Thank you, Madam President, dear Roberta,
Deputy-Minister Raouna, dear Marilena,
Honourable Members,
In the last plenary, we focused on the geopolitical shockwaves that Europe is facing and on our united response. But our power on the global stage depends greatly on our strength on the economic front. Competitiveness is not just the foundation of our prosperity but of our security, and ultimately of our democracies too. This is why competitiveness has been at the top of our agenda from day one. At the very start of the mandate, we turned the Draghi and Letta reports into a plan for change, the Competitiveness Compass. And since then, it has been a year of action. With the Clean Industrial Deal. AI Factories and Gigafactories. Five new trade deals. Ten simplification omnibuses. The Grids Package. Tailor-made action plans for the automotive, steel and chemicals industries. The Savings and Investment Union. The greatest surge in defence investment in our history – with SAFE and the Roadmap 2030. And so much more. This is the urgency mindset we need, and we will relentlessly stay the course until we get it all done.
Today, I would like to focus on progress and next steps in three key areas. First, trade. Second, the Single Market. And third, simplification.
To the first topic: trade. A competitive Europe can only be an independent Europe. Today, dependencies are at risk to become weapons of coercion. Therefore, we must eliminate the bottlenecks in our most strategic value chains. And we can do this by stepping up production in Europe – and by expanding our network of reliable partners. This is why trade is so important. We must be laser-focused on opening growth opportunities and new markets to our companies. We need more rules-based, reliable trade with like-minded partners. Therefore, in 2025 we concluded trade agreements with Mexico, Indonesia and Switzerland. Last month, I signed our trade agreement with Mercosur. And two weeks ago, I was in India to sign the largest free trade agreement ever. The mother of all deals. It has a market of 2 billion people. 25% of global GDP. It grants Europe unique access to the fastest growing large economy – a clear ‘first-mover’ advantage for our businesses. Not only is this a breath of fresh air for European exporters, this will also create alternative supply chains in strategic sectors – from chips to clean tech. And more trade deals are on their way with Australia, Thailand, the Philippines, the UAE, etc. This is the European way to independence. And Europe’s independence moment is now.
Let me continue with the Single Market. The IMF says that interstate barriers in our Union are three times higher than interstate barriers in the US. So how can we compete on an equal footing? We have the second-largest economy in the world, but we are driving it with the handbrake on. The good news is: This can be fixed. But we need single-minded focus on the Single Market. And we need to tear down barriers one by one. That is why, next month, we will propose the 28th regime. We call it EU Inc, a single and simple set of rules that will apply seamlessly all over our Union so that business can operate across Member States much more easily. Our entrepreneurs will be able to register a company in any Member State within 48 hours – fully online. EU Inc will ease access to finance in the start-up and scale-up phases. EU Inc enables smooth cross-border operations, and it allow rapid wind-down – if a company fails. This is the speed we need. And this is ‘Europe made easy’.
The same is true for capital markets. Let me take the US example again. One financial system, one capital market, and a handful of other financial centres. Here in Europe, we do not only have 27 different financial systems, each with its own supervisor. But also, more than 300 trading venues across our Union. That is fragmentation on steroids. We need one large, deep and liquid capital market. And this is the goal of our Savings and Investment Union. We have made proposals on market integration and supervision. And now we need you to get them over the finish line. Our companies need capital right now. So let us get this done this year. And thank you for your support, because my plan A is to move by 27. But if this is not possible, the Treaty allows for enhanced cooperation. We have to make progress, one way or the other, to tear down the barriers that prevent us from being a true global giant.
Honourable Members,
Completing our Single Market also means completing our Energy Union. And this is vital to bring prices down even further. Prices remain too high and too volatile. And we know why. It is because of lack of interconnection and grids and our reliance on fossil fuels. The data is as clear as daylight. In 2025, electricity from gas cost on average more than EUR 100 per megawatt-hour. The price of electricity from solar? EUR 34. Electricity from nuclear? EUR 50 to EUR 60 per megawatt-hour. The figures are telling. Low-carbon energies are not only homegrown and clean. They give us more independence, more security and they bring costs down. This is why today, we are investing heavily in low-carbon energy. Last year, for the first time ever, we produced more electricity from solar and wind than from all fossil fuels combined. And nuclear keeps rising year on year. But we need more than that. To lower and stabilise costs, we need the infrastructure for a true Energy Union. This is why we introduced the European Grids package. It will speed up permitting and fast-track the construction of Energy Highways across our Union. Just last month, we reached an agreement on the first such project. The Bornholm Energy Island. It will create a new bridge between Denmark and Germany, connecting both countries to 3 gigawatts of offshore wind energy. It will transform the Baltic wind from a national resource into shared European power. The goal is simple. Clean energy must flow freely all across our Union.
Finally, on European preference. I believe that in strategic sectors, European preference is a necessary instrument that will contribute to strengthen Europe’s own production base. It can help create lead markets in those sectors and support the scaling-up of European production capabilities. But I want to be clear – it is a fine line to walk. There is no ‘one-size-fits-all’. That is why every proposal must be underpinned by robust economic analysis and be in line with our international obligations.
Honourable Members,
In all of this in the Single Market, we must be driven by the greatest sense of urgency. We need a clear timetable and everyone’s commitment to get things done. This is why we need a Joint Single Market Roadmap to be completed by 2028. I will propose that, together with the Parliament and the Council, we endorse such a roadmap at the March European Council. It will include a commitment to swiftly adopt some key proposals, all by end of next year. Because time is of the essence.
Honourable Members,
My final point is simplification. We know why it is vital. European companies tell us they spend almost as much on bureaucracy as on research and development. This cannot be. We have made simplification a core focus. And in one year, we have delivered more than in the previous decade. We have already proposed to slash bureaucratic costs for companies by EUR 15 billion every year. But all the omnibuses must reach their destination. But we do not only need to look at the omnibuses at the European level. We must also look at the national level. There is too much gold-plating – the extra layers of national legislation that just make businesses’ life much more complicated and create new barriers in our Single Market. Let me give an example. A truck in Belgium can weigh up to 44 tonnes. But if you cross the border with France, it can only carry up to 40 tonnes. In June 2023, we proposed legislation to harmonise this. Almost two years later, it is still under discussion by the co-legislators. Another example. Shipping waste from one Member State to another should be efficient, easy and quick. But with gold-plating, there are different national practices in every Member State. Some Member States for instance only accept correspondence by fax. It is true. It can take several months for traders to get green light from the authorities depending on the different rules in different Member States. If we are serious about simplification, we must crack down on gold-plating and fragmentation. It is time for a deep regulatory housecleaning – at all levels.
So what matters now is speed of delivery. So we need everyone to play their part. This is the moment for unity and for urgency. This is how we make Europe move faster – and this is how we make Europe stronger.
Thank you, and long live Europe.
 
 
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The Council today formally approved new customs duty rules for items contained in small parcels entering the EU, largely via e-commerce. The new rules respond to the fact that such parcels currently enter the EU duty free, leading to unfair competition for EU sellers.
“As global e-commerce booms, EU customs rules must keep pace. Abolishing the out-of-date exemption for small parcels will help support EU business and shut down avenues for unscrupulous sellers. Now, we need to move forward decisively on the overall customs reform which is a key part of the puzzle in making the EU more competitive and more secure.”
– Makis Keravnos, Minister of Finance of the Republic of Cyprus
Today’s agreement abolishes the threshold-based customs duty relief for parcels valued at under €150 entering the EU. Customs tariffs will therefore start applying to all goods entering the EU once the EU customs data hub – under discussion as part of a broader fundamental reform of the customs framework – is operational. This is currently expected in 2028.
Until that time, EU member states have agreed to introduce an interim flat rate customs duty of €3 on items contained in small parcels valued at less than €150 sent directly to consumers in the EU. As of 1 July 2026, the duty will be levied on each different category of item, identified by their tariff sub-headings, contained in a parcel.

Example:
A parcel contains 1 blouse made of silk and 2 blouses made of wool.
Therefore, due to their different tariff sub-headings, the parcel contains two distinct items and €6 in customs duty should be paid.

The new system will have a positive impact both for the EU budget as well as for national public finances, as customs duties constitute a traditional own resource of the Union, and member states retain part of those amounts by way of collection costs. The measure is distinct from the proposed so-called ‘handling fee’ currently under discussion in the context of the customs reform package.
Next steps
The interim flat rate customs duty of €3 will be levied on each item category contained in a small parcel entering the EU from 1 July 2026 to 1 July 2028 and may be extended as appropriate. Once the new EU customs data hub is operational, this interim duty will be replaced by normal customs tariffs.
Background
According to the European Commission, the volume of small packages arriving into the EU has doubled every year since 2022. In 2024, 4.6 billion such packages entered the EU market. 91% of small shipments arrive from China.
More broadly, the EU is currently working to reform its customs system so that it can deal with the significant pressure arising from increased trade flows, fragmented national systems, the rapid rise of e-commerce and shifting geopolitical realities. Negotiations between the Council and the European Parliament on the reform – including on the establishment of the customs data hub, overseen by a new EU customs authority – are ongoing.
 
 
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Import tariffs imposed by other countries tend to lower euro area inflation and weaken growth. However, the sectors most exposed are also the most responsive to interest rate changes. This means that monetary policy can help offset disinflationary pressures and support activity.[1]
 

Tariffs are a tax on trade. The immediate impact falls on the country imposing them, as import prices rise and trade volumes fall. But trading partners can also be affected. On the one hand, higher import costs reduce demand for their products in the tariff-imposing country. Moreover, other countries hit by tariffs may divert some of their exports to other markets, increasing supply and lowering prices in those economies. Through these channels, import tariffs imposed by one country can reduce economic output and lower inflation abroad. On the other hand, when large and globally integrated economies impose tariffs, they raise costs along global value chains, by making inputs more expensive and increasing production prices. Such supply-side effects can lead to higher inflation in trading partners’ economies, even if these countries do not raise tariffs themselves.
Changes in trade dynamics also affect exchange rates. A common assumption is that since higher tariffs lead to lower imports, the demand for foreign currency falls in the country imposing the tariff, which should lead to an appreciation of its own currency relative to those of its trading partners. However, higher import prices and lower activity in the tariff-imposing country could also mean that the domestic central bank either raises or lowers interest rates, depending on how it weighs price stability versus economic growth in its decision-making. In turn, a change in the relative interest rate will affect the exchange rate, reinforcing spillovers to other economies.[2]
All of this means that the consequences of one country’s import tariffs for other countries’ economies are influenced by a wide range of partly opposing effects. In this blog, we analyse which of these effects dominates, on balance. We estimate how declining trade volumes with the US following increases in US tariffs affect the euro area. When trade falls by more than expected after a rise in tariffs – a situation we call a “tariff-related trade surprise” (TTS) – euro area inflation declines and economic activity weakens over the medium term. Our results therefore suggest that the effects of the drop in demand due to US tariffs on the euro area outweigh any inflation-boosting supply effects.[3]
Monetary policy can soften these effects. We find that the impact of US tariffs differs notably between sectors. Those sectors hit hardest by TTSs are also those that respond most strongly to interest rate changes. Consequently, monetary policy can help counter the adverse effects of higher trade barriers.
Identifying tariff-related trade surprises
To study the impact of tariffs, we identify TTSs by linking unusual trade patterns with historical data on US tariff changes in a novel two-step approach.
First, we estimate how much trade between countries would normally be expected. To do this, we use a standard “gravity” model of trade. This model covers monthly exports from 20 euro area countries to 192 trading partners over the pre-pandemic period (2002-19). We control for common factors that affect individual exporting and importing countries as well as those that affect each country-pair together, such as structural economic and financial conditions, local and global business cycles, or membership of bilateral or multinational agreements and institutions. After accounting for the main drivers of trade, we extract the part of euro area exports to the United States that the gravity model cannot explain. We call these unexplained variations in exports “trade surprises”, since they reflect unusually strong or weak trade compared with historical patterns.
Second, we isolate those trade surprises that are plausibly related to tariffs. To this end, we compare the sign of the trade surprise with preceding changes in US tariffs on euro area goods. When effective US tariffs on euro area goods rose over the previous year, and euro area exports to the United States were unexpectedly weak, we interpret this as a trade-tightening TTS. When tariffs fell and euro area exports were unexpectedly strong, we treat it as a trade-easing TTS.[4] We then estimate how the TTSs identified affect euro area prices and activity using local projections.[5]
Effects on prices and activity
Immediately after a TTS, euro area prices edge up slightly, consistent with higher production costs spreading through supply chains (Chart 1). Over the medium term, however, prices begin to fall. At its lowest point, about one and a half years after a TTS that cuts euro area exports to the United States by 1%, the consumer price level[6] is around 0.1% lower. Euro area activity follows a similar pattern, with industrial production declining over this period before stabilising. Taken together, the pattern of lower prices and weaker activity resembles an adverse demand shock.[7]

Chart 1
Impact of a euro area-specific US tariff-related trade surprise on the euro area economy

(percentage changes)

Notes: Impulse responses are derived by local projections estimated in long-differences (see for example Jorda and Taylor, 2024). Tariff-related trade surprises (TTSs) are identified using a two-step process. In step one, residuals from a three-way gravity model with importer-time, exporter-time and country-pair fixed effects are estimated to capture regular drivers of bilateral trade. Step two involves applying simple sign restrictions that directly associate negative (positive) residuals with tariff increases (decreases) observed over the preceding year, isolating the tariff-related component from other unexplained influences. We then feed the identified TTSs into local projections. TTSs are scaled to a 1% trough decline in bilateral exports of euro area countries to the United States in the first year after the shock. The local projections include the first six lags of several euro area macroeconomic and financial market control variables, including industrial production, bilateral euro area exports to/imports from the United States, the HICP, the unemployment rate, the EUR/USD exchange rate, the euro area Composite Indicator of Systemic Stress, the three-month overnight index swap rate, GDP-weighted ten-year sovereign bond yields, and the International Monetary Fund commodities price index. We also include forward controls entering the model at the same t+h-step horizon as the dependent variable to account for the COVID-19 period and the start of the Russian invasion of Ukraine.

Sectoral differences
We also find that the force with which TTSs hit different industries varies (Chart 2).[8] In “downstream” sectors, which predominantly produce final goods such as machinery, autos and pharmaceuticals, the peak impact of a tariff-tightening shock usually occurs one to two years after a TTS, as the shock takes time to transmit through production chains.[9] When we scale the surprise to a 1% fall in bilateral exports, output in these sectors declines by about 0.3% on average and producer prices fall by about 0.1% one year after the TTS. “Upstream” sectors producing predominantly intermediate inputs, like chemicals, can react on a different timeline. As these sectors operate primarily at the beginning of the value chain, they are more likely to be immediately affected by tariff changes.

Chart 2
Impact of a sector-specific US tariff-related trade surprise on euro area sectors

(percentage change)

Notes: Impulse responses are derived by local projections estimated in long-differences (see for example Jorda and Taylor, 2024). Tariff-related trade surprises (TTSs) are identified following the same two-step approach as described in the notes to Chart 1 and are scaled to a 1% trough decline in bilateral sector-specific exports of euro area countries to the United States in the first year after the shock. The local projections include the first six lags of several euro area macroeconomic and financial market control variables, including industrial production, bilateral euro area exports to/imports from the United States and China, the HICP, the unemployment rate, the EUR/USD exchange rate, the euro area Composite Indicator of Systemic Stress, the three-month overnight index swap rate, GDP-weighted ten-year sovereign bond yields, the IMF commodities price index, and the aggregate TTSs as identified for the aggregate results presented in Chart 1. The grey area covers the min-max range of impulse responses estimated for a reference set of other manufacturing sectors.

Can monetary policy soften the impact?
The sectors hit hardest by TTSs also respond most strongly to interest rate changes. Our results show that sectors with larger declines in prices and output in the 12 months after a TTS tend to be more sensitive to an easing of monetary policy over the same horizon (Chart 3).[10]

Chart 3
Impact of sector-specific US tariff and monetary policy shocks on euro area sectors after one year

(percentage change)

Sources and notes: The x-axis shows the impulse response to a monetary policy tightening shock (based on Altavilla et al. 2019) scaled to a 100-basis point peak response in the first year after the shock, evaluated 12 months after the shock. The y-axis shows the impulse response to an adverse sector-specific US TTS scaled to a 1% trough decline in bilateral sector-specific exports of euro area countries to the United States in the first year after the shock. The colours of the dots indicate below-average (blue) or above-average (orange) sectoral exports to the United States in shares of total export volumes reported by the manufacturing sectors that were evaluated. Impulse responses are obtained from the same local projections model as in Chart 2.

This means that, for instance, output in the machinery sector drops sharply following a TTS. But production in this sector also expands particularly strongly in response to an easing of domestic monetary policy. We find that this pattern holds for about 60% of the sectors we study – representing roughly 50% of total average euro area industrial output and of total goods exports to the United States. TTSs push prices and activity down one year after the incidence, but easier monetary policy supports them. This suggests that monetary policy remains a powerful tool to counter TTS-induced disinflation and to cushion the drag from higher trade barriers.[11]
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.

We would like to thank Maria Grazia Attinasi, Ambra Boilini, Claus Brand, Lorenz Emter, Fédéric Holm-Hadulla, Sujit Kapadia and David Lodge for their helpful contributions, comments and suggestions.
See ECB (2025),“What happens when US and euro area monetary policy decouple?”, The ECB Blog, 5 February. Additionally, many other factors can affect how the exchange rate adjusts in response to tariffs. These include relative trade relations and exposures, changes in capital flows, financial spillovers to other economies, supply-chain adjustments and trade rerouting, and not least rising uncertainty regarding future trade modalities.
In contrast, if supply effects dominated, this would normally result in weaker euro area economic activity and higher inflation as US tariffs are passed on to euro area consumers.
Using nominal per unit (i.e. unweighted) tariff rates does not significantly affect the results.
Local projections are estimated in long‑differences, following Jordà, Ò. and Taylor, A.M. (2025), “Local projections”, Journal of Economic Literature, Vol. 63(1). We scale the TTS model to reflect a 1% trough decline in euro area exports to the United States in the first year after the shock. The model includes lags of euro area and global variables, capturing typical reactions such as retaliation, trade diversion, supply chain effects, uncertainty, and demand shifts.
The consumer price level is measured using the Harmonised Index of Consumer Prices (HICP).
This finding is consistent with studies using alternatively identified tariff surprises and shocks, see for instance Barnichon, Régis and Aayush Singh (2025), “What Is a Tariff Shock? Insights from 150 years of Tariff Policy”, Working Papers, Federal Reserve Bank of San Francisco, 17 November.
The analysis is based on sectoral data as presented in De Sanctis, Gebauer, Holm-Hadulla and Sirani (2025), “Financial frictions across the production network and the transmission of monetary policy”.
Formally, “upstreamness” measures the distance of a sector’s output from final demand (Antràs, Chor, Fally, Hillberry (2012), “Measuring the Upstreamness of Production and Trade Flows”). It captures the expected number of production stages an output passes through before reaching final use. Upstream sectors predominantly supply intermediate inputs, while downstream sectors are closer to final consumption.
For this part of the analysis, we use the monetary policy shock database from Altavilla et al. (2019), “Measuring euro area monetary policy”, Journal of Monetary Economics, Vol. 108.
On the monetary policy implications of trade shocks, see Bergin, P.R. and Corsetti, G. (2023), “The macroeconomic stabilization of tariff shocks: What is the optimal monetary response?”, Journal of International Economics, Vol. 143.

 
Authors:
• Alessandro De Sanctis, Economist, EUROPEAN CENTRAL BANK 
• Stefan Gebauer, Senior Economist, EUROPEAN CENTRAL BANK
• Julian Schumacher, Team Lead – Economist, EUROPEAN CENTRAL BANK
• Flavia Ungarelli, BANCO DE ESPANA
 
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Bernd Lange, chair of Parliament’s International Trade Committee and standing rapporteur for the US, has issued the following statement regarding the EU-US trade deal.

Following a Wednesday afternoon meeting of the committee’s shadow rapporteurs (i.e. political group representatives responsible for work on the legislation linked to the implementation of the Turnberry deal), Bernd Lange (S&D, Germany) said: “A majority of shadow rapporteurs of the International Trade Committee have today decided to resume work on the two Turnberry legislative proposals. A vote could therefore potentially take place at the next committee meeting on Tuesday 24 February.
“Trade Committee members remain committed to advancing work on the two legislative proposals expeditiously, provided the US respects the territorial integrity and sovereignty of the Union and its member states, and honours the terms of the Turnberry Deal.
“In this spirit, we have also agreed to include among the grounds for suspension of the tariff preferences granted under both legislative proposals threats to the essential security interests of the Union or its member states, including their territorial integrity.”
Background
In July 2025, the EU and the US reached a political agreement on tariff and trade issues (Turnberry Deal). These were outlined in detail in an August 2025 joint statement announcing an EU-US Framework Agreement. The Commission then published two legislative proposals aimed at implementing certain tariff aspects of the EU-US Framework Agreement.
The International Trade Committee is responsible for steering the legislation through Parliament and for leading negotiations with EU governments on the final shape of the customs duties on goods imports from the US.

 
 
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The European Commission has sent a Statement of Objections to Meta, setting out its preliminary view that Meta breached EU antitrust rules by excluding third party Artificial Intelligence (‘AI’) assistants from accessing and interacting with users on WhatsApp. Meta’s conduct risks blocking competitors from entering or expanding in the rapidly growing market for AI assistants.
The Commission therefore intends to impose interim measures to prevent this policy change from causing serious and irreparable harm on the market, subject to Meta’s reply and rights of defence.
Meta’s flagship products are its social networks, such as Facebook and Instagram, and consumer communication applications, such as WhatsApp and Messenger. It also operates online advertising services and virtual and augmented reality products. Meta provides a general-purpose AI assistant, Meta AI.
On 15 October 2025, Meta announced an update of its WhatsApp Business Solution Terms, effectively banning third-party general-purpose AI assistants from the application. As a result, since 15 January 2026, the only AI assistant available on WhatsApp is Meta’s own tool, Meta AI, while competitors have been excluded.
The Commission has informed Meta that this policy change appears at first sight to be in breach of EU competition rules.

The Commission’s investigation
The Commission preliminarily concludes that:

Meta is likely to be dominant in the European Economic Area (‘EEA’) market for consumer communication applications, notably through WhatsApp.
Meta is likely to be abusing this dominant position by refusing access to WhatsApp to other businesses, including third-party AI assistants. At this stage, the Commission considers that WhatsApp is an important entry point to enable general-purpose AI assistants reach consumers.
There is an urgent need for protective measures due to the risk of serious and irreparable damage to competition. Meta’s conduct risks raising barriers to entry and expansion, and irreparably marginalising smaller competitors on the market for general-purpose AI assistants.

The sending of a Statement of Objections on interim measures does not prejudge the outcome of the investigation. Meta now has the possibility to reply to the Commission’s concerns.
The Statement of Objections covers the EEA except for Italy, where the Italian Competition Authority imposed interim measures on Meta in December 2025.
Background
On 4 December 2025, the Commission opened formal proceedings in the context of this ongoing investigation.
Article 102 Treaty on the Functioning of the European Union (‘TFEU’) and Article 54 of the EEA Agreement prohibit the abuse of a dominant position that may affect trade and prevent or restrict competition within the Single Market. The implementation of Article 102 TFEU is defined in Regulation 1/2003.
Pursuant to Article 8(1) Regulation 1/2003, interim measures may be imposed if, at first sight, there is an infringement of competition law rules, as well as an urgent need for protective measures due to the risk of serious and irreparable harm to competition.
A Statement of Objections is a formal step in the Commission’s investigations into the necessity of imposing interim measures. The Commission informs the parties concerned of its preliminary findings in writing. The parties can then examine the documents in the Commission’s investigation file, reply in writing and request an oral hearing to present their views on the case before representatives of the Commission and national competition authorities.
If the Commission concludes, after the parties have exercised their rights of defence, that the conditions for interim measures are met, it can adopt a decision imposing such measures. The adoption of an interim measures’ decision does not prejudge the final findings of the Commission on the substance of the case.
For more information
More information will be made available under the case number AT.41034 in the public case register on the Commission’s competition website.
 
 
 
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Speech by Piero Cipollone, Member of the Executive Board of the ECB, at the event “The digital euro in Cyprus”
Nicosia, 6 February 2026
It is a pleasure to be in Cyprus today.
I would like to thank Governor Patsalides and the organisers for inviting me.
Cyprus’s Presidency comes at a pivotal moment for Europe. In a global environment defined by rapid change, strategic uncertainty and geopolitical tensions, the Presidency’s priority, “Autonomy through security and competitiveness”, captures Europe’s ambition to strengthen its independence by building a strong, innovative and competitive economy.
This is not a call for protectionism. It is a call to invest in Europe’s collective capacity to innovate and to compete globally.
The ECB, along with the euro area national central banks, stands ready to play its part in turning the concept of autonomy through security and competitiveness into practical actions and solutions.
We will focus on an area that is intrinsically linked to our institutional mandate: issuing central bank money and promoting the smooth operation of payment systems.
There are two types of central bank money: retail money, which is used by people and businesses to purchase goods and services, and wholesale money, which is used by banks to settle claims between each other.
Digital payments are now the norm, and new technologies are disrupting financial services. While this brings exciting opportunities to boost growth, it also comes with challenges. We need to make sure central bank money remains fit for a digital world and thereby safeguard Europe’s monetary sovereignty in a digital world.
On the wholesale side, the lack of a widely available euro-denominated asset to settle transactions using distributed ledger technologies (DLT) creates a void that, if unaddressed, could be filled by non-European solutions. This would create new dependencies and push the euro into a secondary role in global digital finance.[1]
To address this, the Eurosystem has launched a strategy to settle transactions recorded on DLT in central bank money. This will provide a risk-free asset that supports the growth of an integrated and dynamic European digital finance ecosystem. Our strategy consists of two complementary initiatives: Pontes and Appia.[2] We are making swift progress here and aim to launch Pontes, our initial solution for cash settlement, during the third quarter of this year. Appia will develop a vision for Europe’s future digital finance ecosystem.[3]
Similarly, in the area of cross-border payments, the rapid growth of US dollar-denominated stablecoins risks displacing the role of euro commercial bank money. We are making rapid advances on this too, as we unlock faster, cheaper and more transparent cross‑border payments by interlinking Europe’s fast payment system with those of other countries.[4]
But there is one domain where Europe’s sovereignty is already under pressure: retail payments.
The role of cash – our sovereign means of payment – is declining as digitalisation accelerates. And almost two-thirds of card-based transactions in the euro area are carried out by non-European companies. In 13 euro area countries, including Cyprus, in‑store payments depend entirely on international card schemes.
This is the challenge I would like to focus on today as I make the most of having so many different stakeholders in one room, including Members of the European Parliament, national politicians, consumers, merchants and banks.
The ECB is committed to acting in line with its Treaty mandate in this area: to provide sovereign money to Europeans. However, the ECB cannot implement a solution without a robust legal framework to support it. This is why the ongoing work of European co-legislators is essential.
I will first explain why the digital euro is so important, particularly in the current context. I will then describe the many practical benefits it would bring to consumers, merchants and banks across the euro area. Finally, I will outline why we are optimistic that a public-private approach can help build a more resilient European payments system in the future.
The case for digital cash
Let me start with a simple observation: the way we pay has changed more in the past few years than in the previous 50.
Today, when we pay a bill, book a hotel or shop online, we rarely use cash.
For example, the ECB’s study on the payment attitudes of consumers in the euro area shows that here in Cyprus, the share of e-commerce payments increased from around 1% in 2019 to roughly 26% in 2024 – a striking example of how quickly digital payments have become part of everyday life.[5]
Across the euro area, digital payments are increasingly the norm and cash can no longer be used to pay in all situations. Online shopping already accounts for more than one-third of retail transactions, yet cash cannot be used online.
This creates a structural gap in the monetary system: our economy is becoming increasingly digital, but central bank money remains confined to physical cash in retail transactions.
Make no mistake: we will continue to issue banknotes and we are working hard to ensure physical cash remains widely accepted and available.[6] In fact, we are preparing to produce and issue a third series of euro banknotes featuring a new design that Europeans can strongly relate to.
But the ECB must ensure that, in this digital age, public money satisfies the evolving needs of Europeans. Therefore, we are getting ready to complement physical cash with its digital equivalent: a digital euro.
This is not a side project – it forms part of the Eurosystem’s core tasks as defined in the Treaty: providing means of payment with legal tender status and issuing money as a public good.
By preparing for a digital euro, we are simply adapting to evolving technologies and preferences, and preserving Europeans’ freedom to pay with their money – the sovereign money issued by their central bank.
As a digital form of cash, the digital euro would ensure that central bank money remains available and usable in an increasingly digital economy, upholding its role as a trusted anchor of our monetary system.
Benefits for Europe’s autonomy
Given the current environment of growing geopolitical tensions, the digital euro is more than just a “nice to have”. As the use of cash declines, we increasingly rely on complex digital technologies that operate largely in the background.
As European citizens, we want to avoid a situation where Europe is overly dependent on payment systems that are not in our hands.
Payment systems have become part of Europe’s critical infrastructure, alongside energy, transport and telecommunications. The resilience and security of this infrastructure directly affects our economic stability and strategic autonomy. Imagine that digital payments weren’t possible, even just for a day. What effect would this have on society?
Cyprus, like the rest of Europe, is highly dependent on international providers across virtually all use cases, from e-commerce and person-to-person payments to in-store transactions.
Card payments are a case in point. During the first half of 2025 card payments accounted for 74.5% of all cashless transactions in Cyprus – the second highest in the euro area.[7] But there are no European solutions available for card payments in Cyprus.
This level of dependence means that critical parts of Europe’s payment infrastructure are owned and operated outside the euro area. At a time when resilience and strategic autonomy matter more than ever, this creates vulnerabilities that we cannot afford to ignore.
A digital euro, built on European infrastructure, would allow Europe to regain ownership of the rails on which its payment system runs and thereby strengthen our autonomy.
Benefits for consumers
Our motivation is clear, but what concrete benefits would the digital euro bring for consumers?
The digital euro would bring the simplicity and the convenience of being able to pay with a single solution – for example your smart phone. It would also ensure that we always have the freedom to choose to pay with a public means of payment – not only in physical form, but also digitally.
In fact, in a Eurosystem survey, 66% of Europeans said they would be interested in trying a digital euro after the concept was explained to them.[8]
The digital euro would be a payment solution for every occasion. It could be used anytime and anywhere in the euro area – just like cash, but in digital form. It would be universally accepted and free of charge for basic use.
It would work both online and offline. Offline functionality is particularly important, as it ensures resilience in situations where connectivity is limited and allows people to pay digitally with a level of privacy comparable to cash. For offline digital euro transactions, personal transaction details would be known only to the payer and the payee. And for online payments, the ECB and the national central banks would not be able to identify the payer or the payee: we would only see encrypted codes and the transaction amount. The link between these codes and the identities of the payer and the payee would only be known to their banks.[9]
To fulfil its goal of serving as a digital complement to cash, the digital euro would be accessible to everyone, including people who are financially and digitally vulnerable and people with disabilities. We have just signed a collaboration agreement with the ONCE Foundation for Cooperation and Social Inclusion of People with Disabilities[10] to promote and ensure universal access to the digital euro.
In short, the digital euro would combine the convenience of digital payments with the trust, safety and privacy that people associate with cash.
Benefits for merchants
The digital euro would also bring tangible benefits for merchants.
Today, many European merchants depend heavily on international card schemes, which often come with high and non-transparent fees. This is particularly the case for merchants in Cyprus, where it is compulsory for retailers to accept card payments.[11]
The digital euro would offer a European alternative that is accepted across the euro area, thereby putting merchants in a stronger position to negotiate fees.
Today small merchants – including in Cyprus, where very small businesses are a central part of the economy – pay up to four times more for card payments than larger merchants.[12] With the digital euro, these small merchants can expect to pay approximately half of what they are paying today for digital payments. And this would also give them more power to negotiate lower fees than what they pay today.
Larger merchants would need to negotiate a lower charge individually. Given that the digital euro does not charge scheme fees a balanced allocation of these cost savings is important to ensure all stakeholders in the digital euro ecosystem benefit.
From the outset, the ECB has worked closely with merchants and their representatives. This engagement includes high-level meetings with President Christine Lagarde as well as technical workshops at staff level. The design of the digital euro reflects what merchants consider essential: seamless integration with existing checkout systems, ease of use, reliability and resilience.[13]
The digital euro would allow merchants to receive payments instantly. And thanks to its offline functionality, payments could still be accepted even when internet connectivity is temporarily unavailable.
Benefits for payment service providers
Let me now turn to the payment service providers, in particular banks, which play a central role in the digital euro project.
We have designed the digital euro in a way that ensures banks will not be disintermediated.
Right from the start, we envisaged that the digital euro would be distributed through banks and other supervised intermediaries. Just as they are for cash, banks will remain the primary interface for users.
Also, digital euro holdings will not be remunerated and will be subject to holding limits to avoid the risk of excessive deposit outflows, especially in times of stress. Our recent technical assessments confirm that using the digital euro for day-to-day payments would not undermine financial stability.[14] And because it will be possible to link the digital euro wallet to a commercial bank account, people will be able to pay and be paid seamlessly in digital euro, even for larger amounts.
While preserving financial stability, the digital euro would also make it more advantageous for banks to offer payment solutions to their clients. Today, with international card schemes, banks lose fees. With big tech mobile payment solutions, they lose both fees and data. And in the future, with stablecoins – which do not have holding limits – they would lose fees, data and stable retail deposits.
But the compensation model envisaged for the digital euro ensures that banks will benefit when payments move from these solutions to the digital euro. As I already mentioned, this is because the Eurosystem will not charge scheme or settlement fees, creating savings that can be distributed among banks and merchants.
European rails for digital payments
In sum, the digital euro will deliver tangible benefits to European citizens, merchants and payment service providers alike – it is a win-win for Europe.
We strongly believe in public-private partnership when it comes to enhancing the resilience of our payment systems and strengthening our autonomy. And both sides of this partnership are moving forward.
On the public side, the digital euro project is advancing well, both technically and legislatively.
On the technical front, we are continuing the preparations and building the necessary technical capacity ahead of a possible decision to issue. As part of this work, we will shortly publish a call for interest inviting payment service providers to take part in our pilot exercise.[15]
On the legislative front, we welcome the Council of the European Union’s agreement on its negotiating position on the proposed digital euro Regulation.[16] This agreement by Member States, including Cyprus, is a decisive step towards a digital euro.
The Council’s position preserves the key pillars of the European Commission’s proposal, including legal tender status, mandatory distribution and acceptance as well as online and offline functionalities. It also introduces targeted adjustments that address some of the concerns raised by European banks.[17]
In parallel, the European Parliament is actively discussing the proposal and is expected to reach its position in May.
On the private sector side, we welcome the recent announcement on the collaboration between regional and domestic schemes to facilitate cross-border payments and the intention to move towards greater European market integration. This shows that European actors are stepping up.
At the same time, most European payment solutions today have a small footprint in physical shops. Their coverage in online shopping is also limited. Therefore, building a common acceptance network will take time and money, also because most industry standards are currently in the hands of foreign companies. It is therefore unclear whether these solutions, on their own, can scale up enough to address Europe’s payment challenges in the long run.
That is why we have always been committed to working with the private sector – to ensure that it can make the best use of the opportunities created by the digital euro.
The digital euro, thanks to its legal tender status, would create a European standard – a common set of rails on which private payment solutions can operate and innovate.[18]
I often compare this to a public rail network. The infrastructure is public, but private companies can use these tracks to reach any destination in Europe and compete on services, quality and innovation.
Thanks to this shared infrastructure, private European payment initiatives would be able to achieve pan-European reach more easily and scale up faster.
Private providers would also be able to integrate the digital euro seamlessly into their existing payment solutions, for example in digital wallets or by co-badging it on physical cards.[19]
At the same time, we aim to minimise additional investment costs for payment service providers by reusing existing infrastructures as much as possible.
Adopting the digital euro Regulation has become increasingly urgent if we are to make use of the synergies between public and private solutions and reduce our dependence on foreign companies.
Importantly, some of the benefits of the digital euro will start to materialise even before its launch. Once the legislation is adopted, the digital euro standards can be finalised and made available to the market. As merchants renew their payment terminals, they can ensure that the new devices are “digital euro-ready”. This will, in turn, allow European payment service providers to begin expanding their reach and the range of use cases they can support.
Delays in the legislative process would risk breaking the momentum of these twin public and private efforts. They would further entrench our dependence on international card schemes and increase our exposure to non-European big tech payment solutions and stablecoins.
Conclusion
Let me conclude.
In October last year European leaders stressed the importance of “swiftly completing legislative work and accelerating other preparatory steps” for the digital euro.[20] Their message was clear: the time to act is now.
In this fast-changing world, let’s show Europeans that we respond to challenges head-on – by protecting our currency and guaranteeing people’s freedom to pay as they choose.
Consumers, merchants and payment service providers all stand to benefit.
 
 
 
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Submarine data cables, carrying 99% of intercontinental internet traffic, are essential for modern life and the European economy. As the EU faces increasing risks to this critical infrastructure, the European Commission is intensifying efforts to enhance its security and resilience. Today, it introduced a new Cable Security Toolbox of risk mitigating measures and a list of Cable Projects of European Interest (CPEIs). It also amended the Connecting Europe Facility (CEF) – Digital Work Programme to allocate €347 million to strategic submarine cable projects, including a €20 million call to enhance Europe’s repair capacities, which opens today.
Today’s announcements are part of the EU Action Plan on Cable Security, aimed at increasing the security and resilience of Europe’s submarine cables, including countering the rise of intentional damage and sabotage.
Cable Security Toolbox and projects of European interest
The toolbox outlines six strategic and four technical and support measures to improve the security of submarine cable infrastructure. It builds on the October 2025 risk assessment, which identified risk scenarios, threats, vulnerabilities and dependencies.
The list of 13 CPEI areas for public funding specifies three five-year stages, up to 2040, to fund projects aimed at strengthening the resilience of submarine cables. CPEI areas will be prioritised in upcoming CEF Digital calls for proposals and will inform planning for possible funding under the next Multi-annual Financial Framework.
These resources—risk assessment, toolbox and CPEIs—were developed by the Commission and Member State representatives within a dedicated Cables Expert Group.
Funding opportunities under Connecting Europe Facility (CEF) Digital
The Commission amended the CEF Digital Work Programme, allocating €347 million to fund strategic submarine cable projects. These calls will support the CPEIs, enhance the EU’s cable repair capacity and equip submarine cables with smart capabilities.
In 2026, two funding calls worth €60 million will support cable repair modules, alongside a separate €20 million call for SMART cable system equipment. These are sensors and monitoring components integrated into submarine telecommunications infrastructure to gather real-time ocean and seismic data. Additionally, there will be two calls for CPEI funding in 2026 and 2027, totalling €267 million.
Supporting submarine cable repairs
Opening today is a €20 million call under CEF Digital to finance adaptable modules for submarine cable repairs. These modules will be stationed at ports or shipyards to swiftly restore submarine cable services.
This marks the first phase of a broader initiative planned for all major sea basins of the European Union, including the Baltic, the Mediterranean and the Atlantic. This pilot will focus on the Baltic Sea due to the rise in submarine cable disruptions in recent years, suggesting these critical infrastructures might be subject to hostile acts.
Calls for proposals will be open only to public entities with an ‘emergency response’ mandate, such as those active in civil protection, national emergency response agencies, coastguards and military navies.
Background
In February 2024, the Commission adopted a Recommendation (EU) 2024/779 on Secure and Resilient Submarine Cable Infrastructures. It established the Submarine Cable Infrastructure Expert Group, involving Member State authorities and the European Agency for Cybersecurity (ENISA).
A year later, Joint Communication on an EU Action Plan on Cable Security outlined measures to protect submarine cables at all stages of resilience. By October 2025, the Cable Expert Group published the EU risk assessment on submarine cable infrastructures, informing today’s EU Cable Security Toolbox of mitigating measures and the CPEIs list.
Under the current CEF Digital multiannual Work Programme (2024-2027), a total €533 million is allocated for submarine cable projects, with €186 million already awarded to 25 projects. From 2021 to 2024, it provided €420 million to 51 backbone cable connectivity projects.
 
 
 
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Frankfurt am Main, 5 February 2026
Good afternoon, the Vice-President and I welcome you to our press conference.
We would like to begin by congratulating Bulgaria on joining the euro area on 1 January 2026. We also warmly welcome Dimitar Radev, the Governor of Българска народна банка (Bulgarian National Bank), to the Governing Council. Membership of the euro area has almost doubled since 1999 and is testimony to the attractiveness of the single currency and the enduring benefits of European integration.
We will now report on the outcome of today’s meeting.
The Governing Council today decided to keep the three key ECB interest rates unchanged. Our updated assessment reconfirms that inflation should stabilise at our two per cent target in the medium term. The economy remains resilient in a challenging global environment. Low unemployment, solid private sector balance sheets, the gradual rollout of public spending on defence and infrastructure and the supportive effects of our past interest rate cuts are underpinning growth. At the same time, the outlook is still uncertain, owing particularly to ongoing global trade policy uncertainty and geopolitical tensions.
We are determined to ensure that inflation stabilises at our two per cent target in the medium term. We will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. In particular, our interest rate decisions will be based on our assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. We are not pre-committing to a particular rate path.
The decisions taken today are set out in a press release available on our website.
I will now outline in more detail how we see the economy and inflation developing and will then explain our assessment of financial and monetary conditions.
Economic activity
The economy grew by 0.3 per cent in the fourth quarter of 2025, according to Eurostat’s preliminary flash estimate. Growth has mainly been driven by services, notably in the information and communication sector. Manufacturing has been resilient despite the headwinds from global trade and geopolitical uncertainty. Momentum in construction is picking up, also supported by public investment.
The labour market continues to support incomes, even though demand for labour has cooled further. Unemployment stood at 6.2 per cent in December, after 6.3 per cent in November. Growing labour incomes together with a lower household saving rate should bolster private consumption. Government spending on defence and infrastructure should also contribute to domestic demand. Business investment should strengthen further, and surveys indicate that firms are increasingly investing in new digital technologies. At the same time, the external environment remains challenging, owing to higher tariffs and a stronger euro over the past year.
The Governing Council stresses the urgent need to strengthen the euro area and its economy in the present geopolitical context. Governments should prioritise sustainable public finances, strategic investment and growth-enhancing structural reforms. Unlocking the full potential of the Single Market remains crucial. It is also vital to foster greater capital market integration by completing the savings and investments union and the banking union to an ambitious timetable, and to rapidly adopt the Regulation on the establishment of the digital euro.
Inflation
Inflation declined to 1.7 per cent in January, from 2.0 per cent in December and 2.1 per cent in November. Energy inflation dropped to -4.1 per cent, after -1.9 per cent in December and -0.5 per cent in November, while food price inflation increased to 2.7 per cent, from 2.5 per cent in December and 2.4 per cent in November. Inflation excluding energy and food eased to 2.2 per cent, after 2.3 per cent in December and 2.4 per cent in November. Goods inflation edged up to 0.4 per cent, whereas services inflation declined to 3.2 per cent, from 3.4 per cent in December and 3.5 per cent in November.
Indicators of underlying inflation have changed little over recent months and remain consistent with our two per cent medium-term target. Negotiated wage growth and forward-looking indicators, such as the ECB’s wage tracker and surveys on wage expectations, point to a continued moderation in labour costs. However, the contribution to overall wage growth from payments over and above the negotiated wage component remains uncertain.
Most measures of longer-term inflation expectations continue to stand at around 2 per cent, supporting the stabilisation of inflation around our target.
Risk assessment
The euro area continues to face a volatile global policy environment. A renewed increase in uncertainty could weigh on demand. A deterioration in global financial market sentiment could also dampen demand. Further frictions in international trade could disrupt supply chains, reduce exports and weaken consumption and investment. Geopolitical tensions, in particular Russia’s unjustified war against Ukraine, remain a major source of uncertainty. By contrast, planned defence and infrastructure spending, together with the adoption of productivity-enhancing reforms and the adoption of new technologies by euro area firms, may drive up growth by more than expected, including through positive effects on business and consumer confidence. New trade agreements and a deeper integration of our European Single Market could also boost growth beyond current expectations.
The outlook for inflation continues to be more uncertain than usual on account of the volatile global policy environment. Inflation could turn out to be lower if tariffs reduce demand for euro area exports by more than expected and if countries with overcapacity increase further their exports to the euro area. Moreover, a stronger euro could bring inflation down beyond current expectations. More volatile and risk-averse financial markets could weigh on demand and thereby also lower inflation. By contrast, inflation could turn out to be higher if there were a persistent upward shift in energy prices, or if more fragmented global supply chains pushed up import prices, curtailed the supply of critical raw materials and added to capacity constraints in the euro area economy. If wage growth moderated more slowly, services inflation might come down later than expected. The planned boost in defence and infrastructure spending could also cause inflation to pick up over the medium term. Extreme weather events, and the unfolding climate and nature crises more broadly, could drive up food prices by more than expected.
Financial and monetary conditions
Market rates have come down since our last meeting, while global trade and geopolitical tensions temporarily increased financial market volatility. Bank lending rates for firms ticked up to 3.6 per cent in December, from 3.5 per cent in November, as did the cost of issuing market-based debt. The average interest rate on new mortgages again held steady, at 3.3 per cent in December.
Bank lending to firms grew by 3.0 per cent on a yearly basis in December, after 3.1 per cent in November and 2.9 per cent in October. The issuance of corporate bonds rose by 3.4 per cent in December. According to our latest bank lending survey for the euro area, firms’ demand for credit was up slightly in the fourth quarter, especially to finance inventories and working capital. At the same time, credit standards for business loans tightened again.
Mortgage lending grew by 3.0 per cent, after 2.9 per cent in November and 2.8 per cent in October, in response to still rising demand for loans and an easing of credit standards.
Conclusion
The Governing Council today decided to keep the three key ECB interest rates unchanged. We are determined to ensure that inflation stabilises at our two per cent target in the medium term. We will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. Our interest rate decisions will be based on our assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. We are not pre-committing to a particular rate path.
In any case, we stand ready to adjust all of our instruments within our mandate to ensure that inflation stabilises sustainably at our medium-term target and to preserve the smooth functioning of monetary policy transmission.
We are now ready to take your questions.
 
 
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Today, the European Union, the United States and Japan met during the Critical Minerals Ministerial meeting held in Washington, DC in which several EU member states also took part.
The European Union, the United States and Japan are now taking significant steps towards increasing their economic security and national security by jointly enhancing resilience in critical minerals supply chains. They have announced their intention to expedite cooperative efforts for a mutually beneficial Partnership, with two components.
This includes a commitment within the next 30 days to conclude a Memorandum of Understanding between the European Union and the United States aimed at boosting critical minerals supply chain security. The forthcoming Memorandum of Understanding will identify areas of cooperation to stimulate demand and diversify supply for both participants by identifying and supporting projects in mining, refining, processing, and recycling. It will also include discussion of measures to prevent supply chain disruptions, promote research and innovation efforts, and facilitate the exchange of information on stockpiling. In addition, on 27 October 2025, the leaders of the United States and Japan signed a Framework for Securing the Supply of Critical Minerals and Rare Earths through Mining and Processing, covering the abovementioned areas.
Building upon existing international cooperation and initiatives, the European Union, the United States and Japan intend to develop Action Plans and explore a plurilateral trade initiative with like-minded partners on trade in critical minerals. Such a plurilateral trade initiative could include exploring the development of coordinated trade policies and mechanisms, such as border-adjusted price floors, standards-based markets, price gap subsidies, or offtake-agreements.
The Department of State will lead US engagement on the Memorandum of Understanding. The Office of the US Trade Representative will lead US engagement on the Action Plan.
The European Union, the United States and Japan intend to further engage on these aspects, as well as explore additional possibilities for critical minerals resilience and other measures, in relevant international fora, including the G7, and the Minerals Security Partnership or any successor forum.
 
 
 
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