Governments should renew their efforts to better design, deliver, and review regulation and regulatory processes, according to a new OECD report. 
The Regulatory Policy Outlook 2025 – the OECD’s flagship publication on drafting laws and regulations, their implementation and review – highlights the efforts governments are making to advance policy objectives while adapting to rapid technological change and evolving policy environments. It identifies opportunities to reduce unnecessary regulations, while ensuring regulatory frameworks are focused on better outcomes for people, and contribute to a policy environment that supports innovation and strong and sustainable growth.
Regulations are often seen as burdensome for citizens and businesses, while their weak enforcement can raise concerns about government effectiveness in protecting people and the environment. Governments must renew efforts to design and review rules and build trust, the report said.
“To navigate today’s complex policy environment, with fast technological changes and growing demands for efficiency and effectiveness, governments need to ensure that regulatory frameworks are adaptive, efficient and proportionate to underlying policy objectives,” OECD Secretary-General Mathias Cormann said. “By tackling unnecessary regulations, and ensuring regulatory frameworks are focused on better outcomes, governments can contribute to a supportive policy environment for stronger and more sustainable growth. This fourth edition of the Regulatory Policy Outlook provides evidence-based recommendations for developing best practice regulatory frameworks to achieve these objectives.”
New analysis shows that OECD Members have made good progress toward improving stakeholder engagement, particularly by using digital platforms, extending consultation periods, and enabling the public to provide evidence on both the anticipated and actual impacts of regulations. However, there is room for improvement. Only 33% of OECD countries provide direct feedback to stakeholder engagement, missing the chance to make interaction more meaningful and encourage future participation. Broader consultations are also needed to ensure inclusivity and reduce concerns around undue influence.
Regulations are more likely to be effective when based on sound evidence. Governments have improved evidence-based decision making, requiring an examination of more social and environmental considerations alongside economic ones when using tools such as regulatory impact assessment. These efforts should continue and be followed by effective implementation of regulations, the report said.
Current regulatory frameworks often lag behind technological progress, and struggle with overlapping jurisdictions, legal fragmentation, and outdated rules. To better support innovation while managing risks, governments must embrace adapt and learn from experience to improve anticipatory governance, while also strengthening co-operation and co-ordination across authorities. The use of strategic intelligence tools like horizon scanning and strategic foresight can also help anticipate and mitigate risks, ensuring rules stay relevant and effective even as circumstances change.
Most OECD countries have scope to further support compliance and desired outcomes by adopting risk-based analysis. This would allow enforcement resources to be focused on where non-compliance would have the greatest impact, saving both businesses and government time and resources, while maintaining positive outcomes. However, less than 50% of OECD countries currently allow regulators to base enforcement work on risk criteria.
Significant challenges remain in implementing governments’ commitments to environmental protection while preserving economic growth. Only 21% of OECD Members review rules with a “green lens” of environmental sustainability across sectors and the wider economy. Deepening such reviews to consider the local and broader impact of pollution, carbon emissions and biodiversity is critical to ensure that regulations actively support the green transition.
To achieve meaningful environmental outcomes, governments should streamline the complex patchwork of rules with environmental objectives, viewing them as a system, reducing unnecessary regulatory burdens including across borders, prioritising risk-based regulation and focusing enforcement efforts on areas where the greatest risks to the environment exist.
To access the report, data, and summary, visit: https://www.oecd.org/en/publications/oecd-regulatory-policy-outlook-2025_56b60e39-en.html.
For further information on OECD work on regulatory policy, visit: https://www.oecd.org/en/topics/policy-issues/regulatory-reform.html.
Media enquiries should be directed to Lawrence Speer in the OECD Media Office (+33 1 45 24 97 00).
 
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Introductory statement by Piero Cipollone, Member of the Executive Board of the ECB, at the Committee on Economic and Monetary Affairs of the European Parliament
It is a privilege to be here today to continue our discussion on the digital euro.
There are many compelling arguments in favour of introducing a digital euro, and in my view they all converge on one fundamental principle: strengthening Europe’s strategic autonomy.
Today I would like to discuss what strategic autonomy in day-to-day payments means in practice, looking at both the key role of cash and the benefits of a digital euro.
Faced with a less predictable international environment, it is now time to take concrete action.
Retail payments are becoming increasingly digital.[1] Consumers are increasingly choosing to use digital means of payment in shops, and they are also making ever more purchases online. Yet, a significant share of these transactions depend on non-European providers. Today, people in 13 euro area countries rely solely on international card schemes or mobile solutions for in-shop payments.[2] And even where national card schemes exist, they rely on co-badging with international card schemes to enable cross-border payments within the euro area. In the not so distant future, this could evolve into dependence on other private means of payment, for instance foreign stablecoins.
Excessively relying on foreign providers undermines our resilience and compromises our monetary sovereignty.[3] It also underscores the urgent need for a digital euro. Failing to act would not only expose us to significant risks, but also deprive us of a great opportunity.
The vital role of cash in ensuring financial inclusion and resilience
Despite the rapid digitalisation of retail payments, cash remains a cornerstone of the European financial system and is currently our only sovereign means of payment.
The continued strong demand for cash[4] highlights the importance of ensuring that it remains a convenient, secure and universally accepted means of payment and store of value.
Cash ensures financial inclusion, but it also plays a crucial role in maintaining the resilience of our payment systems and economies. In times of crisis, for example during cyberattacks or power failures, cash provides a reliable fall-back option. We have also seen this during the natural disasters that have affected parts of the euro area over the past year.
Against this background, the Eurosystem is fully committed to ensuring that cash remains a widely available and accepted means of payment for everyone in Europe. We have implemented a comprehensive cash strategy[5], and we are redesigning euro banknotes to make them fit for the future.
Moreover, the ECB strongly welcomes the proposed regulation governing the legal tender status of euro banknotes and coins. As we explained in our opinion, the regulation should clearly prohibit ex ante unilateral exclusions of cash by retailers or service providers. It should also ensure that Member States will hold the banking sector responsible for providing essential cash services to both private and corporate customers, ensuring good access to facilities for withdrawing and depositing euro cash across the euro area.[6]
The need to enhance Europe’s strategic autonomy in digital payments in a changing geopolitical environment
However, we must also ensure that Europeans have a secure and reliable digital means of payment that complements cash and extends its key benefits to the digital sphere. The growing preference for digital payments means that the acceptance and the availability of cash are no longer sufficient to cover a growing share of use cases. For example, online shopping accounts for more than one-third of our retail transactions, but cash cannot be used online and it is often not possible to pay using a European payment service[7], meaning we need to rely on non-European payment systems. This is a structural weakness that we need to address.
Europe cannot afford to rely excessively on foreign payment solutions. Doing so makes us dependent on the kindness of strangers in a context of heightened geopolitical tensions. The urgency of preserving our autonomy in defence and energy is already extremely clear. But ensuring autonomy for essential services like daily payments is just as urgent. Without it, we are vulnerable to geopolitical threats and risk losing our monetary sovereignty. Recent international developments underscore these risks.
Meanwhile, our reliance on foreign payment providers weakens our economic potential and our ability to compete. Owing to the fragmented payments market, European payment service providers often lack the scale to offer their services across the EU. This plays into the hands of non-European providers that can offer their services at the European level, and even internationally.
Our fragmented market structure also comes with a large price tag. But it does not have to be this way – we have the power to decide how unified our payments market should be.
Data show that domestic card schemes are losing market share across Europe[8], while international schemes charge high fees to European banks and merchants.[9]
And the growing popularity of digital wallets like PayPal or Apple Pay is exposing European banks to further outflows of fees and data.
Most recently, the measures taken by the new US Administration to promote crypto-assets and US dollar-backed stablecoins raise concerns for Europe’s financial stability and strategic autonomy. They could potentially result not just in further losses of fees and data, but also in euro deposits being moved to the United States and in a further strengthening of the role of the dollar in cross-border payments. At the same time, private businesses are increasingly open to accepting stablecoins for customer payments, which could have far-reaching implications for monetary sovereignty.[10]
Faced with these challenges, we need a public-private partnership to retain our sovereignty. The digital euro – as a sovereign European means of payment based on EU legislation – would be the cornerstone of this partnership.
It would ensure that the euro area retains control over its financial future. By offering a secure and universally accepted digital payment option which would be suitable for all use cases – and, crucially, under European governance – it would reduce our dependence on foreign providers. And it would limit the potential for foreign currency stablecoins to become a common medium of exchange within the euro area.[11]
The digital euro would provide European consumers with a simple and safe digital payment option, free for basic use, that covers all their payment needs everywhere in the euro area while ensuring their privacy.[12] It would also protect European merchants from excessive charges imposed by international card schemes and put them in a stronger position to negotiate fees with these schemes.[13]
In addition, the digital euro could be used offline, making our daily payments more resilient as both consumers and merchants would still be able to use the digital euro without a network connection.
And, importantly, the digital euro would enable European payment service providers to operate autonomously once more.[14] The digital euro would not compete with private initiatives. Instead, it would exploit synergies and enable private initiatives to scale up more easily across the EU. This would help overcome the hurdles that have led to the current fragmentation.
One example of these synergies is offering an integrated solution that enables private initiatives to provide services across the euro area and effectively cover all use cases thanks to the common digital euro standards.
This would mean that people would not have to look for alternative foreign payment solutions. European banks would be able to retain their customers and be adequately compensated for their services.
The world of payments is changing fast, which is why it is crucial to move forwards with the digital euro legislation now.
The consequences of inaction are becoming increasingly apparent. Inaction could lead to a loss of control over our financial infrastructure, increased reliance on foreign systems and potential disruptions to our banking and credit systems. Delaying the digital euro would slow down our collective public-private response to these risks. European citizens are relying on us to secure Europe’s chance to drive change rather than watch from the sidelines.
Digital euro project on track
Let me now focus on the technical progress of our project.
The legal framework is crucial in shaping how the digital euro operates, including its status as legal tender and how privacy is protected. In parallel, the digital euro project is progressing according to schedule and we are nearing the end of the preparation phase.[15]
Together with market participants we are working on the digital euro rulebook – a single set of rules, standards and procedures for digital euro payments.[16] You have previously asked about the benefits a digital euro would have for the private sector. This rulebook will enable European payment providers to expand their services across the euro area by capitalising on the open standards and legal tender status of the digital euro. As soon as the legislation is adopted by the co-legislators, these standards can be finalised and market participants can use them, even before the potential issuance of a digital euro.[17] This would frontload the benefits for both merchants and consumers. Later this week we will publish an update on the progress we have made on developing the rulebook.
It is vital that the digital euro ensures the stability of the financial system – we have heard your concerns on this topic, and it is one of our key priorities. As I mentioned the last time we met, we are currently developing the methodology that builds a solid analytical base to determine the digital euro holding limit.[18] This methodology is based on the three pillars indicated in the draft legislation – usability, monetary policy and financial stability. We are building on the feedback we have received from all market stakeholders, and we aim to publish the results in the summer. Preliminary findings already indicate that using the digital euro for daily payments will not harm financial stability, banking supervision or monetary policy.
This public-private effort to regain our autonomy in the retail payment space will be more likely to succeed if it also fosters innovation, as some of you have mentioned previously. Therefore, last October we issued a call for expressions of interest in innovation partnerships for the digital euro.[19] The primary goal is to experiment with conditional payments and other innovative use cases. For example, we are exploring the possibility of allowing people to pay only if a given service is provided, thereby avoiding lengthy and uncertain reimbursement procedures.
We have seen a lot of interest from various market sectors, with around 100 applicants wanting to experiment further with new use cases and technological solutions.[20] These innovation partnerships will ultimately benefit all digital euro providers and users. Providers will be able to expand their customer and revenue bases, while users will benefit from innovative payment options.
In addition, technical work on privacy, offline functionality and operational resilience is progressing well. We are also in the middle of the procurement process to establish framework agreements with possible future providers of digital euro services.[21]
Finally, we are conducting comprehensive user research to gather actionable insights into user preferences and ensure that the digital euro offers people clear benefits.[22] This is something you also raised in the European Parliament’s recent resolution on the ECB’s Annual Report.[23]
Conclusion
Let me conclude.
The time to act is now. Making progress on both the digital euro regulation and the regulation on the legal tender status of cash has become urgent if we are to increase our resilience to possible disruptions and reverse our ever-increasing dependence on foreign companies.
We have been highlighting the importance of Europe’s strategic autonomy since the very beginning of the digital euro project.[24] The good news is that both the co-legislators and the ECB have been working hard on this issue in recent years.
This is a public-private common European project, and as co-legislators you are central to making it happen. Now is the moment to make Europe’s strategic autonomy in the critical area of payments a reality.
For the digital euro to be successful, we need robust and forward-looking legislation. The ECB stands ready to support you with technical input as your deliberations progress, and we will of course continue to update you on the progress we are making.
In a fast-changing world, let’s show all Europeans that we respond to challenges head-on, protect our currency and guarantee people’s freedom to pay as they choose.
Thank you for your attention.

ECB (2024), Study on the payment attitudes of consumers in the euro area (SPACE), December.
ECB (2025), Report on card schemes and processors, February. In addition, only a limited number of European countries offer a domestic payment option for online shopping.
According to the most recent ECB payment statistics, in the first half of 2024 international card schemes accounted for 66% of all electronically initiated transactions conducted using cards issued in the euro area (up from 61% in 2022).
The total value of euro banknotes in circulation is currently just below €1.6 trillion. And banknotes circulate rapidly: in 2024 the value of banknotes supplied by banks to their customers was at a similar level, just above €1.6 trillion.
The Eurosystem cash strategy aims to ensure that cash remains widely available and accepted as both a means of payment and a store of value. See also ECB (2025), “ECB selects motifs for future euro banknotes”, press release, 31 January.
This approachensures legal certainty for in-person payments and is aligned with the provisions laid down in the digital euro draft regulation. See Proposal for a Regulation of the European Parliament and of the Council on the legal tender of euro banknotes and coins, European Commission, COM(2023) 364 final, 28 June 2023 and Opinion of the European Central Bank of 13 October 2023 on a proposal for a regulation on the legal tender of euro banknotes and coins (CON/2023/31).
ECB (2024), op. cit.
ECB (2025), Report on card schemes and processors, February.
EuroCommerce (2024), “EU businesses’ competitiveness impacted by current cards payments landscape – a call for urgent action”, position paper, 8 July.
For example, PayPal has announced plans to offer its own stablecoin – PayPal USD (PYUSD) – as a payment option to more than 20 million small and medium-sized merchants by the end of 2025. This will allow merchants to easily pay their vendors in stablecoins through a new PYUSD-powered feature for paying bills. Instead of wiring payments through traditional banking networks, businesses will be able to send PYUSD instantly, with no intermediaries involved. PYUSD can be used anywhere PayPal is accepted, including millions of merchants worldwide. PYUSD can therefore already be used as a payment option on e-commerce platforms and at point-of-sale terminals, enabling merchants to accept payments from customers.
See also Lane, P.R. (2025), “The digital euro: maintaining the autonomy of the monetary system”, speech at the University College Cork Economics Society Conference 2025, Cork, 20 March.
An offline functionality would allow people to use digital euro even when they have poor or no network reception. Before making a payment, the user would need to prefund their offline digital euro payment account and the funds would be stored locally on their device. The payment would take place without any third-party involvement. For more information on privacy, see Daman, M.G.A. (2024), “Making the digital euro truly private”, The ECB Blog, ECB, 13 June.
As is currently the case for other payment systems, payment service providers distributing the digital euro would be able to charge merchants for these services. Price-setting for merchants and payment service providers would be subject to a cap, as proposed by the European Commission in its digital euro legislative proposal. As with the production and issuance of banknotes, the Eurosystem would bear the costs of establishing the digital euro scheme and infrastructure.
There are several examples of market initiatives that aim to provide pan-European solutions. For example, 14 banks from France, Germany, Belgium, the Netherlands and Luxembourg are seeking to position a new brand, Wero, as part of the European Payments Initiative (EPI). Wero currently offers payment solutions for person-to-person and online (where accepted) use cases. While this is a positive development, Wero still has a limited scope in the EU and does not intend to expand into point-of-sale payments with a contactless (NFC) solution. In parallel, EuroPA, the European Payments Alliance, has been created, under which Bancomat, Bizum and MB WAY have started rolling out their service to enable users in Italy, Portugal, Spain and Andorra to send and receive money instantly via mobile phone number. While interoperability among domestic schemes has the potential to connect separate payment systems, achieving a truly seamless and integrated payment experience requires significant technical, regulatory and user experience challenges to be overcome, particularly when considering various use cases like point-of-sale and e-commerce. These European private initiatives could capitalise on the open standards and legal tender status of the digital euro, thereby expanding into new countries and addressing new use cases more cost-effectively.
ECB (2024), Progress on the preparation phase of a digital euro – Second Progress Report, 2 December.
The Eurosystem established a Rulebook Development Group for the digital euro scheme to obtain input from the financial industry, consumers and merchants. The Group consists of 22 public and private sector experts with experience in finance and payments. See ECB (2023), “Members of the Rulebook Development Group”, 15 February. For more information, see the letter from Piero Cipollone to Aurore Lalucq, Chair of the Committee on Economic and Monetary Affairs of the European Parliament, on the “Update on work of digital euro Rulebook Development Group”, 5 September 2024.
The digital euro rulebook would mandate common standards across the euro area. The digital euro acceptance standards would be made available for free for reuse by private parties, who will be able to develop their services on that basis. This will help private providers achieve a pan-European acceptance on a technical level, leading to cost efficiencies and a more integrated European payment market. The expansion of both their geographical reach and their portfolio of products will, in turn, make it easier for them to compete internationally. While technical acceptance would be guaranteed, commercial agreements would still be needed.
The ECB has been working with experts from national central banks and national competent authorities to develop a comprehensive methodology for calibrating the digital euro holding limit. At the technical session on a digital euro held on 16 July 2024, Euro Retail Payments Board member associations shared their views on the factors influencing this calibration, which were incorporated into the development process. See ECB (2024), “Preliminary methodology for calibrating holding limits”, 10 December.
ECB (2024), “Call for expressions of interest in innovation partnerships for the digital euro”, MIP News, 31 October.
The applicants included 25 start-ups, 18 IT companies, ten other payment service providers, nine universities and five banks. Examples of new use cases include i) suburban transportation using a smartphone as the check-in/out device and allowing for conditional reimbursement if a service is delayed; ii) implementing consumer rights to withdraw from subscriptions, a process that is currently not always transparent.
In 2024 we launched the process to select potential providers. We issued calls for applications to establish framework agreements for five digital euro components expected to be operated by providers outside the Eurosystem: (i) the alias lookup component; (ii) the secure exchange of payment information component; (iii) the fraud and risk management component; (iv) the offline component; and (v) a digital euro app and related software development kit. Other components, such as payment settlement, would be sourced from within the Eurosystem. For more information, see the letter from Piero Cipollone to Irene Tinagli, Chair of the Committee on Economic and Monetary Affairs of the European Parliament, on “Update on work of digital euro Rulebook Development Group and start of selection procedure for potential digital euro providers”, 3 January 2024.
The ECB has engaged a specialised provider to conduct comprehensive user research, which began in September 2024. The aim of this research is to gather actionable insights into user preferences to enhance the digital euro’s value proposition. Key focus areas include: (i) a general segmentation analysis of the broader population to identify who would use a digital euro and what they would need; (ii) user preferences for holding limits that will inform the technical work on the methodology for calibrating the holding limit; and (iii) in-depth studies carried out with vulnerable groups and small merchants. The methodologies employed include surveys, focus groups, peer interviews and an online community for rapid consultation with users. The research findings are expected to be published in mid-2025.
European Parliament (2025), REPORT on European Central Bank – annual report 2024, 22 January.
ECB (2020), Report on a digital euro, October.

 
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Blog post by Emil Bandoni, Giorgia De Nora, Margherita Giuzio, Ellen Ryan and Manuela Storz | Institutional investors are increasingly active in housing markets across Europe. The ECB blog examines implications for house price growth and the transmission of monetary policy.

Institutional investors have been shaking up Europe’s housing markets over the past decade: if you are renting in major cities like Paris, Dublin or Madrid, there is a good chance your landlord is an investment company, insurance corporation, or pension fund. The same goes for large parts of Germany and the Netherlands (Chart 1). Purchases of residential properties by institutional investors have more than tripled in the last decade.[1]
The growing footprint of institutional investors impacts the housing market – and by extension the economy – in ways private households alone never could. Our research indicates that increased purchases by these investors may push up housing prices and increase mortgage borrowing by households. In this way investors can amplify the effects of monetary policy. As institutional investors increasingly influence house prices, the link between local wages and house prices also appears to weaken. Where this results in overvaluation it may create instability in housing markets.
So, what happens when institutional investors move into the housing market?

Chart 1
Institutional investors are particularly active in major cities and in countries like Germany and the Netherlands

Sources: Eurostat and MSCI Real Capital Analytics.
Notes: For each NUTS2 region in our sample, the figure shows the average purchase volume of residential assets by institutional investors between 2007 and 2021, normalised by regional GDP.

Higher prices, looser ties to local economies
Studying institutional investor activity in euro area housing markets over the period 2007-2021, we find that when institutional investors increase their purchases of residential real estate, house prices rise and stay elevated for an extended period. This is because these investors often buy in bulk, which increases demand and pushes prices up. Hence, when institutional investors move in, buying a house or flat becomes more expensive.
In markets where institutional investors are more active, the traditional link between local wages and house prices weakens. Normally, as households tend to buy locally, house prices in a region, city or neighbourhood reflect how much residents earn. Large investors, however, move in a different rhythm. Their behaviour reflects the broader financial trends and investor sentiment among competitors. While on one hand this may insulate house prices from downturns in the local economy, it can also make housing less affordable for local residents, especially first-time buyers.
A New Link Between Housing and Monetary Policy
One channel of monetary policy transmission goes through housing markets. Central banks aim to influence household borrowing and spending. For example, lower interest rates increase households’ borrowing capacity, pushing up house prices and stimulating wider economic activity. Our research shows that monetary policy also operates through institutional investors. When the ECB lowers interest rates, institutional investors increase their property purchases, driving house price growth. In fact, we find that institutional investors appear to be even more sensitive to monetary policy changes than households, suggesting that their presence may amplify the transmission of monetary policy.
Moreover, we find that investor activity in the housing market appears to have spillover effects for the actions of households. We find that increased housing purchases by institutional investors lead to a persistent increase in mortgage borrowing by households, which again will have implications for house prices.[2]
Why the growing footprint of institutional investors matters
The growing role of institutional investors in the housing market presents both opportunities and risks. On the one hand, they provide liquidity and stability to housing markets, particularly during local economic downturns. On the other hand, where institutional investor activity results in house price overvaluation this will also make the market more vulnerable to price drops. This in turn can have serious repercussions for overall financial stability.
Furthermore, a significant share of institutional real estate buyers are “open-ended” investment funds. That means investors who put their money in the funds can also ask for it back with a defined notice period. However, real estate assets are illiquid, meaning that the funds cannot sell them at short notice, at least not for a reasonably fair price. This asymmetry of illiquid assets and relatively short-term funding creates liquidity risks: if many investors ask for their money back at the same time, the fund manager may have to sell buildings quickly. To do that, they may have to sell at discounted prices. This dynamic in turn can create negative self-reinforcing cycles. In such a case, a market downturn could push many investors to redeem their investments. This, in turn, would push more fund managers to fire-sell buildings at discounts, further depressing markets and creating a downward spiral.
These risks raise important questions for regulators and policymakers about how best to safeguard financial stability while ensuring housing markets can benefit from having a diverse range of participants.
Looking Ahead
For better housing and financial policies, we need to understand how institutional investors impact the housing market. Policymakers should aim to balance the benefits and disadvantages of institutional investment. Our findings highlight the importance of widening the macroprudential toolkit. Potential policy tools could include lower redemption frequencies and adequate liquidity buffers for real estate investment funds, as well as longer notice and settlements periods, and minimum holding periods.
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.
Check out The ECB Blog and subscribe for future posts.

Unfortunately, our data set does not allow us to capture the market share held by these investors. However, Savills estimate that approximately 7% of the stock of German apartments are owned by private companies, with firm ownership particularly pronounced in major cities such as Berlin and Munich and typically more pronounced in the North than the South.
Using a Bayesian Vector Autoregression (BVAR) model.

 
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Speech by Luis de Guindos, Vice-President of the ECB, at the International Federation of Accountants’ Chief Executives Forum

Introduction
It is a pleasure to be taking part in the International Federation of Accountants’ Chief Executives Forum today.[1] In line with the topic of the event, I will reflect on the risks and uncertainty that threaten financial stability and their implications for policymakers. I will be brief to allow enough time to take your questions.
Conceptually, risk is associated with situations where the exact outcome is unknown but the possible outcomes can be identified and their probabilities can be estimated reasonably well.[2] For the ECB, financial stability is defined as a condition in which the financial system is capable of withstanding shocks and the unravelling of financial imbalances. So, when assessing financial stability, we evaluate the likelihood of shocks materialising and their potential impact. Uncertainty, by contrast, refers to scenarios where it is impossible to define and measure outcomes and probabilities, often owing to a lack of information. While risk is quantifiable, uncertainty can be proxied at best.
The current environment
Uncertainty in the macro-financial and credit environment is currently exceptionally high, in a world being reshaped by significant shifts in geopolitics, international cooperation, global trade policy, financial regulation and the role of crypto-assets. At the same time, the scale of the defence investment foreseen in the EU is unprecedented and adds another significant layer of uncertainty to the current environment.
According to a news-based index[3], economic policy uncertainty in the euro area is currently more than three times the historical average.[4] Similarly, an index of trade policy uncertainty is more than eight times the historical average.[5] These levels are well above those seen during the pandemic.
Amid all of this uncertainty, the ECB’s Governing Council decided to lower interest rates by another 25 basis points in March. The deposit facility rate is now at 2.5%, 150 basis points below its recent peak.
The disinflation process is well on track, with inflation developing broadly as expected. Headline inflation decreased further from 2.3% in February to 2.2% in March. According to recent data and in line with our projections, wage growth is moderating, which is helping services inflation to gradually decline. Most measures of underlying inflation suggest that inflation will settle at around our 2% inflation target, on a sustained basis.
But uncertainty surrounding the inflation outlook remains high, mainly on account of increasing friction in global trade. An escalation in trade tensions could see the euro depreciate and import costs rise, while much needed defence and infrastructure spending could raise inflation via aggregate demand. Geopolitical tensions could also lead to higher inflation owing to trade disruptions, rising commodity prices and energy costs. At the same time, lower demand for euro area exports and lower growth resulting from the impact of higher tariffs or geopolitical tensions could pose a threat to the economy, depress demand and push inflation down.
Weak economic growth remains a challenge for the euro area, even without any further shocks. ECB staff have again revised down their growth projections – to 0.9% for 2025, 1.2% for 2026 and 1.3% for 2027. The downward revisions reflect lower exports and ongoing weakness in investment. High uncertainty, both at home and abroad, is holding back investment, while competitiveness challenges are weighing on exports. Addressing these challenges in order to improve growth prospects is clearly more demanding in the current context of exceptionally high uncertainty about trade and economic policy.
Challenges when analysing financial stability
Our macroeconomic projections are not the only area where we face great difficulties navigating this environment of heightened uncertainty. Analysing financial stability also requires us to adjust our frameworks and use state-of-the-art tools to assess the financial system’s capacity to withstand shocks under these conditions.
Analysing multiple scenarios is a powerful way to deal with situations of high uncertainty. It allows us to test the resilience of the financial system against various possible manifestations of financial stress. Shocks cannot be predicted, but drawing on a diverse array of indicators and a range of sensitivity analyses is essential for us to understand the nuances of the current uncertainty. It is also crucial that our various approaches include ways to measure sources of risk amplification and non-linearities. By combining hard data indicators with survey results and analyses based on micro data, we can achieve a more granular, diverse and timely understanding of the economic landscape. Such a comprehensive approach can enhance our ability to anticipate and respond to emerging challenges.
The main risks to financial stability in the euro area
In the current economic environment, we are observing marked vulnerabilities in financial stability. While banks remain in good shape, with sound solvency and liquidity indicators that are well above regulatory minimums, there are weaknesses in several other areas. First, elevated valuations and concentrated risks make financial markets susceptible to adverse corrections. Non-bank financial intermediaries have remained resilient to recent bouts of market volatility, but they are still quite heavily exposed to risky assets. Broader market shocks could cause sudden investment fund outflows or trigger margin calls on derivative exposures, unsettling markets and leading to abrupt price corrections. Second, sovereign indebtedness is a cause for concern at a time when defence spending is emerging as a priority in Europe, with different countries having very different amounts of fiscal space to respond. Despite the likely increase in debt servicing costs, public finances need to be managed in a growth-friendly way and ultimately be sustainable. Third, the corporate sector has demonstrated resilience but faces competitiveness challenges and is subject to emerging credit risk concerns, especially in the case of firms that are more exposed to the export sector and geopolitical risks.
Conclusion
In conclusion, an extraordinarily high level of uncertainty around economic and trade policy has been acting as a drag on markets and the economy alike. Financial intermediaries need to adapt their risk management tools in the face of new vulnerabilities and scenarios at a time when it is no longer possible to measure likely outcomes and probabilities. This environment calls for heightened vigilance, which is why we are exploring unconventional sources of risk and vulnerability and using a broader range of tools, such as sensitivity and scenario analyses, to assess the resilience of the financial system.
In terms of monetary policy, this uncertainty means we need to be extremely prudent when determining the appropriate stance. While most indicators point to inflation moving in the right direction, the environment of exceptional uncertainty requires us to stick even more closely to our data-dependent and meeting-by-meeting approach.
The European Union is at a crossroads. Defence policy requires a significant overhaul and challenges relating to trade and economic competitiveness need to be addressed. In addition to ramping up defence spending, we need to deepen and strengthen our Economic and Monetary Union with a true single market for goods and services that shores up our structural economic growth prospects, supported by a complete banking union and capital markets union.

I am grateful to Max Lampe for his contribution to this speech.
Knight, F.H. (1921), Risk, Uncertainty, and Profit, Houghton Mifflin Company, Boston.
Such indices are based on the frequency of specific words in news articles.
Baker, S.R., Bloom, N. and Davis, S.J. (2016), “Measuring Economic Policy Uncertainty”, The Quarterly Journal of Economics, Vol. 131, No 4, November, pp. 1593-1636.
Caldara, D., Iacoviello, M., Molligo, P., Prestipino, A. and Raffo, A. (2020), “The economic effects of trade policy uncertainty”, Journal of Monetary Economics, Vol. 109, January, pp. 38-59.

 
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President Trump’s announcement of universal tariffs on the whole world, including the EU, is a major blow to the world economy.
I deeply regret this choice.
Let’s be clear-eyed about the immense consequences.
The global economy will massively suffer.
Uncertainty will spiral and trigger the rise of further protectionism.
The consequences will be dire for millions of people around the globe.
Also for the most vulnerable countries, which are now subject to some of the highest US tariffs.
The opposite of what we want to achieve.
The tariffs will also hurt consumers around the world.
It will be felt immediately.
Millions of citizens will face higher grocery bills.
Medication will cost more as well as transportation.
Inflation will go up.
And this is hurting in particular the most vulnerable citizens.
All businesses – big and small – will suffer from day one.
From greater uncertainty to the disruption of supply chains to burdensome bureaucracy.
The cost of doing business with the United States will drastically increase.
And what is more, there seems to be no order in the disorder.
No clear path through the complexity and chaos that is being created as all US trading partners are hit.
In the past eighty years, trade between Europe and the United States has created millions of jobs.
Consumers across the Atlantic have benefited from reduced prices.
Businesses have benefited from huge opportunities leading to unprecedented growth and prosperity.
At the same time, we know that the global trading system has serious deficiencies.
I agree with President Trump, that others are taking unfair advantage of the current rules.
And I am ready to support any efforts to make the global trading system fit for the realities of the global economy.
But I also want to be clear: Reaching for tariffs as your first and last tool will not fix it.
That is why, from the outset, we have always been ready to negotiate with the US, to remove any remaining barriers to Transatlantic trade.
At the same time, we are prepared to respond.
We are already finalising a first package of countermeasures in response to tariffs on steel.
And we are now preparing for further countermeasures, to protect our interests and our businesses if negotiations fail.
We will also be watching closely what indirect effects these tariffs could have, because we cannot absorb global overcapacity nor will we accept dumping on our market
As Europeans we will always promote and defend our interests and values.
And we will always stand up for Europe.
But there is an alternative path.
It is not too late to address concerns through negotiations.
This is why our Trade Commissioner, Maros Šefčovič,is permanently engaged with his US counterparts.
We will work towards reducing barriers, not raising them.
Let’s move from confrontation to negotiation.
Finally I would also like to speak directly to my fellow Europeans.
I know that many of you feel let down by our oldest ally.
Yes, we must brace for the impact that this will inevitably have.
Europe has everything it needs to make it through this storm.
We are in this together.
If you take on one of us, you take on all of us.
So we will stand together and stand up for each other.
Our unity is our strength.
Europe has the largest Single Market in the world – 450 million consumers – that is our safe harbour in tumultuous times.
And Europe will stand at the side of those directly impacted.
We have already announced new measures to support the steel and cars sectors.
Last week, we limited the amount of steel that can be imported to Europe tariff-free.
This will give more breathing space to these strategic industries.
Now we will also convene Strategic Dialogues with the steel, the automotive and the pharmaceutical sector.
And others will follow.
Europe stands together for our businesses, for our workers,and for all Europeans.
And we will continue to build bridges with all those that like us care about fair and rules-based trade as the basis for shared prosperity.
Thank you.
 
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Speech by Christine Lagarde, President of the ECB, on the occasion of the conferral of the Sutherland Leadership Award in Dublin, Ireland

It is an honour to receive the Sutherland Leadership Award.
There are moments in history when things that were once set in stone become fluid. Institutions, norms and alliances that seemed timeless can suddenly be remade.
These moments typically come only once in a generation. Peter Sutherland faced such a juncture when the Cold War ended. The collapse of the Soviet Union could have ushered in a period of global instability and turmoil.
But Peter demonstrated skilful leadership to leverage the defining geopolitical event of his time. As head of the General Agreement on Tariffs and Trade, he successfully led the world’s largest trade negotiation, involving over 120 countries, which ushered in an era of unprecedented global cooperation and prosperity.[1]
Compared with Peter’s era, however, the geopolitical landscape we face today has been turned upside down. We can see this inverted world playing out in different ways.
After the Cold War, the global economy was generally one of openness, integration and certainty. Everyone benefited from a hegemon, the United States, that was committed to a multilateral, rules-based order. This allowed trade and investment to flourish.
But today we must contend with closure, fragmentation and uncertainty.
Geopolitical rivalries are spurring protectionism and upending global supply chains. The international institutions that Peter helped to build are facing increasing challenges. And one index of trade policy uncertainty now stands at more than eight times its average value since 2021.[2]
This landscape poses a serious challenge for Europe on two fronts.
Economically, it risks compounding existing issues like sluggish productivity growth and weak competitiveness. Europe’s reliance on external trade – its trade-to-GDP ratio is about twice that of the United States – makes it vulnerable to trade headwinds. On top of this, pronounced uncertainty may hold back the investment necessary for Europe’s recovery.
Strategically, this new environment could also heighten our security vulnerabilities. We can no longer fully count on the security arrangements that have stood in place since the Second World War. If a security vacuum should arise, it may encourage opportunism by hostile actors on Europe’s doorstep.
Yet despite this challenging landscape, I see a tremendous opportunity for Europe.
Just as in Peter’s time, the structures that once seemed permanent are now becoming fluid again. And just as he did, we can harness the momentum created by geopolitical events to drive positive change.
So how can we – as Europeans – rise to the moment?
We can do so by embracing a simple idea that, at first glance, seems contradictory, but which in an inverted world makes perfect sense: we must cooperate to compete. And in doing so, we must also leverage our competitive advantage.
On the economic front, we need to work together to simplify and scale up our economy so that we can hold our own in a world dominated by economic giants. If we do so, we can attract talent and investment.
That means integrating our capital markets, allowing Europe’s ample savings to fund our much-needed investments. And following the powerful example set by Peter during his time as European Commissioner in the 1980s, it means removing internal barriers that stand in the way of our Single Market, allowing our firms to scale more easily and compete more effectively.[3]
There is clear momentum on this front. The reports by Enrico Letta and Mario Draghi have opened the way. And with its Competitiveness Compass, the European Commission has put forward a concrete roadmap with milestones that should be urgently implemented.
But we cannot stop halfway and we are pressed for time. As we scale up our economy, we need to scale up our decision-making to match it – and thereby stand tall and be heard.
At a time when major economies are adopting cohesive strategic agendas – using tariffs, for example, to extract concessions on other strategic goals – Europe cannot afford to be disunited. If we cannot take decisions in a European way, then others will use that against us.
To stand our ground, we need to be able to act as a single entity across several key areas. And that means we need to structurally change how we make decisions.
We know what stands in our way: a historical tradition whereby a single veto can scupper the collective interest of 26 other countries. But given the geopolitical shift at hand, I am convinced that national and European interests have never been so aligned. In this inverted world, more qualified majority voting would therefore be inherently more democratic.
I have no doubt that we can unleash a “European moment” – if leaders are willing to seize it.
If it sounds like I am confident about Europe’s future, it is because I am. But I am in good company here tonight. A recent survey finds that of all the Member States, the Irish are the most optimistic about the EU’s future, and they are among the strongest supporters of the euro.[4]
This sense of optimism is perhaps rooted in Ireland’s extraordinary transformation in recent decades. And here I am reminded of the words of Oscar Wilde, who once wrote, “Success is a science; if you have the conditions, you get the result.”[5]
Ireland put those conditions in place during the most challenging of times, and has reaped the rewards. It is now incumbent on Europe to do the same.
Thank you.

See Chapter 10 in Walsh, J. (2020), The Globalist: Peter Sutherland – His Life and Legacy, William Collins, London.
Index based on Caldara, D. et al. (2020), “The economic effects of trade policy uncertainty”, Journal of Monetary Economics, Vol. 109, pp. 38-59. See also “Topic 2: The impact of a shift in US trade policies” in ECB (2025), “Introductory statement in three charts”, 20 March.
See Chapter 8 in Walsh, J. (2020), The Globalist: Peter Sutherland – His Life and Legacy, William Collins, London.
More specifically, at 77%, Ireland shares the top level of optimism about the EU’s future with Poland. See Eurobarometer (2025), “New Eurobarometer survey shows record high trust in the EU: Irish people most optimistic about its future”.
Wilde, O. in Hart-Davis, R. (ed.) (1962), The Letters of Oscar Wilde, Harcourt, Brace & World, New York, p. 143.

 
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The Commission has presented ProtectEU, a new European internal security strategy to support EU countries in guaranteeing security for its citizens. It sets out a workplan with a stronger legal framework, better information sharing and closer cooperation. 
To address increasing security and hybrid threats like terrorism, organised crime, cybercrime, and attacks on critical infrastructure, Europe needs to review its approach to internal security. The strategy aims to adopt a whole-of-society approach that includes citizens, businesses, researchers, and civil society who can contribute to better safety for all.
Key objectives and actions:

a new European internal security governance
anticipating security threats through new ways of sharing intelligence
more effective tools for law enforcement and stronger justice and home affairs agencies
building resilience against hybrid threats
fighting serious and organised crime
combatting terrorism and violent extremism
the EU as a strong global player on security

The actions are backed by evidence from the EU Serious and Organised Crime Threat Assessment (EU-SOCTA). The strategy complements the preparedness union strategy and the European defence white paper. Together with the forthcoming European Democracy Shield, they form a comprehensive framework for a safe, secure, and resilient EU.
 
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Today, the European Commission is revising the EU’s cohesion policy to better support EU competitiveness and decarbonisation, defence and security, the Eastern border regions as well as affordable housing, water resilience, and the energy transition.
The objective of this initiative is to make cohesion policy more effective, by encouraging Member States and regions to invest in the European strategic priorities, while maintaining the focus of cohesion policy on reducing economic, social and territorial disparities. Member States will be invited to reprogramme part of their 2021-2027 cohesion funds to new investments in the context of the ongoing cohesion policy’s mid-term review.
Strengthening Europe’s competitiveness and closing the innovation gap
Given the role of businesses, regardless of their size, in steering research, innovation, knowledge and technology transfer, the Commission is proposing to extend the support of the European Regional Development Fund to large companies in critical areas, such as defence, strategic technologies, and decarbonisation. In addition, the Commission encourages Member States to increase investments in strategic technologies under the Strategic Technologies for Europe Platform, to boost Europe’s competitiveness and innovation.
Backing the defence industry and supporting Eastern border regions
Today’s proposal will further enable Member States to use current cohesion funding to build resilient infrastructure to foster military mobility. It will also support productive capacities of small and large enterprises in the defence sector across all EU regions.
Moreover, cohesion programmes in the Eastern border regions, disproportionately affected by the Russian war of aggression against Ukraine, will benefit from a preferential prefinancing level, if they move at least 15% of their overall funds to the new strategic priorities.
More affordable housing
The Commission proposes, in line with the President’s political guidelines, to double the amount of cohesion policy funding dedicated to affordable housing. Member States will also be able to leverage private and public financing by using a new financial instrument set up jointly with the European Investment Bank (EIB). The instrument will combine cohesion funding with the resources of the EIB and of other international financial institutions as well as national promotional and commercial banks.
Enhancing water resilience
Member States will be able to increase investments in water resilience, including in digitisation of water infrastructure, mitigation of drought and desertification impacts.
Supporting the energy transition
Cohesion funding will support investments to promote energy interconnectors and related transmission systems, as well as the deployment of recharging infrastructure. This will be crucial to accelerate the energy transition and promote clean mobility. The proposal will also make it easier to fund decarbonisation measures.
Financial incentives under the strategic priorities
While all cohesion projects developed under the EU strategic priorities will be entitled to up to 30% of prefinancing, cohesion programmes, which will move at least 15% of their overall funds to these priorities, will enjoy an even higher level of advanced payment.
In addition, the EU funding for investments in strategic priorities will cover up to 100% of the costs in all regions.
Next steps
Today’s amendments of the cohesion policy legislations, proposed in the context of the 2025 mid-term review, will be discussed by the European Parliament and the Council.
The Commission’s objective is to conclude the reprogramming exercise of the mid-term review with Member States and regions in 2025, so that the new programmes can start being implemented in early 2026.
Background
With a budget of €392 billion in the current programming period 2021-2027, cohesion policy is the EU’s main investment policy. In line with the legal rules, the current mid-term review allows Member States to assess the implementation of their cohesion programmes and adjust them to the new political priorities in 2025.
For more information, please contact:

Maciej Berestecki, Spokesperson, EUROPEAN COMMISSION
Isabel Arriaga-E-Cunha, Press Officer, EUROPEAN COMMISSION

 
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Welcome address by Christine Lagarde, President of the ECB, at the ECB conference on “The transformative power of AI: economic implications and challenges” in Frankfurt, Germany.
It is a pleasure to welcome you to our conference on the transformative power of AI.
In the early stages of a new technological breakthrough, it is often hard to discern fact from fiction. We struggle to imagine the ways in which the new technology will be used. And even if we predict the direction of technological change correctly, we rarely get the timeline or the size of the impacts right.
Today, we sometimes hear claims that AI is improving so fast that we are only a few years away from the nature of work being radically reformed. But we also hear arguments that the same barriers that slowed down the adoption of all past technologies will also delay AI adoption.
I cannot claim to know which vision will prove to be correct. But the early evidence is promising and, in my view, we must act on the basis that we are facing an economic revolution. This attitude will be particularly important here in Europe.
On this side of the Atlantic, we are still paying the price for having been too slow to capitalise on the last major digital revolution, the internet. The tech sector explains around two-thirds of the productivity gap between the EU and the United States since the turn of the century.
And now we are faced with a technology that can improve its own performance through self-learning mechanisms and feedback loops, enabling even more rapid advances and innovations. The risks of underestimating the potential of AI, and falling behind again, are simply too great to be ignored.
What’s more, we are facing a new geopolitical environment in which we can no longer be sure that we will have frictionless access to new technologies developed overseas. This new reality strengthens the case for Europe to establish itself at the technological frontier.
There are two main areas where we should expect, and prepare for, major changes in the economy.
The first is productivity.
We can already see the productivity effects of AI in sectors like the US tech sector, where output is expanding while employment is falling.[1] But we are still in the early phase of the “productivity J-curve”, where new technologies diffuse to the wider economy and are reflected in GDP.
As such, estimates about the productivity gains of AI vary widely – but even at the lower end they would be a game changer for Europe.
One widely accepted methodology estimates that the euro area could see a boost to total factor productivity (TFP) of around 0.3 percentage points per year over the next ten years.[2] Compare that with the past decade, when annual TFP growth averaged just 0.5%.
Other estimates point to much larger gains, with productivity expected to grow 1.5 percentage points faster annually if AI is widely adopted over the next decade.[3]
Whether Europe can achieve such productivity gains will depend on whether we can improve the environment for AI innovation and diffusion.
This comes down to funding, regulation and energy.
As I have been arguing for some time, Europe’s relatively small venture capital ecosystem is a major hindrance to building foundational models in the EU.[4] Between 2018 and 2023, around €33 billion was invested in AI companies in the EU, compared with more than €120 billion in their US peers.[5]
Building and developing this technology also requires considerable investment in data centres, and the EU currently has around 4 times fewer dedicated sites than the US.[6]
At the same time, ECB research finds that regulation and a lack of institutional quality are particularly detrimental to the expansion of high-tech sectors relative to more mature technologies. Investing in radical technologies is highly risky and needs a different set of framework conditions.[7]
The adoption of AI, for example, depends on access to data pools to train models, which requires smart regulation to avoid data fragmentation while ensuring data protection. It also requires good institutions as, for instance, effective legal systems are needed to defend a non-patentable asset like a set of AI prompts.
Our research shows that if the EU’s average institutional delivery were raised to the level of best practice, AI-intensive sectors would see their share in investment rise by more than 10 percentage points.[8]
Finally, unless we see major breakthroughs in efficiency, Europe’s energy supply constraints could pose a challenge to the diffusion of AI through the economy in the future.
The power consumption of data centres is expected to triple in Europe by the end of the decade.[9] AI training and inference is extremely energy-intensive.[10] And this surge in demand comes at a time when the green transition is also increasing the demand for electricity, for example for charging battery electric vehicles.
There is now a clear policy agenda in Europe to address these barriers. It is widely recognised that we need to build a savings and investment union to jump-start European venture capital, that we must simplify complex digital regulations and improve permitting speeds, and that we have to massively increase investment in data centres, fibre-optic networks and electricity grids.
But for Europe to make the most of the AI revolution, how the productivity gains from AI are harnessed also matters. Labour productivity can be increased either by reducing labour inputs relative to outputs, or by raising outputs relative to inputs. The employment implications of each route are vastly different.
This brings me to the second area of major change: the effect of AI on labour markets.
According to ECB research, between 23% and 29% of workers in Europe are highly exposed to AI.[11] This does not necessarily herald a “job apocalypse”. It is reasonable to expect that AI will follow historical patterns by displacing some jobs while creating new one.[12]
But there are two new questions that this technology poses.
First, will the pace of technological change be faster than in previous transitions? This question is critical for Europe, as our social model and traditionally high levels of job protection make it hard to see how a transition that leads to massive job reallocations could avoid a major backlash.
The key factor will be whether AI leans more towards job displacement via its “automation potential”, or towards changes in the nature of work via its “augmentation potential”. In the augmentation scenario, workers will still need to adapt to changing roles and tasks, but the transition will likely be easier.
Recent research by the ILO finds that only a small share of jobs – around 5% in advanced economies – meet the criteria for high automation. But a much larger share – over 13% – meet the criteria for high augmentation.[13]
The second question is about the distribution of gains.
Early studies suggested that AI could increase the productivity of lower-skilled workers the most.[14] But newer studies looking at more complex tasks – like scientific research[15], running a business[16]and investing[17]– tell a different story. High performers benefit disproportionately and, in some cases, less productive workers see no improvements at all.
So even if AI augments more than it automates, we are likely to see an increase in labour market inequality. Demand for higher-skilled workers who can use AI most effectively will rise, while those less able to learn new skills could suffer.
All told, I do see a path for Europe to adopt AI without fracturing its social model. But it will require massive complementary investments in skills to prevent a rise in inequality.
Crucially, this will not require everyone to become coders, which would probably set the bar too high. According to the OECD, most workers who will be exposed to AI will not need specialised AI skills to get ahead in their careers.
In fact, the most sought-after skills in highly exposed jobs will be linked to management and business – skills that many people have the capacity to learn.[18]
The CEO of Anthropic, Dario Amodei, has described the potential capabilities of AI as being like “a country of geniuses in a data centre”.[19] If this proves to be correct, it is both an awesome prospect for humanity and a daunting one for individual workers.
I believe we must act today, and especially in Europe, with the mindset that this future will likely come to pass. We must remove all the barriers that will prevent us from being at the forefront of this revolution.
But we must also prepare for the human and climate impacts of this transition, and we need to start now.
I trust that this conference will generate the ideas we need to move forwards.

Allianz (2025), “Invest in your future: How to save your way out of employment vulnerability”, Allianz Research, 26 March.
Bergeaud, A. (2024), “The Past, Present and Future of European Productivity”, paper presented at the ECB Forum on Central Banking.
Briggs, J. and Kodnani, D. (2023), “The Potentially Large Effects of Artificial Intelligence on Economic Growth”, Goldman Sachs Economics Research, 26 March.
Lagarde, C. (2023), “A Kantian shift for the capital markets union”, speech at the European Banking Congress, 17 November.
European Parliamentary Research Service (2024), “AI investment: EU and global indicators”, March.
KPMG (2024), “Data centres in Europe – a strategic approach”, 23 September.
Bothner, J., Lopez-Garcia, P., Momferatou, D. and Setzer, R. (2025), “Investment in AI intensive sectors – the role of institutional factors in EU countries”, Working Paper Series, ECB, forthcoming.
ibid.
McKinsey (2024), “The role of power in unlocking the European AI revolution”, 24 October.
de Vries, A. (2023), “The growing energy footprint of artificial intelligence”, Joule, Vol. 7, No 10, 18 October.
Albanesi, S., Dias da Silva, A., Jimeno, J., Lamo, A. and Wabitsch, A. (2025), “New technologies and jobs in Europe”, Economic Policy, Vol. 40, No 121, January, pp. 71-139.
Autor, D., Chin, C., Salomons, A. and Seegmiller, B. (2022), “New Frontiers: The Origin and Content of New Work, 1940–2018”, MIT Working Papers, 14 August.
Gmyrek, P., Berg, J. and Bescond, D. (2023), “Generative AI and Jobs: A global analysis of potential effects on job quantity and quality”, ILO Working Papers, No 96, August.
Brynjolfsson, E., Li, D. and Raymond, L.R. (2023), “Generative AI at work”, NBER Working Papers, No 31161, National Bureau of Economic Research, April.
Toner-Rodgers, A. (2024), “Artificial Intelligence, Scientific Discovery, and Product Innovation”, 27 November.
Otis, N.G., Clarke, R., Delecourt, S., Holtz, D. and Koning, R. (2023), “The Uneven Impact of Generative AI on Entrepreneurial Performance”, Working Papers, No 042, Harvard Business School.
Kim, A.G., Muhn, M. and Nikolaev, V.V. (2023), “From Transcripts to Insights: Uncovering Corporate Risks Using Generative AI”, Chicago Booth Research Papers, No 23-19.
OECD (2024), “Artificial intelligence and the changing demand for skills in the labour market”, OECD Artificial Intelligence Papers, No 14, 10 April.
Amodei, D. (2024), “Machines of Loving Grace::How AI Could Transform the World for the Better”, October.

 
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“Check against delivery”
Madam President, dear Roberta,
Mr President of the European Council, dear António,
Honourable Members,
Today, I would like to focus on the threats to global prosperity and stability and the rise of protectionism. And as our domestic agenda cannot be seen separately from global developments around us, let me start with the US tariffs.
When the dream of a united Europe began, it started with a simple idea: Let us create one Single Market. Let us break barriers and take tariffs down. This is what made us strong. Because our companies grew. And so did the ties that bind us together. And then in the same spirit, we worked with partners across the world – including America. We built connections that we believed were unbreakable. And trade brought more than prosperity. It brought the idea of a shared way of life. And with commerce, our partnership has also grown. Countless are the friendships across the Atlantic. And because of this collective experience, so many Europeans feel utterly disheartened by the announcements from the US. Let me be clear: Europe did not start this confrontation. We think it is wrong. But my message to you today is also that we have everything we need to protect our people and our prosperity. We have the largest Single Market in the world. We have the strength to negotiate. We have the power to push back. And the people of Europe should know: Together we will always promote and defend our interests and values. And we will always stand up for Europe.
So far, the US administration has announced a 25% increase of tariffs on imports of steel, aluminium, cars and car parts. The next sectors facing tariffs will be semiconductors, pharmaceuticals and timber. And tomorrow we expect another announcement – with so-called ‘reciprocal’ tariffs that will immediately apply to almost all goods and many countries in the world. Of course there are severe issues in the world of trade. Overcapacities, imbalances, unfair subsidies, denial of market access, intellectual property theft. I hear Americans, when they say some others have taken advantage of the rules. I agree. We also suffer from it. So let us work on it. But tariffs across the board make things worse, not better. Tariffs are taxes that will be paid by the people. Tariffs are taxes for the Americans on their groceries and their medication. Tariffs will just fuel inflation. Exactly the opposite of what we want to achieve. American factories will pay more for components that are produced in Europe. This will cost jobs. It will create a bureaucratic monster of new customs procedures. And today nobody needs that – neither in the US nor in Europe.
So our strategy builds on three pillars. First, we are open to negotiations. We will approach these negotiations from a position of strength. Europe holds a lot of cards. From trade to technology to the size of our market. But this strength is also built on our readiness to take firm countermeasures. All instruments are on the table. Second, we will keep diversifying our trade with other partners. Our hallmark is not only that we are the biggest market in the world but that we are reliable and predictable. We honour our commitments. And that is exactly what our partners are looking for today. And third, we will double down on our Single Market. The Single Market is the cornerstone of European integration and values. It is our powerful catalyst for growth, prosperity and solidarity. We have to tear down remaining barriers to have a Single Market to go big because scale matters. And a Single Market to go fast and go far.
To the first point: Our immediate response is unity and determination. I have already been in contact with our Heads of State and Government on the next steps. We have the parliamentary debate today. And we will assess tomorrow’s announcements carefully to calibrate our response. Our objective is a negotiated solution. But of course, if need be, we will protect our interests, our people and our companies. I want to be very clear on the aim of our response. We think that this confrontation is in no one’s interest. The flow of goods and services between us is nearly balanced. We are willing to work on the trade balance of goods as well as services. This is the largest and most prosperous trade relation worldwide. We would all be better off if we could find a constructive solution. At the same time, it also has to be clear: Europe has not started this confrontation. We do not necessarily want to retaliate, but we have a strong plan to retaliate if necessary.
The second element of our strategy is diversification. Trade goes to where the business case is. We will open doors towards fast-growing markets across the world. Europe already has trade agreements in place with 76 countries. And we are now growing this network. We just concluded trade deals with Mercosur, Mexico and Switzerland. We launched the first-ever Clean Trade and Investment Partnership with South Africa. We aim to conclude a trade agreement with India by the end of the year. We are in intense negotiations with Indonesia and Thailand. And later this week,
President Costa and I will head to Samarkand, for the first-ever summit between the European Union and Central Asia. Europe has always been a trading continent. Let us connect with the new beating hearts of the global economy. Our message is clear: Europe is reliable, predictable and open for fair business.
And the third point, Honourable Members, is: unchain the Single Market. There are too many obstacles that tie down our businesses. And we have to do our homework. Mario Draghi is right when he says: ‘High internal barriers are far more damaging for growth than any tariff.’ The Single Market was born to tear down barriers between our countries. To erase customs and duties. And to make business easy inside Europe. We must go back to that idea and fulfil it. It must be easier for SMEs to sell the same product in all Member States, instead of re-labelling it 27 times to comply with national laws. It must be easier for professionals to work across borders, instead of getting stuck with different national bureaucracies. It must be easier for tech companies to launch a new service all across Europe, instead of dealing with 27 different procedures. And it must be easier for Europeans to invest in Europe, instead of sending their savings to the other side of the world. This is the promise of our Single Market. And it must be fulfilled.
Honourable Members,
The European Parliament has always worked hard to complete the Single Market. Now we have a generational opportunity to get it done. We have a strong consensus on the Draghi and Letta reports. We have put ambitious proposals on the table, from the Savings and Investment Union, to ensure that people get a better return on their savings and the companies find the capital they need to grow, to our omnibus simplification packages, or the Union of Skills. And more will come, including the 28th legal regime for innovative companies. According to the IMF, Europe’s internal market barriers are equivalent to a tariff of 45% for manufacturing and 110% for services.
This simply cannot be. This must change now. That is why I have tasked EVP Séjourné to come up with concrete and bold proposals next month to remove some of these barriers and prevent new ones. These reforms are overdue. And now they have become more urgent than ever. In a stormy global economy, the Single Market is our safe harbour. Thirty years after Jacques Delors laid its first stone, it is time to finish the job.
Thank you, and long live Europe.
 
Compliments of the European CommissionThe post European Council | Speech by President von der Leyen at the European Parliament Plenary debate on the conclusions of the European Council meeting of 20 March 2025 first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.