more than 10 million people in Europe, the transport system is critical to European businesses and global supply chains. At the same time, transport is not without costs to our society: greenhouse gas and pollutant emissions, noise, road crashes and congestion. Today, transport emissions represent around one quarter of the EU’s total GHG emissions.
This push to transform transport comes at a time when the entire sector is still reeling from the impacts of the coronavirus. With increased public and private investment in the modernisation and greening of our fleets and infrastructure, and by reinforcing the single market, we now have a historic opportunity to make European transport not only more sustainable but more competitive globally and more resistant to any future shocks.
However, this evolution should leave nobody behind: it is crucial that mobility is available and affordable for all, that rural and remote regions remain connected, and that the sector offers good social conditions and provides attractive jobs.
Compliments of the European Commission.
The post A fundamental transport transformation: EU Commission presents its plan for green, smart and affordable mobility first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The co-chairs of the EU-UK Joint Committee – European Commission Vice-President Maroš Šefčovič and the UK Chancellor of the Duchy of Lancaster, the Rt Hon Michael Gove – yesterday held a political meeting to address the outstanding issues related to the implementation of the Withdrawal Agreement. Ensuring that the Withdrawal Agreement, in particular the Protocol on Ireland and Northern Ireland, is fully operational at the end of the transition period, i.e. as of 1 January 2021, is essential. The Protocol protects the Good Friday (Belfast) Agreement in all its dimensions, maintaining peace, stability and prosperity on the island of Ireland.
Following intensive and constructive work over the past weeks by the EU and the UK, the two co-chairs can now announce their agreement in principle on all issues, in particular with regard to the Protocol on Ireland and Northern Ireland.
An agreement in principle has been found in the following areas, amongst others: Border Control Posts/Entry Points specifically for checks on animals, plants and derived products, export declarations, the supply of medicines, the supply of chilled meats, and other food products to supermarkets, and a clarification on the application of State aid under the terms of the Protocol.
The parties have also reached an agreement in principle with respect to the decisions the Joint Committee has to take before 1 January 2021. In particular, this concerns the practical arrangements regarding the EU’s presence in Northern Ireland when UK authorities implement checks and controls under the Protocol, determining criteria for goods to be considered “not at risk” of entering the EU when moving from Great Britain to Northern Ireland, the exemption of agricultural and fish subsidies from State aid rules, the finalisation of the list of chairpersons of the arbitration panel for the dispute settlement mechanism so that the arbitration panel can start operating as of next year, as well as the correction of errors and omissions in Annex 2 of the Protocol.
In view of these mutually agreed solutions, the UK will withdraw clauses 44, 45 and 47 of the UK Internal Market Bill, and not introduce any similar provisions in the Taxation Bill.
Next steps
This agreement in principle and the resulting draft texts will now be subject to respective internal procedures in the EU and in the UK. Once this is done, a fifth regular meeting of the EU-UK Joint Committee will be convened to formally adopt them. This will take place in the coming days and before the end of the year.

In this context:
Be sure to attend the EACC’s upcoming event with the EU’s Brexit Negotiator Stefaan De Rynck, details and RSVP here. Not to be missed!
The post Joint statement by the co-chairs of the EU-UK Joint Committee re the Brexit Negotiations first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.