Today, the Commission is proposing to the European Parliament and Council to sign up to a declaration of rights and principles that will guide the digital transformation in the EU.
The draft declaration on digital rights and principles aims to give everyone a clear reference point about the kind of digital transformation Europe promotes and defends. It will also provide a guide for policy makers and companies when dealing with new technologies. The rights and freedoms enshrined in the EU’s legal framework, and the European values expressed by the principles, should be respected online as they are offline. Once jointly endorsed, the Declaration will also define the approach to the digital transformation which the EU will promote throughout the world.
Executive Vice-President for a Europe Fit for the Digital Age, Margrethe Vestager, said: “We want safe technologies that work for people, and that respect our rights and values. Also when we are online. And we want everyone to be empowered to take an active part in our increasingly digitised societies. This declaration gives us a clear reference point to the rights and principles for the online world.”
Commissioner for the Internal Market, Thierry Breton, said: “We want Europeans to know: living, studying, working, doing business in Europe, you can count on top class connectivity, seamless access to public services, a safe and fair digital space. The declaration of digital rights and principles also establishes once and for all that what is illegal offline should also be illegal online. We also aim to promote these principles as a standard for the world.”
Rights and principles in the digital age
The draft declaration covers key rights and principles for the digital transformation, such as placing people and their rights at its centre, supporting solidarity and inclusion, ensuring the freedom of choice online, fostering participation in the digital public space, increasing safety, security and empowerment of individuals, and promoting the sustainability of the digital future.
These rights and principles should accompany people in the EU in their everyday life: affordable and high-speed digital connectivity everywhere and for everybody, well-equipped classrooms and digitally skilled teachers, seamless access to public services, a safe digital environment for children, disconnecting after working hours, obtaining easy-to-understand information on the environmental impact of our digital products, controlling how their personal data are used and with whom they are shared.
The declaration is rooted in EU law, from the Treaties to the Charter of Fundamental rights but also the case law of the Court of Justice. It builds on the experience of the European Pillar of Social Rights. Former European Parliament President David Sassoli promoted the idea of the access to the Internet as a new human right back in 2018. Promoting and implementing the principles set out in the declaration will be a shared political commitment and responsibility at both Union and Member State level within their respective competences. To make sure the declaration will have concrete effects on the ground, the Commission proposed in September to monitor progress, evaluate gaps and provide recommendations for actions through an annual report on the ‘State of the Digital Decade’.
Next Steps
The European Parliament and the Council are invited to discuss the draft declaration, and to endorse it at the highest level by this summer.
Background
On 9 March 2021, the Commission laid out its vision for Europe’s digital transformation by 2030 in its Communication on the Digital Compass: the European way for the Digital Decade. In September 2021, the Commission introduced a robust governance framework to reach the digital targets in the form of a Path to the Digital Decade. In a speech at the ‘Leading the Digital Decade’ event in Sines, Portugal, on 1 June 2021, Commission President Ursula von der Leyen declared: “We embrace new technologies. But we stand by our values.”
The Commission also conducted an open public consultation which showed broad support for European Digital Principles – 8 EU citizens out of 10 consider it useful for the European Union to define and promote a common European vision on digital rights and principles – as well as a special Eurobarometer survey. Yearly Eurobarometer surveys will collect qualitative data, based on citizens’ perception of how the digital principles enshrined in the declaration are implemented in the EU.
The declaration also builds on previous initiatives from the Council including the Tallinn Declaration on eGovernment, the Berlin Declaration on Digital Society and Value-based Digital Government, and the Lisbon Declaration – Digital Democracy with a Purpose for a model of digital transformation that strengthens the human dimension of the digital ecosystem with the Digital Single Market as its core.
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The Federal Reserve Board on Thursday released a discussion paper that examines the pros and cons of a potential U.S. central bank digital currency, or CBDC. It invites comment from the public and is the first step in a discussion of whether and how a CBDC could improve the safe and effective domestic payments system. The paper does not favor any policy outcome.
“We look forward to engaging with the public, elected representatives, and a broad range of stakeholders as we examine the positives and negatives of a central bank digital currency in the United States,” Federal Reserve Chair Jerome H. Powell said.
The paper summarizes the current state of the domestic payments system and discusses the different types of digital payment methods and assets that have emerged in recent years, including stablecoins and other cryptocurrencies. It concludes by examining the potential benefits and risks of a CBDC, and identifies specific policy considerations.
Consumers and businesses have long held and transferred money in digital forms, via bank accounts, online transactions, or payment apps. The forms of money used in those transactions are liabilities of private entities, such as commercial banks. Conversely, a CBDC would be a liability of a central bank, like the Federal Reserve.
While a CBDC could provide a safe, digital payment option for households and businesses as the payments system continues to evolve, and may result in faster payment options between countries, there may also be downsides. They include how to ensure a CBDC would preserve monetary and financial stability as well as complement existing means of payment. Other key policy considerations include how to preserve the privacy of citizens and maintain the ability to combat illicit finance. The paper discusses these and other factors in more detail.
To fully evaluate a potential CBDC, the Board’s paper asks for public comment on more than 20 questions. Comments will be accepted for 120 days and can be submitted here.
Contact:

For media inquiries, please email media@frb.gov or call 202-452-2955

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Inflation will remain high at the start of 2022 but will fall later on, especially towards the end of the year, Chief Economist Philip R. Lane tells Verslo žinios. Our current projections foresee inflation below the 2% target in 2023 and 2024.
I just read the news this morning that the latest Purchasing Managers’ Index published this Monday shows that the eurozone economic recovery weakened further in January. This is due to the new restrictions imposed to contain the Omicron variant of the coronavirus (COVID-19). So what is your opinion on the state of the eurozone today, after two years of the pandemic and what are the prospects?
In the near term, there are some risks from the Omicron variant. But I think it’s increasingly clear that the impact is only for a few weeks. So it is not turning out to be a factor that will influence the activity levels for the year, it’s more the activity levels for a few weeks. In that sense, I think there’s less concern about Omicron than we had in December. In terms of the overall pandemic, I think it is fair to say that the recovery so far has been stronger than expected − compared to, for example, early 2020 when the pandemic hit. In the initial months of the pandemic there was a lot of concern. But essentially, when the vaccines have been rolled out during 2021, it turned out that the euro area economy and the world economy has recovered more quickly than expected. And looking to this year, 2022, we expect another strong year of recovery. So essentially, there’s been a strong recovery, supported by a lot of policy measures, both fiscal policy and monetary policy. I think in overall terms the sense is that, between the public health measures and other measures, it’s turning out that we can hope that the euro area can recover quite well from the pandemic.
Let’s go to the start of the pandemic. The euro area economy as a whole shrank more than 6 per cent in 2020. However, Ireland’s economy grew 3.4 per cent. And the Lithuanian economy escaped the recession too. To your mind, why did the Lithuanian economy and the Irish economy manage to decouple from the recessionary trends in the euro area last year?
What I think is that some sectors in the world economy were able to continue during the pandemic. So in those sectors where the pandemic might cause an interruption for a few months, even during 2020 it turned out there was a good recovery. The sectors where Lithuania is a big producer and the sectors where Ireland is a big producer, including a lot of multinational firms, turned out to be quite strong. But I would say both in Ireland and in Lithuania many sectors suffered. The fact that in overall terms, these economies did grow, should not take away from the fact that many service-type industries would have been damaged by the pandemic.
Euro area inflation hit a record high of 5 per cent in December of last year. Are you worried about further rising inflation in the eurozone?
We should think about these years of the pandemic, 2020, 2021 and 2022 as part of a pandemic cycle. In the first year 2020, inflation was relatively low. In the second half of 2021, inflation turned out to be quite high. And then, as we look into this year, 2022, we think inflation will remain high at the start of this year, but will fall later this year, especially towards the end of the year. So it’s a year, essentially, where in the first part of the year, we’ll still see inflation remaining high. But we do expect it to fall quite a bit later this year.
Do you expect inflation to rise further than 5 per cent at the start of the year? And what levels do you expect at the end of the year?
We are clear from our December forecast that we expect inflation − in overall terms for this year − to be around 3.2 per cent in the euro area, and then to be below 2 per cent in 2023 and 2024. Compared with the peak, that’s quite a big decline. We will see exactly the timing of how quickly inflation falls. So rather than focus on month by month, we have a clear vision in terms of the overall direction: that the inflation rate will fall later this year. And in fact, as you know, our current view from December is that inflation will fall below the 2 per cent target in the next couple of years.
What ECB monetary policy adjustments do you expect in the face of rising energy goods and services prices if the rise is higher than your forecasts?
I think we are always clear that we’re guided by our intentions to deliver an inflation rate of 2 per cent over the medium term. So we will adjust all of our policies − whether that’s asset purchases, the targeted lending programme, our interest rates − to deliver that goal. You’ve given me a hypothetical, the hypothetical is: what happens if inflation is above our forecast. So let me in turn make clear that what is very important is whether inflation will essentially settle at around our target of 2 per cent, which would be essentially what we want, or whether there might be signs of inflation being above 2 per cent in a significant way for a significant amount of time. And if we saw the data coming in to suggest that inflation would be too high relative to 2 per cent, then of course we would respond. We also have been clear on our sequence. The first decision under that scenario would be to end net purchasing. And only after ending net asset purchases would we look at the criteria for raising the interest rates. So we will be driven by the data, driven by our assessment. And every month, every quarter, we’re going to learn more about where the data are going.
Is there a risk of inflationary second round effects such as salary growth?
We spend a lot of time looking at the interlinkages. One linkage is that an increase in the cost of living may be a factor in wage negotiations. We think that is clear. The question is how much, because, remember, energy is both a direct cost to the consumer, but also a cost to other firms. Rising energy prices can also mean rising food prices, rising prices of goods and services. We are also examining how much the increase in energy prices might show up in rising goods prices and services prices. So far, we do not see a big response of wages. We do expect a response of wages but what is critical is how big. Because, remember, in the euro area, for inflation to be around 2 per cent and allowing for a typical increase in labour productivity of about 1 per cent, then wages should be growing around 3 per cent a year in the euro area on average to be consistent with the 2 per cent target. We are not, right now, seeing wage increases in that zone. But of course, we will continue to look at this throughout the year.
Some of your colleagues have mentioned another risk. Do you see any pressure to the rise of inflation in the euro area due to the green energy investments?
I think this is a complicated issue. Let me also emphasise that what we have right now is an increase in global energy prices. The euro area imports energy from the rest of the world. So this is a very different scenario from a scenario, which we would expect to occur in the coming years. Which is essentially, if there’s, for example, policies that increase the price of carbon, as part of the transition away from a high-carbon economy. If we see an increase in the price of carbon because of taxes or regulation, driven by domestic policy, those revenues from a carbon tax, for example, can be recycled in the domestic economy and can stimulate the economy. Wheras what we have right now is different. We have an increase in import prices from the rest of the world. And this is reducing living standards, increasing the import bill. It has a negative channel to lower incomes, lower consumption. So I think it’s a very interesting, very important debate about the future of green energy policies. That is playing some role right now. But the main role right now is a global issue, rather than the transition. So we will return to this topic, no doubt.
So overall, what scenarios do you see where interest rates in the eurozone could be lifted?
Let me mention three scenarios. And again, to repeat, we’re examining hypotheticals here. One scenario is in fact that the forces that generated low inflation before the pandemic essentially become visible again after the pandemic. So one scenario is that the world economy will return to quite low inflation rates. A second scenario is that some of these headwinds will not return and, in fact, it may be easier for us to deliver our target of 2 per cent. So that is a kind of middle scenario where inflation will stabilise at 2 per cent. And then the third scenario is, if inflation picks up and there is a risk that inflation will be significantly above 2 per cent. In this third scenario, where inflation is significantly above 2 per cent on a persistent basis, then that will call for a monetary policy tightening. We would have to respond. In the middle scenario where inflation stabilises at 2 per cent, then clearly over time we would normalise monetary policy. The policies we need to fight very low inflation would no longer be needed if inflation were stable around 2 per cent. And in the first scenario where inflation is significantly below 2 per cent, then the policies that we have employed to fight low inflation would still remain relevant. So this is the way I think about the world, but there are three scenarios. One, we remain with a low inflation problem. Two, we stabilise — in a kind of smooth way — inflation around 2 per cent. And three, if inflation turns out to be persistently above 2 per cent, we would have to tighten. And so those are three very different scenarios.
Which of these three scenarios do you see as the most likely scenario in this economic environment?
In the December round of projections, the assessment was that, in fact, we saw inflation returning to below 2 per cent. But we also emphasised that in a world of uncertainty, as we have more data come in, of course the data can change. But in the euro area context, I would say that it’s also possible that we may enter a world where inflation stabilises around 2 per cent. I find it less likely to think about a scenario where inflation is persistently, significantly above 2 per cent, which would require a serious tightening. That scenario, would, I think, in the context of the euro area, be less likely than the other two scenarios.
Higher sovereign borrowing costs after the financial crisis of 2007-09 turned into a eurozone debt crisis in 2010-13 that hit some southern European Member States, also Ireland. Debt levels have significantly risen during the pandemic. Is there any risk of another debt crisis this time provided interest rates will rise?
Let me make two important points here. One, at that time, there was a significant combination which, by and large, countries had of both high private sector debt – many households, many firms were highly indebted – and there was high government debt. That is a major problem. What we’ve seen in this pandemic is: yes, governments have borrowed more, and some types of firms have borrowed more. But households have been saving a lot. In the banking sector, we also have banks which are better able to handle debt, because they have increased their capital positions. So, when you have a situation where, essentially, in the euro area, debt levels have gone up for the sovereign and for some corporates but have gone down for households, and where the banks, that are kind of in the middle of the system, are in better shape, then I think it’s a different scenario to ten years ago. And then the other issue is: we think the trend level of interest rates is lower today than ten years ago. So, when interest rates go up, it’s from a very low level. And that’s important.
Finally, I have one question as to the elephant in the room: the deteriorating geopolitical situation in Ukraine these days due to the possible Russian military offensive. Do you see any side effects to the ECB monetary policy, should the geopolitical situation in Europe deteriorate further?
Geopolitics always matters. I think if you look at the history of the world economy, the European economy, geopolitical events matter a lot via trade, via global prices, via uncertainty. So, of course, we will be looking very closely at such factors. We already talked about the very high energy prices. And of course, there’s a connection between higher energy prices and these tensions. So of course, it’s very directly relevant for us.
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The Council approved conclusions today endorsing the new priorities for the 2022-2024 period under the UN-EU strategic partnership on peace operations and crisis management.
The Council reiterates the firm commitment made by the EU and its member states to uphold the multilateral rules-based global order with the United Nations at its core, and it commends the achievements and recognises the mutually beneficial nature of the longstanding UN-EU cooperation on peacekeeping and civilian, police and military crisis management.
The Council welcomes the extended scope of the priorities, which aim to respond more effectively to the evolving threat landscape and cross-cutting challenges such as climate change, disruptive technologies and misinformation, and the consequences of the global COVID-19 pandemic. Additionally, the Council welcomes the inclusion of the matter of children and armed conflict as a cross-cutting priority, as well as the increased attention to the Youth, Peace and Security agenda and the enhanced joint UN-EU efforts on the Women, Peace and Security agenda and gender equality.
The conclusions stress that partnering with the UN helps the EU play its role as a security provider and a global peace and security actor in support of effective multilateralism.
The EU provides the UN with political support as well as expertise, financial backing and political leverage to deliver on UN mandates. Close cooperation helps UN and EU missions and operations act more effectively to ensure they have an impact on the ground. It has a multiplier effect and enables the EU to deliver on its integrated approach.

Council Conclusions on taking the UN-EU strategic partnership on peace operations and crisis management to the next level: Priorities 2022-2024
Reinforcing the EU-UN Strategic Partnership on crisis management, EEAS website
The European Union at the United Nations – Factsheet

Contact:

Maria Daniela Lenzu, Press officer | +32 2 281 21 46 | +32 470 88 04 0

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The European Commission has today disbursed €271 million to Finland in pre-financing, equivalent to 13% of the country’s financial allocation under the Recovery and Resilience Facility (RRF). The pre-financing payment will help kick-start the implementation of the crucial investment and reform measures outlined in Finland’s recovery and resilience plan.
The Commission will authorise further disbursements based on the implementation of the investments and reforms outlined in Finland’s recovery and resilience plan. The country is set to receive €2.1 billion in total, fully consisting of grants, over the lifetime of its plan.
Since June 2021, the Commission has raised €71 billion for NextGenerationEU via long-term EU Bonds – €12 billion of which through the first-ever NextGenerationEU green bond issuance. On 14 December, the Commission published its funding plan for the first semester of 2022. The plan foresees the issuance of €50 billion of long-term EU Bonds between January and June 2022, to be complemented by short-term EU-Bills. In addition, the Commission currently has around €20.5 billion in EU-Bills outstanding.
The RRF is at the heart of NextGenerationEU which will provide €800 billion (in current prices) to support investments and reforms across Member States. Finland’s plan is part of the unprecedented EU response to emerge stronger from the COVID-19 crisis, fostering the green and digital transitions and strengthening resilience and cohesion in our societies.
Supporting transformative investments and reform projects
The RRF in Finland finances investments and reforms that are expected to have a deeply transformative effect on Finland’s economy and society. Here are some of these projects:

Securing the green transition: Finland’s plan supports the green transition through investments of €319 million in decarbonisation of the energy sector, namely in energy transmission and distribution and in new energy technologies. €156 million will be invested in low-carbon hydrogen along the hydrogen value chain as well as in carbon capture, storage and recovery. The objective of the investments is to contribute to Finland’s goal to achieve carbon neutrality by 2035 by stimulating the introduction of new clean technologies for energy production and use.

Supporting the digital transition: The plan supports the digital transition with investments and reforms amounting to €50 million in high-speed broadband infrastructure across Finland. It increases the quality and availability of communication connections in areas where such connections are not provided based on market mechanisms alone. Digital innovations for social welfare and health care servicesare supported with €100 million.

Reinforcing economic and social resilience: The plan reinforces economic and social resilience by allocating €90 millionto the reform of the Public Employment Services to increase the employment rate. The plan invests €260 million in streamlining healthcare service processes and providing faster and more equal access to social and health services as well as to promote prevention and early identification of health issues.

Members of the College said:
President of the European Commission, Ursula von der Leyen, said: “This first disbursement under NextGenerationEU is great news for Finland and the Finnish people. This is European solidarity at its best, part of the €2.1 billion Finland will receive for its digital transition and helping the country to further prosper and grow while respecting the boundaries of our planet. Therefore the EU supports Finland’s investments in clean energy and decarbonising industry. We will stand by Finland in the years ahead to ensure that the plan delivers on its full potential.”
Johannes Hahn, Commissioner for Budget and Administration, said: “Our NextGenerationEU funds raised on the financial market continue to support the digital and green transition in EU Member States, as just now with the disbursement of the pre-financement to Finland. I am sure that the Finnish citizens, businesses and the society as a whole will profit from the transformative investments and projects.”
Paolo Gentiloni, Commissioner for Economy, said: “Today Finland receives €271 million in pre-financing for its recovery and resilience plan. The Finnish plan is strongly focused on the green transition, with no less than 50% of its total allocation set to support climate objectives. This will help to speed the country towards its ambitious target of carbon neutrality by 2035. The plan also contains an array of measures to boost Finland’s already strong digital competitiveness. I particularly welcome the Finnish plan’s strong social elements, with measures to raise the employment rate, tackle youth unemployment and facilitate access to social and healthcare services.”
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Today, the EU is requesting consultations with Russia at the World Trade Organization (WTO) concerning export restrictions placed by Russia on wood products. The export restrictions consist of significantly increased export duties on certain wood products and a drastic reduction in the number of border crossing points through which exports of wood products can take place.
The Russian restrictions are highly detrimental to the EU wood processing industry, which relies on exports from Russia, and create significant uncertainty on the global wood market. The EU has repeatedly engaged with Russia since Moscow announced these measures in October 2020, without success. They entered into force in January 2022.
Specifically, the EU is challenging:

The increase of export duties on certain wood products:

At the WTO, Russia committed to applying export duties at rates of maximum 13% or 15% for certain quantities of exports. By withdrawing these tariff-rate quotas, Russia now applies export duties at a much higher rate of 80%, and thereby does not respect its commitments under WTO law.

The reduction of the number of border-crossing points for Russian exports of wood products into the EU:

Russia has reduced the number of border crossing points handling wood exports to the EU, from more than 30 to only one (Luttya, in Finland). By prohibiting the use of existing border crossing points that are technically capable of handling such exports, Russia is violating a WTO principle forbidding such restrictions.
Next steps
The dispute settlement consultations that the EU has requested are the first step in WTO dispute settlement proceedings.
If they do not lead to a satisfactory solution, the EU can request that the WTO set up a panel to rule on the matter.
For more information
WTO Dispute Settlement in a Nutshell
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Today, the OECD releases the 2022 edition of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.
The OECD Transfer Pricing Guidelines provide guidance on the application of the “arm’s length principle”, which represents the international consensus on the valuation, for income tax purposes, of cross-border transactions between associated enterprises. In today’s economy where multinational enterprises play an increasingly prominent role, transfer pricing continues to be high on the agenda of tax administrations and taxpayers alike. Governments need to ensure that the taxable profits of MNEs are not artificially shifted out of their jurisdiction and that the tax base reported by MNEs in their country reflects the economic activity undertaken therein and taxpayers need clear guidance on the proper application of the arm’s length principle.
This latest edition consolidates into a single publication the changes to the 2017 edition of the Transfer Pricing Guidelines resulting from:

The report Revised Guidance on the Transactional Profit Split Method, approved by the OECD/G20 Inclusive Framework on BEPS on 4 June 2018, and which replaced the guidance in Chapter II, Section C (paragraphs 2.114-2.151) found in the 2017 Transfer Pricing Guidelines and Annexes II and III to Chapter II;
The report Guidance for Tax Administrations on the Application of the Approach to Hard-to-Value Intangibles, approved by the OECD/G20 Inclusive Framework on BEPS on 4 June 2018, which has been incorporated as Annex II to Chapter VI;
The report Transfer Pricing Guidance on Financial Transactions, adopted by the OECD/G20 Inclusive Framework on BEPS on 20 January 2020, which has been incorporated into Chapter I (new Section D.1.2.2) and in a new Chapter X;
The consistency changes to the rest of the OECD Transfer Pricing Guidelines needed to produce this consolidated version of the Transfer Pricing Guidelines, which were approved by the OECD/G20 Inclusive Framework on BEPS on 7 January 2022.

For more information on the OECD Transfer Pricing Guidelines, visit https://oe.cd/tpg2022
Contacts:

Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration (CTPA) | Pascal.Saint-Amans@oecd.org

Manuel de los Santos, Acting Head of CTPA’s Transfer Pricing Unit | Manuel.DELOSSANTOS@oecd.org

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A proposed $50-billion trust fund could help low-income and vulnerable middle-income countries build resilience to balance of payments shocks and ensure a sustainable recovery.
Even as countries continue to battle COVID-19, it is crucial not to overlook the longer-term challenge of transforming economies to become more resilient to shocks and achieve sustainable and inclusive growth. The pandemic has taught us that not addressing these long-term challenges in a timely manner can have significant economic consequences, with the potential for future balance of payments problems. Climate change is another long-term challenge that threatens macroeconomic stability and growth in many countries through natural disasters and disruptions to industries, job markets, and trade flows, among others.

‘It is the shared responsibility of individual countries and the international community to overcome these global public policy challenges.’

These are global public policy challenges, and it is the shared responsibility of individual countries and the international community to take timely actions. In a previous blog, we explained how the IMF is considering options for channeling some of the $650 billion SDRs issued in August 2021 from countries with strong external financial positions to vulnerable countries through a Resilience and Sustainability Trust, or RST. The RST’s central objective is to provide affordable long-term financing to support countries as they tackle structural challenges.
As we’ve continued to work toward developing the RST, our current thinking on the key design features—which we outline further below—aim to balance the needs of potential contributors and borrowing countries. With broad support from the membership and international partners, we hope that the Trust can be approved by the IMF Executive Board before the upcoming Spring Meetings and for it to become fully operational before the year’s end.
Key design features
Eligibility
About three quarters of the IMF’s membership could be eligible for RST financing. This would include all low-income countries, all developing and vulnerable small states, and all middle-income countries with per capita GNI below 10 times the 2020 IDA operational cutoff , or about $12,000.
Qualifying reforms
RST support aims to address macro-critical longer-term structural challenges that entail significant macroeconomic risks to member countries’ resilience and sustainability, including climate change, pandemic preparedness, and digitalization. That said, not all long-term structural challenges lend themselves to IMF lending. The ability to support reforms in a particular area would depend on the availability of and access to strong diagnostics, the ability to identify policy priorities, and develop the appropriate reform targets. Country ownership and strong commitment of the authorities to do the necessary reforms will be critical to catalyze the much-needed finance from multilateral development banks and the private sector. It is also critical to work in close coordination with other relevant institutions in order to leverage expertise and knowledge. The IMF and World Bank staff have worked closely to develop a coordination framework on RST operations on climate risks, building on earlier experience in supporting countries with structural reforms. Similar frameworks with relevant institutions will be developed in the coming months in this and other reform areas.
Qualification
To qualify for RST support, an eligible member would need: a package of high-quality policy measures consistent with the RST’s purpose; a concurrent financing or non-financing IMF-supported program with appropriate macroeconomic policies to mitigate risks for borrowers and creditors; and sustainable debt and adequate capacity to repay the Fund.
Financing terms
Like the IMF’s highly concessional and currently zero interest rate Trust for low-income countries (PRGT), the RST would be established under the IMF’s power to administer contributor resources, which allows for more flexible terms, notably on maturities, than the terms that apply to the IMF’s general resources. Consistent with the longer-term nature of balance of payments risks the RST seeks to address, its loans would have much longer maturities than traditional IMF financing. Specifically, staff has proposed a 20-year maturity and a 10-year grace period. A tiered interest structure would differentiate financing terms across country groups, with a high degree of concessionality for lower-income members.
Access to financing
Access to RST financing would be determined case by case, based on the strength of reforms and debt sustainability considerations, and is expected to be capped at 150 percent of IMF quota or SDR 1 billion, whichever is smaller. RST lending would be part of a broader financing strategy members would pursue to address longer-term balance of payments risks, involving a mix of multilateral, bilateral official, and private financing.
Financial architecture
Like the PRGT, the RST’s resources would be mobilized on a voluntary basis from members who wish to channel their SDRs or currencies for the benefit of poorer or vulnerable countries . The financial architecture of the RST is designed to ensure that substantial resources for low-cost long-maturity loans can be mobilized while ensuring the safety and liquidity of contributors’ claims on the Trust based on a multilayered risk management framework that maintains the reserve asset nature of channeled SDRs. To meet the projected demand, the RST would need to mobilize initially around $50 billion in total resources. A smooth functioning SDR trading market would underpin successful RST operations.
Collaboration essential for success
Mitigating economic risks from long-term structural challenges requires a consistent and deliberate approach, with strong commitment from policymakers to undertake sometimes difficult reforms. And where such commitment is evident, the international community can help with affordable financing, capacity building, and policy advice. The RST will support such a collaborative effort. We will build on our experience of working with the World Bank and other international institutions and regional development banks, complementing their lending to provide the best support to member countries.
The success of the new Trust will depend equally on economically stronger IMF members providing meaningful resources to help countries improve long-term resilience and sustainability; borrowers willing to go the extra mile to achieve the macroeconomic environment and reform framework conducive to improving balance of payments stability; other international financial institutions supporting with their expertise, knowledge, and financing where feasible. These actions would also help mobilize private sector investment.
Faced with a range of long-term structural challenges that require global action, it has never been more important to support all countries tackle these challenges at an early stage and achieve sustainable growth. The RST could help achieve this goal.
Authors:

Ceyla Pazarbasioglu is Director of the Strategy, Policy, and Review Department (SPR) of the IMF

Uma Ramakrishnan is currently Deputy Director of the IMF’s Strategy, Policy and Review Department

Compliments of the IMF.
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Today, European society needs the contribution of universities and other higher education institutions more than ever. Europe is facing major challenges such as climate change, the digital transformation and aging population, at a time when it is hit by the biggest global health crisis in a century and its economic fall-out. Universities, and the entire higher education sector, have a unique position at the crossroads of education, research and innovation, in shaping sustainable and resilient economies, and in making the European Union greener, more inclusive and more digital.
The two new initiatives adopted today, a European strategy for universities and a Commission proposal for a Council Recommendation on building bridges for effective European higher education cooperation, will support universities in this endeavour.
Margaritis Schinas, Vice-President for Promoting the European Way of Life, said: “European Universities of excellence and inclusiveness are both a condition and a foundation for our European Way of Life. They support open, democratic and fair societies as well as sustained growth, entrepreneurship, integration and employment. With our proposals today, we seek to take transnational cooperation in Higher Education to a new level. Shared values, more mobility, broader scope and synergies to build a genuinely European dimension in our Higher Education.”
Commissioner for Innovation, Research, Culture, Education and Youth, Mariya Gabriel, said: “Today’s proposals will benefit the entire higher education sector, first and foremost our students. They need modern transnational campuses with easy access to mobility abroad to allow for a truly European study path and experience. We stand ready to join forces with the Member States and higher education institutions across Europe. Together we can bring closer education, research and innovation in service to society.  The European Universities alliances are paving the way; by mid-2024 the European budget will support up to 60 European Universities Alliances with more than 500 universities across Europe.”
The European strategy for universities
Europe is home to close to 5,000 higher education institutions, 17.5 million tertiary education students, 1.35 million people teaching in tertiary education and 1.17 million researchers. This strategy intends to support and enable all universities in Europe to adapt to changing conditions, to thrive and to contribute to Europe’s resilience and recovery.  It proposes a set of important actions, to support Europe’s universities towards achieving four objectives:

Strengthen the European dimension of higher education and research;
Consolidate universities as lighthouses of our European way of life with supporting actions focusing on academic and research careers, quality and relevance for future-proof skills, diversity, inclusion, democratic practices, fundamental rights and academic values;
Empower universities as key actors of change in the twin green and digital transition;
Reinforce universities as drivers of EU’s global role and leadership.

Building bridges for effective European higher education cooperation
The Commission proposal for a Council Recommendation aims to enable European higher education institutions to cooperate closer and deeper, to facilitate the implementation of joint transnational educational programmes and activities, pooling capacity and resources, or awarding joint degrees.  It is an invitation to Member States to take action and create appropriate conditions at national level for enabling such closer and sustainable transnational cooperation, more effective implementation of joint educational and research activities and the European Higher Education Area (Bologna) tools. It will facilitate the flow of knowledge and build a stronger link between education, research and innovative industrial communities. The objective is notably to support the provision of high-quality life-long learning opportunities for everyone with a focus on the most needed skills and competences to face today’s economic and societal demands.
Making it happen: four flagship initiatives
The European dimension in higher education and research will be boosted by four flagships initiatives by mid-2024:

Expand to 60 European Universities with more than 500 higher education institutions by mid-2024, with an Erasmus+ indicative budget totalling €1.1 billion for 2021-2027. The aim is to develop and share a common long-term structural, sustainable and systemic cooperation on education, research and innovation, creating European inter-university campuses where students, staff and researchers from all parts of Europe can enjoy seamless mobility and create new knowledge together, across countries and disciplines.
Work towards a legal statute for alliances of higher education institutions to allow them to pool resources, capacities and their strengths, with an Erasmus+ pilot as of 2022.
Work towards a joint European degree to recognise the value of transnational experiences in the higher education qualification the students obtain and cut the red tape for delivering joint programmes.

Scale-up the European Student Card initiative by deploying a unique European Student Identifier available to all mobile students in 2022 and to all students in universities in Europe by mid-2024, to facilitate mobility at all levels.

Next Steps
Coordination of efforts between the EU, Member States, regions, civil society and the higher education sector is key to make the European strategy for universities a reality. The Commission invites the Council, Member States and universities to discuss on this policy agenda and work jointly towards future-proof universities.
The Commission proposal for a Council recommendation on building bridges for effective European higher education cooperation will be discussed with Member States. Once adopted by the Council, the Commission will support Member States and relevant partners in implementing this Council Recommendation.
Background
The Commission announced its intention to initiate the co-creation of a transformation agenda for higher education in its Communication on Achieving the European Education Area by 2025 and its Communication on a new European Research Area. The Council Conclusions on the New European Research Area, adopted on 1 December 2020, stress “that stronger synergies and interconnections between the ERA, the EHEA and the higher education related elements of the European Education Area (EEA), are to be developed”. In its Resolution of 26 February 2021 on ‘a strategic framework for European cooperation in education and training towards the European Education Area and beyond (2021-2030)’, the Council has identified the establishment of an agenda for higher education transformation as a concrete action in the priority area of higher education.
The ERA Policy Agenda annexed to the Council Conclusions on the Future Governance of the European Research Area, adopted on 26 November 2021, support actions relevant for universities including a dedicated action on empowering higher education institutions to develop in line with the European Research Area and in synergy with the European Education Area.
Compliments of the European Commission.
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