Once I was elected President of the European Council, I decided to visit each member state every year, to meet bilaterally with each European leader. These exchanges are first and foremost an opportunity to listen: to remain closely attuned to the concerns, priorities and expectations of the members of the European Council, and of the citizens they represent. They also allow me to share my perspective on the challenges and opportunities ahead for our union. These visits take place at the beginning of the political season, provide a unique 360-degree view of the state of our union and help to ensure that the work of the European Council remains firmly anchored in the realities, priorities and aspirations across Europe. 
One of the defining features of European integration is that its most tangible benefits often go unnoticed precisely because they have become part of our everyday lives. We cross borders with ease. We share a single currency from Lisbon to Helsinki and from Dublin to Athens. We benefit from common standards that protect our environment, our health and our quality of life. We support one another in responding to natural disasters – as we have done during this summer’s devastating forest fires –, public health emergencies and other common challenges. And when we travel across Europe, we stay connected with family and friends without giving a second thought to mobile roaming charges. What has become ordinary in our daily lives is, in fact, the result of decades of a shared European endeavour.
This provides a strong foundation on which to continue to build Europe. In today’s geopolitical reality, a stronger, more resilient and more autonomous Europe is more important than ever.
That is why we are building the Europe of defence: to strengthen our ability to deter threats, protect our citizens and, ultimately, restore peace on our continent. A peace that has been shattered by Russia’s ongoing aggression against Ukraine. The EU has set itself the objective of decisively ramping up Europe’s defence readiness by 2030 by strengthening the European defence industry, reducing strategic dependencies and jointly developing priority military capabilities. What is crucial is that Europe’s necessary rearmament is pursued collaboratively, avoiding duplication and waste and, above all, ensuring that this historic effort strengthens the collective security and defence of Europe as a whole.
Building Europe’s strategic autonomy also requires a more competitive economy. That is why the European Union is making it easier to do business by cutting red tape, mobilising private investment to help businesses scale up and innovate, completing the single market, strengthening supply chains and diversifying trade relations, while ensuring access to critical raw materials and to affordable, clean and home-grown energy sources. In all these areas, the ‘One Europe, One Market’ agenda agreed by the European Council sets out concrete objectives to be delivered from now until the end of 2027. Beyond the geopolitical imperative, this is ultimately about making life more affordable for citizens, creating the conditions for more high-quality jobs and improving the resilience of Europe’s social market economy.
Defence and competitiveness, together with EU enlargement and our ongoing support for Ukraine, will be high on the agenda as I meet the European leaders during this year’s tour of capitals.
But among the key decisions before us this year, one stands above all others: reaching, by the end of the year, an agreement on the EU’s next multiannual financial framework – our long-term budget for 2028-2034.
Why must that agreement be reached before the end of 2026? Because we will then need about a year to put in place the necessary legislative and administrative framework – in Brussels and in the member states – to ensure the uninterrupted implementation of the next EU budget. This is simply sound planning. Otherwise, we risk disrupting funding for farmers, businesses, students, researchers and innovators.
For decades, the EU budget has supported sustainable and inclusive growth across our continent through investments in agriculture, our regions, research, and the green and digital transitions. It will continue to do so. At the same time, the budget must also reflect Europe’s evolving priorities, including defence, security and competitiveness.
Like national budgets, the EU budget must deliver on its priorities within the limits of finite resources. Most of it is financed through member states’ national contributions. We need to keep those contributions within reasonable limits. That is why a balanced and ambitious package of new common resources will be an essential part of an overall agreement.
I have been encouraged by the constructive spirit of discussions among leaders on the multiannual budget so far. I am confident that, in the end, we will find the right balance for our union, our citizens and our future. Because it is our shared responsibility to do so.
 
 
Compliments of the European Council The post European Council | Listening to Europe, Building its Future – Op-Ed Article by President Costa first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

GDP (Gross Domestic Product) growth in the OECD area increased slightly to 0.5% in Q2 2026, up from 0.4% in the previous quarter, according to provisional estimates (Figure 1). This reflected a mixed picture across the 30 OECD countries for which data were available. In Q2 2026, 27 countries recorded growth, but at varying rates, while 3 saw no change in GDP.
GDP growth in the G7 slowed to 0.3% in Q2 2026, down from 0.4% in Q1, reflecting slower growth in five G7 countries: Germany, from 0.4% to 0.2%; Italy, from 0.3% to 0.2%; Japan, from 0.5% to 0.3%; the United Kingdom, from 0.6% to 0.4%; and the United States, from 0.5% to 0.4%. In Japan, the slowdown mainly reflected stagnant private consumption, destocking and a decline in investment. In the United Kingdom, weaker private consumption and a decline in government consumption weighed on economic activity. In the United States, slower growth mainly reflected weaker export growth, destocking and a decrease in government consumption. By contrast, growth in Canada accelerated from zero in Q1 to 0.8% in Q2. In France, GDP returned to growth (0.2%) in Q2, following a contraction of 0.1% in Q1.
Among other OECD countries for which data were available, Ireland recorded the highest quarter-on-quarter GDP growth in Q2, at 3.9%, followed by Israel, at 3.6%. At the other end of the spectrum, GDP was unchanged in Austria, Belgium and Chile.
Year-on-year GDP growth in the OECD area increased to 2.3% in Q2 2026, up from 1.7% in Q1 (Table 2). Among G7 economies, the United States recorded the highest annual GDP growth, at 2.1%, while Japan recorded the lowest, at 0.5%.
Click here to access the interactive chart.
 
 
Compliments of the Organisation for Economic Co-operation and DevelopmentThe post OECD | GDP Growth in OECD Area Picks up Slightly in the Second Quarter of 2026 first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

€3.9 bn surplus for EU

Euro area
The first estimates of euro area balance showed a €8.6 bn surplus in trade in goods with the rest of the world in June 2026, compared with + €4.8 bn in June 2025.
The euro area exports of goods to the rest of the world in June 2026 were €272.5 billion, an increase of 14.4% compared with June 2025 (€238.2 bn).
Imports from the rest of the world stood at €264.0 bn, a rise of 13.1% compared with June 2025 (€233.4 bn).

In June 2026, the euro area balance registered a surplus of €8.6 bn, following a deficit of €9.0 bn in May 2026. Compared with June 2025, when the balance stood at a surplus of €4.8 bn, the latest figure represented an improvement of €3.8 bn. In the presence of a larger energy deficit, this increase was primarily driven by a higher surplus in chemicals and related products, and by surpluses in other manufactured goods as well as in food and drink. The surplus of machinery and vehicles also slightly improved.

€3.9 bn surplus for EU

In January to June 2026, the euro area recorded a surplus of €9.8 bn, compared with €82.2 bn in January-June 2025.
The euro area exports of goods to the rest of the world fell to €1 487.2 bn (a decrease of 0.2% compared with January-June 2025), and imports rose to €1 477.4 bn (an increase of 4.9% compared with January-June 2025).
Intra-euro area trade rose to €1 408.2 bn in January-June 2026, up by 4.7% compared with January-June 2025.
European Union
The EU balance showed a €3.9 bn surplus in trade in goods with the rest of the world in June 2026, compared with +€5.2 bn in June 2025.
The extra-EU exports of goods in June 2026 were €241.5 billion, up by 12.5% compared with June 2025 (€214.7 bn).
Imports from the rest of the world stood at €237.7 bn, up by 13.5% compared with June 2025 (€209.5 bn).

In June 2026, the EU balance registered a surplus of €3.9 bn, following a deficit of €13.9 bn in May 2026. Compared with June 2025, when the balance stood at a surplus of €5.2 bn, the latest figure represented a deterioration of €1.3 bn. This deterioration was primarily driven by a larger energy deficit, partly offset by a wider surplus in chemicals and related products.

In January to June 2026, the EU recorded a deficit of €14.9 bn, compared with €74.1 bn in January-June 2025.
The extra-EU exports of goods fell to €1 317.0 bn (a decrease of 2.1% compared with January-June 2025), and imports rose to €1 331.9 bn (an increase of 4.7% compared with January-June 2025).
Intra-EU trade rose to €2 200.6 bn in January-June 2026, +5.7% compared with January-June 2025.
Annex – Seasonally adjusted data
In June 2026 compared with May 2026, euro area seasonally adjusted exports increased by 0.9%, while imports decreased by 2.1%. The seasonally adjusted balance was €1.8 bn, an increase compared with May (€-6.1 bn).
In June 2026 compared with May 2026, EU seasonally adjusted exports increased by 0.4%, while imports decreased by 2.1%. The seasonally adjusted balance was €-4.9 bn, a narrowing compared with May (€-10.8 bn).
In April-June 2026, euro area exports rose by 5.6%, while imports rose by 8.6%. Intra-EA trade rose by 3.9%.During the same period, EU exports increased by 5.4%, while imports rose by 9.9%. Intra-EU trade increased by 4.0%
Click here to access the interactive charts and tables.

Compliments of EurostatThe post Eurostat | Euro Area International Trade in Goods Surplus €8.6 bn first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Blog | The rise of AI has driven a blistering rally in the tech sector, bringing stock market valuations to levels last seen during the dot-com bubble. Although AI is reshaping the economy, do today’s high valuations bear the risk of an abrupt and painful setback in the euro area?
Valuations on the US stock market, as measured by the CAPE ratio, are currently close to their historical peak.[1] Euro area equity valuations have also risen, albeit to a lesser extent (Chart 1). Markets on both sides of the Atlantic reflect investors’ enthusiasm about artificial intelligence (AI) shaping the economy and driving profits. The extremely optimistic valuations raise questions: do today’s stock market prices reflect a rational bet on the transformative technology? Or are we seeing a remake of the dot-com bubble? We argue that economic research on past technological revolutions points to a worrisome conclusion: a correction of current stock market valuations is likely.
A sharp stock market correction would have severe consequences for the euro area, through two channels. One is euro area investors’ direct exposure to the Magnificent Seven stocks (hereafter Mag7) and the other is the degree of overexuberance in euro area stock markets themselves.[2] This post explains why a correction should be expected even if current valuations are rational, why that matters not only to the shareholders who would take the direct hit, and what it implies for the euro area specifically.
Chart 1
US and euro area stock market valuations

a) S&P 500 Index (cyclically adjusted price-to-earnings ratio)

b) Euro area Market Equity Index (cyclically adjusted price-to-earnings ratio)

(Index)

(Index)

Source: Datastream
Notes: Price-earnings ratio (monthly) from 1980 to 2026. Numerator: real (inflation-corrected) S&P Composite Stock Price Index (panel a) and Euro Stoxx 50 Price Index (panel b). Denominator: moving average over preceding ten years of real S&P Composite (panel a) and Market Equity (panel b) earnings.

Why do technological revolutions so often end in a boom and bust?
The current excitement surrounding AI has many historical precedents. To name just a few: the railway boom of the 19th century, the expansion of electricity and radio in the 1920s and the surge of the internet, or the “dot-com era”, in the 1990s. In each case, a genuinely transformative technology attracted investment, and the stock market valuations of firms that adopted it rose strongly before falling sharply. Economic research offers two complementary explanations.
First, the rational view argues that high valuations can be justified by extreme uncertainty about a new technology’s productivity.[3] Why has Nvidia’s share price risen 20-fold since 2022? Because investors rationally perceived that the company would become the next Google – with a highly uncertain and potentially large upside. In the worst case in such a scenario, investors lose their investment. But in the best case, the gains are large and genuinely hard to bound. This “option value” increases the stock valuations of early adopters, causing their price-to-earnings ratios to rise sharply.
Even if the technology succeeds, stock prices may eventually fall. Why? The nature of uncertainty shifts from a “single sector” to the “entire” economy. Initially, the new technology is like a small-scale experiment. If it fails, it’s unfortunate for that company, but the rest of the economy is unaffected. The risk can be diversified away. As adoption spreads, the same uncertainty becomes economy wide. If something then goes wrong with that technology, the whole economy suffers. This risk cannot be diversified, so investors demand a higher risk premium. However, this does not necessarily mean that profits will fall. Adoption itself is good news for cash flows, but the rising risk premium has the opposite effect and tends to prevail historically (Chart 2, blue line), unless profit growth is strong enough to compensate for that (Chart 2, yellow line). The exact timing is unknowable in advance. These boom-bust patterns are only identifiable with hindsight.
The second explanation for technology-driven boom and bust is the behavioural view. It holds that overconfident, overoptimistic investors bid up prices beyond fundamentals (see Chart 2, red line).[4] When overconfidence fades, prices can fall even more sharply than in the rational scenario.
Both views imply a boom followed by a correction, or a pullback from wherever valuations have risen, at some point in the future. This does not mean that today’s prices represent a ceiling. If AI proves to be transformative enough, valuations could still be much higher in the future, even after a correction. As mentioned previously, it is impossible to know in advance where we stand on this path. Furthermore, the case for expecting a correction is not dependent on whether today’s prices are rational or irrational. We should be aware of that and prepare. The rest of this blog post considers two ways in which such a correction might affect the euro area – wealth effects for euro area investors in US stocks and contagion to euro area stock markets.

Chart 2
Stylised boom-bust scenarios

(Index)

How exposed is the euro area to a fall in Mag7 prices?
The dominance of the Mag7 on widely held global indices (e.g. MSCI World) carries significant risks for euro area investors. Panel a) of Chart 3 shows that most euro area exposures to the Mag7 are via investment funds – mutual funds and exchange traded funds (ETFs) – rather than direct holdings. Using data on the underlying mutual fund investors, we can identify which euro area investors carry the greatest exposure to US technology equities (Chart 3, panel b). Euro area households, which are increasingly channelling funds into low-cost ETFs, have around €440 billion of exposures to US technology equities without necessarily being aware of the associated concentration risk. Insurance companies and pension funds also hold significant exposures to the Mag7.
This fund-based structure is itself a transmission channel. A sharp correction can force funds to sell assets to meet redemptions – first, liquid holdings and then, if the correction persists, distressed assets – pushing valuations down further and triggering more redemptions. This is why a Mag7 correction is a question of financial stability for the euro area, rather than just a private one. The more severe scenario is not the equity correction on its own but a correction that coincides with broader market instability that policymakers cannot easily calm: unlike in the dot-com episode, today’s starting point leaves markedly less room to cut interest rates or use fiscal policy to cushion the fallout.
Chart 3
Euro area investors’ Mag7 exposures

a) Direct exposures

b) Indirect exposures

(EUR billions)

(EUR billions)

Sources: ECB (SHSS and SHS-Look-through) and authors’ calculations.
Note: Holding amounts of the five largest investors in the euro area (market values, Q3 2025).

Is there overexuberance in euro area stock markets?
Beyond this exposure to the Mag7, is there also a risk of a home-grown correction? While euro area equity prices have risen substantially in recent years (Chart 1, panel b), valuation metrics such as price-to-earnings ratios remain considerably lower than in the United States (Chart 1, panel a). The euro area macroeconomic environment in the information and communication technology sector currently appears resilient compared with the times of the dot-com bubble. Productivity and markups in the sector are rising, the business climate in euro area digital services does not seem exuberant and euro area firms’ AI adoption is rising notably, only a few years after the launch of ChatGPT in 2022. The global AI boom has also sparked an ongoing and profound digital transformation across the euro area. The overall increase in digital investment in the euro area over the past decade was more than three times the cumulative growth in GDP over that period.
In sum, the euro area AI transformation is proceeding at a steady if unspectacular pace. On the one hand, euro area stock markets are dominated by “old economy” stocks, which show little of the AI excitement that we see in the US Mag7, reducing the risk of a future correction. On the other hand, euro area and US stock markets have historically been very highly correlated, meaning that a US correction will not leave the euro area unaffected.
Conclusion
Historical experience suggests that technological revolutions carry risks of a boom-bust cycle in asset prices, and this risk does not depend on today’s valuations being rational or irrational. The euro area’s smaller, less richly valued tech sector limits the risk of a home-grown crash. But this offers little reassurance: households, insurers and pension funds have significant exposures through global index trackers, and US equity stress has historically also had an impact on euro area stock markets. The effects of a US correction could extend beyond financial markets to euro area sentiment, financing conditions and hiring. A US AI fallout would not remain a US problem.
The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.

The CAPE (cyclically adjusted price-to-earnings) ratio was developed by Robert Shiller. The S&P 500 CAPE is a measure of stock market valuations that compares share prices of the leading 500 US-listed companies with average inflation adjusted earnings over the previous ten years.

The Magnificent Seven stocks are a group of high-performing and influential companies in the US stock market: Alphabet, Amazon, Apple, Tesla, Meta Platforms, Microsoft and NVIDIA.

See Pástor, Ľ. and Veronesi, P. (2009), “Technological revolutions and stock prices”, American Economic Review, 99(4), pp. 1451-1483.

See, for example, Scheinkman, J. A. (2014), Speculation, trading, and bubbles, Columbia University Press, and Hong, H. and Stein, J. C. (2007), Disagreement and the stock market, Journal of Economic Perspectives, 21(2), pp.109-128.

 
 
Compliments of the European Central Bank The post ECB | The AI Boom: Rational Enthusiasm or the Next Dot-Com Bubble? first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.