Welcome address by Philip R. Lane, Member of the Executive Board of the ECB, at the ECB Conference on Money Markets | 8 November 2021 |
Welcome to our annual conference on money markets. This is a prominent event in our calendar: it is difficult to over-state the importance of understanding money markets for the design and implementation of monetary policy. Money markets are a seismograph for central bank liquidity conditions and market expectations of future policy, while money market rates are central to the transmission of monetary policy through their impact on economy-wide financing conditions.
In recent weeks, there has been volatility in money markets around the world, as traders work to absorb the implications of the recent increase in inflation rates for central bank policy decisions. At the ECB, our decision-making is guided by our new monetary policy strategy, as demonstrated by the revision of our interest rate forward guidance that we decided in July.
A central element in our monetary policy strategy is the principle that if the economy is close to the effective lower bound it is necessary to adopt especially forceful or persistent monetary policy action to avoid negative deviations from the inflation target becoming entrenched. Despite the high current inflation rate, the analysis indicating that the euro area is still confronted with weak medium-term inflation dynamics remains compelling. In particular, the backdrop of the adverse demand shocks and positive supply developments during the pre-pandemic period — in which inflation averaged just 0.9 percent between 2014 and 2019 – has had a persistent impact on price- and wage-setting dynamics. In 2020, the inflation rate further declined to 0.3 percent on account of the initial adverse pandemic shock to the economy and inflation. The euro area has been confronted for an extended period with extensive slack and weak medium-term aggregate demand conditions, as reflected in the chronically-large aggregate current account surplus. While fiscal policy has been forcefully counter-cyclical during the pandemic (including the launch of the innovative Next Generation EU initiative), the capacity of fiscal policy to support aggregate demand dynamics over the medium term is constrained by high aggregate national debt levels and the absence of a permanent central fiscal capacity. These factors reinforce our strategic assessment that extensive monetary accommodation is required to ensure that inflation pressure builds up on a persistent basis in order to stabilise inflation at two per cent over the medium term.
How do we reconcile the current high inflation rate and the subdued prospects for inflation over the medium term? Our analysis points to three temporary factors that are acting to push up inflation today but are projected to fade over the course of next year. First, the pandemic initially exerted powerful downward pressure on inflation. In part, this was due to the severe drop in economic activity during 2020; in part, some policy measures directly contributed to lower inflation in 2020, especially the temporary VAT cut in Germany. The economic recovery during 2021 and termination of temporary tax cuts has operated in the opposite direction, temporarily pushing up the inflation rate. In particular, the base effect of unusually-low prices during 2020 has contributed to higher inflation during 2021, but these unusually-low prices will fall out of the inflation calculation (which compares prices today with prices twelve months ago) at the end of this year. In terms of individual factors, the reversal of the temporary German VAT cut is a quantitatively-important component that will no longer feature in the data in the new year.[1]
Second, inflation pressures related to bottlenecks can in part be attributed to the unexpectedly-strong European and global recovery from the pandemic shock. In the June 2020 Eurosystem staff macroeconomic projections, it was foreseen that euro area GDP for 2021 would remain 4 percentage points below the 2019 pre-pandemic level; in the latest September 2021 projections, euro area GDP for 2021 is foreseen to run only 1.8 percentage points below the 2019 level. Similarly, at the global level, the June 2020 update to the IMF World Economic Outlook (WEO) forecast assessed that world GDP in 2021 would barely exceed the 2019 level (by 0.2 percentage points), whereas the October 2021 WEO puts global output in 2021 at 2.6 percentage points above the 2019 level. The performance is much stronger than initially expected, which can be attributed to the success of vaccination campaigns and other public health measures, together with extensive policy support around the world. However, a by-product of an unexpectedly-strong recovery is that there have been extensive demand-supply mismatches in the global markets for commodities and manufactured goods, which have been exacerbated by some sector-specific supply disruptions (including in the semi-conductor industry). There are also mis-matches in some segments of domestic labour markets, especially in those services sectors that suffered the most from the severe lockdowns but are now experiencing high demand, such as in hospitality.
However, the nature of such bottleneck-induced inflation is that there is an inherent temporary component. In particular, demand-supply mismatches should be alleviated over time through the expansion of supply capacity, together with some normalisation of demand patterns following the reopening. All else equal, if lack of supply is putting upward pressure on prices today, the introduction of extra supply over time will operate in the opposite direction as an anti-inflationary force. The expansion of supply capacity can also be expected in domestic labour markets, through the reversal of the pandemic-related drop in the labour force participation rate and the return of many international workers that had temporarily gone back to their home countries.
Third, the largest single contributor to the currently-high inflation rate has been the surge in energy prices. While energy inflation has been influenced by both base effects (energy prices dropped sharply in 2020) and bottleneck effects (demand-supply mismatches have been extensive for both oil and natural gas), the contribution of energy to overall inflation is typically stronger in the near term than in the medium term, also due to the adverse macroeconomic impact of high energy prices. In particular, since the euro area is a significant net importer of energy, an increase in global energy prices constitutes a negative terms of trade shock, depressing the net revenues of European firms and the disposable income of European households. This adverse aggregate demand channel means that an energy price shock can simultaneously raise headline inflation but, all else equal, exert downward pressure on the path of underlying inflation.[2]
Taken together, these three forces explain why inflation is temporarily high and provide solid reasons to expect inflation to decline through the course of next year.
In relation to the connection between our inflation analysis and our interest rate policy, it is always necessary to keep in mind that monetary policy affects the inflation rate only with a considerable lag. In particular, an abrupt tightening of monetary policy today would not lower the currently-high inflation rates but would serve to slow down the economy and reduce employment over the next couple of years and thereby reduce medium-term inflation pressure. Given our assessment that the medium-term inflation trajectory remains below our two per cent target, it would be counter-productive to tighten monetary policy at the current juncture.
In particular, our new forward guidance specifies three conditions that need to be met before we would start raising our policy rates. The first condition is that the Governing Council “sees inflation reaching two per cent well ahead of the end of its projection horizon.” The second condition is that the two per cent target is reached “durably for the rest of the projection horizon”. The third condition is that the Governing Council “judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term.”[3]
With regard to temporarily-high inflation, the requirement that we need to see inflation reaching two per cent not only “well ahead of the end of our projection horizon” but also “durably for the rest of the projection horizon” ensures that interest rate policy will not react to inflation shocks that are expected to fade away before the end of our projection horizon (which will include 2024 in the December round).
Moreover, the condition that “realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term” serves an important purpose in our analysis of the incoming data: it sharply differentiates between the volatile components of headline inflation and the dynamics of underlying inflation, which is the persistent component that is the best guide to medium-term inflation dynamics. In assessing underlying inflation, it is critically important to filter out the temporary impact of base effects and bottlenecks on goods inflation and services inflation.
The persistent component in wage dynamics will be central in the assessment of underlying inflation, especially in view of the high share of services in the overall price level and the high share of labour in services value added. Accordingly, tracking wage outcomes – adjusted for productivity – and differentiating between transitory and persistent components in wage settlements will be pivotal in assessing progress in the realised path of underlying inflation. In particular, a one-off shift in the level of wages as part of the adjustment to a transitory unexpected increase in the price level does not imply a trend shift in the path of underlying inflation.
In addition to rate forward guidance, the calibration of asset purchases also plays a major role in ensuring that the monetary stance is sufficiently accommodative to deliver the timely attainment of our medium-term two per cent target. In particular, the compression of term premia through the duration extraction channel is quantitatively-significant in determining longer-term yields and ensuring that financing conditions are sufficiently supportive to be consistent with the delivery of our medium-term inflation objective.
Finally, it is vitally important that the ECB is always attentive to the full risk distribution of possible outcomes, rather than focusing only on the baseline assessment. In our latest monetary policy meeting, we assessed that, in the near term, supply bottlenecks and rising energy prices are the main risks to the pace of recovery and the outlook for inflation. If supply shortages and higher energy prices last longer, these could slow down the recovery. At the same time, if persistent bottlenecks feed through into higher than anticipated wage rises or the economy returns more quickly to full capacity, price pressures could become stronger. However, economic activity could outperform our expectations if consumers become more confident and save less than currently expected. We will continuously reassess these risk factors, in line with incoming data flows.
Compliments of the European Central Bank.

By pushing down the current price level compared with the future price level, a temporary VAT cut can be an effective stimulus measure during a downturn as it encourages a shift in consumption towards the present. The data suggest that the German VAT cut was effective in raising consumption: see Bachmann, R., Born, B., Goldfayn, O., Kocharkov, G., Luetticke, R. and Weber, M. (2021), “A Temporary VAT Cut as Unconventional Fiscal Policy”, Discussion Paper Series, No. 16690, Centre for Economic Policy Research, London.

Under a different scenario, if energy prices rise due to hikes in carbon taxes, there is no decline in the terms of trade and aggregate demand can be protected through the recycling of carbon tax revenues.

Our two percent target is expressed in relation to the HICP. While our strategy recognises that the inclusion of the costs related to owner-occupied housing in the HICP would better represent the inflation rate that is relevant for households, the full inclusion of owner-occupied housing in the HICP is a multi-year project. In the meantime, the Governing Council in its monetary policy assessments will take into account inflation measures that include initial estimates of the cost of owner-occupied housing in its wider set of supplementary inflation indicators. However, in terms of the two percent inflation target, clarity requires that this is guided by the prevailing HICP measure, which is produced by Eurostat on a timely, comprehensive basis with the application of the highest statistical standards.

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European Commission President Ursula von der Leyen announced today €1 billion at the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow as the European Union contribution to the Global Forests Finance Pledge. This 5-year support package from the EU budget will help partner countries to protect, restore and sustainably manage forests worldwide and deliver on the Paris Agreement.
President Ursula von der Leyen said: “Forests are the green lungs of the earth. We need to protect and restore them. I gladly announce that we are pledging €1 billion to protect world forests. This is a clear sign of the EU’s commitment to lead global change to protect our planet, in line with our EU Green Deal.”
Commissioner for International Partnerships, Jutta Urpilainen, added: “The EU’s contribution pledged today to sustainably manage, restore and protect forests will support sustainable growth and jobs, climate mitigation and adaptation, as well as preservation of biodiversity in our partner countries. The European Union will work in partnerships with governments, civil society, indigenous peoples and private actors, in a multilateral approach, to achieve the Sustainable Development Goals and to put people and planet first. The specific focus on the Congo Basin is a timely message on the importance of this unique area and its ecosystem.”
This pledge is the European Commission’s contribution to the Global Forests pledge made at COP26 by the international community. As a follow-up, the EU will work with partner countries to conserve, restore and ensure the sustainable management of forests in a comprehensive and integrated way. Within the €1 billion pledged today, €250 million will go to the Congo Basin, covering eight countries (Cameroon, Central African Republic, Democratic Republic of the Congo, Republic of the Congo, Equatorial Guinea, Gabon, Burundi and Rwanda) to protect the world’s second largest tropical rainforest region while improving livelihoods for its populations.
Background
More than 1.6 billion people all over the world depend on forests for food, medicine and livelihoods. Forests preserve soil and support 80% of the world’s biodiversity, with the biggest forest basins outside the EU’s territory.
Because they produce oxygen and purify the air, forests are also essential for mitigating climate change as they absorb up to 30% of Green House Gas Emissions. They are equally important for climate adaptation. Greenhouse gas emissions linked to deforestation are the second biggest cause of climate change. Between 1990 and 2016, the world has been losing forest cover at a rate equivalent to about 800 football pitches an hour.
Since the early 1990s, the EU has been supporting forest conservation, particularly in Central Africa through the EU flagship ECOFAC programme (Preserving Biodiversity and fragile ecosystems in Central Africa). This continuous support helped conserve around 16 million ha of humid forests in the Congo Basin, while promoting sustainable development and livelihoods amongst the local population.
Today’s European Commission pledge is funded by the NDICI-Global Europe instrument.
Compliments of the European Commission.
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Speech by Christine Lagarde, President of the ECB, on the occasion of the 175th anniversary of Banco de Portugal in Lisbon |
Introduction
I am delighted to be here in Lisbon to celebrate the 175th anniversary of the Banco de Portugal, an institution that can be proud of its contribution to Portuguese history.
And it is a history that is fused with Europe. Lisbon was home to the peaceful Carnation Revolution of 1974, which ushered in democracy and marked a crucial step towards Portugal’s membership of the European Community. Not long after, the city gave its name to one of the most important treaties to have shaped the European Union – the Treaty of Lisbon.
But Portugal’s past is also rich with lessons for Europe today. One of the defining events for Portugal was the Lisbon earthquake of 1755, which struck the city in the early hours of a November morning.
The earthquake was first and foremost a human tragedy. The number of deaths in the city was estimated at between 20,000 and 30,000.[1] The catastrophe sparked a great debate about the causes of such destruction, attracting the finest minds of the era, such as Voltaire and Kant, and marking a seminal moment in the European Enlightenment.
The earthquake was also an enormous economic shock, costing between 32% and 48% of Portuguese GDP.[2] Yet the Portuguese leaders of that time managed to turn a terrible disaster into a starting point for transformation. They acted immediately and forcefully in the direct aftermath of the earthquake, providing life-saving assistance to the city’s population and focusing on recovering from the natural disaster. This prevented an even greater catastrophe.
Perhaps most crucially, the earthquake provided the government with a now-or-never moment for a far-reaching reform of the economy.[3] Portugal launched a series of measures, including industrial development policies, that would go on to revitalise the country in the latter half of the eighteenth century.
There are some clear parallels between that episode and the situation in Europe today as we recover from the coronavirus (COVID-19) pandemic.
We have also faced a human tragedy, with over 800,000 people in the EU losing their lives.[4]
We have reacted decisively to prevent even worse outcomes: policies have worked together in an unprecedented way to preserve jobs and stave off bankruptcies.
And now we have a chance to transform the economy, accelerating the necessary green and digital transitions and protecting ourselves in a fast-changing world.
In this process, we have drawn – and must still draw – on the strengths that characterised Portugal’s response to the unexpected disaster of the Lisbon earthquake: resolve, recovery, and resilience.
Resolve and recovery
Following the outbreak of the pandemic, the euro area experienced a highly unusual recession.
We saw an extraordinary contraction in economic activity with euro area real GDP’s steepest fall on record.[5] Portugal’s economy was hit even harder.[6] Lockdowns and physical distancing measures delivered a particularly hard blow to the services sector, which is the most labour-intensive part of the economy. This threatened jobs and incomes on a previously unforeseen scale.
But the historic magnitude of the pandemic crisis was matched by the resolve of Europe’s policy response to overcome it. Faced with an unprecedented threat to citizens’ welfare, we saw an unprecedented degree of alignment between monetary policy, fiscal policy and regulatory policy – and unprecedented cooperation between European countries.
In particular, national and European policies worked together to protect jobs by financing wide-ranging job retention schemes. More than one-quarter of the labour force in Portugal benefited from temporary state support during the most acute phase of the crisis in 2020.[7] This was aided by close to €6 billion in loans under the EU’s SURE instrument.[8]
This decisive joint intervention meant that, despite the scale of the contraction, the unemployment rate increased only marginally – by less than half a percentage point between 2019 and 2020 – in Portugal and the euro area as a whole.[9] For comparison, after the great financial crisis, the unemployment rate rose by well over 4 percentage points in both.
The ECB also played its role. Our pandemic emergency purchase programme (PEPP) ensured that financing conditions for all sectors of the economy remained favourable, even during the darkest moments of the crisis. Coupled with measures taken by ECB Banking Supervision, our policy response is estimated to have saved more than one million jobs.[10]
The overall European policy mix proved crucial in bridging the crisis while vaccination campaigns got underway. Today over three-quarters of adults in Europe are fully vaccinated.[11] Portugal has the highest rate of fully vaccinated people in the world, according to one measure.[12]
As a result of Europe’s resolve, we have created the conditions for a sustained recovery.
We expect to see euro area GDP back at its pre-pandemic level before the end of this year, while Portugal’s GDP should reach that level by mid-2022.[13] After the great financial crisis, it took the euro area seven years to get back to its pre-crisis level and Portugal a decade. However, growth momentum is moderating somewhat owing to the effects of supply bottlenecks and the rise in energy prices.
Market interest rates have risen over the past weeks, mainly as a result of greater market uncertainty about the inflation outlook, spillovers from abroad to policy rate expectations in the euro area, and some questions about the calibration of asset purchases in a post-pandemic world.
In our forward guidance on interest rates, we have clearly articulated the three conditions that need to be satisfied before rates will start to rise. Despite the current inflation surge, the outlook for inflation over the medium term remains subdued, and thus these three conditions are very unlikely to be satisfied next year.
Regarding asset purchases, for the time being, we continue to use the PEPP to safeguard favourable financing conditions and ensure that borrowing costs for all sectors of the economy do not unduly tighten. An undue tightening of financing conditions is not desirable at a time when purchasing power is already being squeezed by higher energy and fuel bills, and it would represent an unwarranted headwind for the recovery.
As for the calibration of bond purchases in a post-pandemic world, we will announce our intentions in December. Even after the expected end of the pandemic emergency, it will be still important that monetary policy – including the appropriate calibration of asset purchases – supports the recovery and the sustainable return of inflation to our target of 2%.
European resilience in an uncertain world
With the recovery underway, now is the time for Europe to focus on building more resilience.
The pandemic has created both internal and external challenges for Europe.
Internally, it has irreversibly sped up the green and digital transitions. Nine out of ten Europeans now want the EU to become climate-neutral by 2050.[14] And the pandemic has accelerated the digitalisation of products and services in Europe by seven years, according to one estimate.[15]
This is a positive development, but it could create difficulties if the transition is not managed well. Specifically, if we move too slowly, there is a risk that the green transition may cause more volatility in energy prices. The digital transition could also increase inequality between those with high levels of digital skills and those without.
Externally, the pandemic has shown us how vulnerable we are to disruptions that threaten the global trading order – and this is particularly true for Europe, with our deep integration into the global economy.
Indeed, today’s supply chain disruptions may only be a dress rehearsal for some of the difficulties we will face when natural disasters become more frequent, or if international relations become more fraught and supply chains start to be influenced by geopolitical biases.
So how can we strengthen our resilience along these two dimensions?
On the internal front, we need to step up our investment in the sectors of the future. And we have an ideal tool for the job: the €750 billion Next Generation EU (NGEU) fund. It gives us a mechanism to stay focused on future-oriented investment even when national fiscal policies become less expansionary after the pandemic. And it helps reduce the green and digital divide within Europe, which is crucial for ensuring that future growth is equitable.
There are major opportunities here for Portugal. Over the last 15 years, the carbon intensity of Portugal’s economy was over one-fifth above the EU average.[16] The European Commission’s most recent Digital Economy and Society Index placed Portugal 18th out of 27 in terms of digital performance.[17]
But now Portugal, one of the first to submit proposals for NGEU funds, is set to receive €16.6 billion in grants and loans, a sizeable majority of which will support green and digital initiatives.[18] This should reinforce the positive trends that are already underway: for example, energy sector carbon emissions have halved since 2005.[19]
To make the most of this opportunity, all economies need to be able to adapt to changes faster. As demand moves towards the sectors of the future, supply needs to be able to adjust with it.
This is an important reason why NGEU is linked to reform plans that allow the economy to make the most of the European investment push. In this area, Europe can in fact learn from Portugal’s experience. The country suffered very badly during the sovereign debt crisis, but it managed to implement difficult labour market reforms as part of an economic adjustment programme. These reforms ultimately increased the labour market’s ability to adjust to changes.[20]
On the external front, we need to be ready for a more uncertain world. As I have recently argued, this means using Europe’s economic weight to support reciprocated trade openness globally, while strengthening its own domestic demand to insure against a more volatile global economy.[21]
Europe’s goal of “open strategic autonomy” helps reduce vulnerabilities while continuing to support open trade. That goal can include pursuing supply chain diversification for those inputs that have strategic implications for the European economy. For example, 93% of the EU’s supply of magnesium, a crucial resource for the automotive and construction industries, comes from China alone.[22]
As a result, regionalisation will likely become more important for Europe, a trend that was already clear before the pandemic. Export integration within the euro area consistently outpaced export integration with the rest of the world in the decade following the great financial crisis.[23] In fact, by 2019 over 70% of the euro area’s contribution to global value chains was regional.[24]
This is a trend that Portugal is well placed to benefit from. Its gains in competitiveness during the last crisis helped the country enjoy strong export growth in the years leading up to the pandemic.[25] In recent years, Portugal has formed stronger trade ties with the euro area as well. By July 2021, roughly 65% of Portugal goods exports went to the euro area, compared with under 60% back in 2014.
Conclusion
Let me conclude.
For Europe to master today’s challenges, we must demonstrate a drive and capacity for reform. That requires courage. We should follow in the footsteps of the people of Portugal all those generations ago.
The pandemic, like the Lisbon earthquake, was a human tragedy and an unexpected economic shock. But through its resolve, Europe has achieved a strong economic recovery. Let us now work on building a more resilient future.
And as we look to that future, I am reminded of the Portuguese poet Fernando Pessoa, who once wrote, “Trago comigo as feridas de todas as batalhas que evitei” – “I bear the wounds of all the battles I’ve avoided.”
If Europe does not seize the unique opportunity presented by the pandemic and push ahead with the transformation of the economy, we will all be the worse for it in the long run.
But we can take courage from the example set by our forebears. If Portugal could achieve such a fundamental revitalisation of its economy in the eighteenth century, so too can Europe in the twenty-first century.
Europe should embrace this lesson from Lisbon.
Compliments of the European Central Bank.
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Building on the June 2021 commitment of G7 Leaders to launch a values-driven, high-standard, and transparent infrastructure partnership to meet global infrastructure development needs, U.S. President Biden and European Commission President von der Leyen hosted a discussion on the margins of COP26 with UK Prime Minister Johnson, Barbadian Prime Minister Mottley, Canadian Prime Minister Trudeau, Colombian President Duque, Ecuadorian President Lasso, Democratic Republic of the Congo President Tshisekedi, Indian Prime Minister Modi, Japanese Prime Minister Kishida, and Nigerian President Buhari on how infrastructure initiatives must simultaneously advance prosperity and combat the climate crisis, in line with the Sustainable Development Goals and the Paris Agreement.  Global leaders discussed how the Build Back Better World, Global Gateway and Clean Green Initiatives will jumpstart investment, sharpen focus, and mobilize resources to meet critical infrastructure needs to support economic growth, while ensuring that this infrastructure is clean, resilient, and consistent with a net-zero future.  President Lasso, Prime Minister Modi, President Buhari, and President Duque shared their perspectives on the challenges their countries have previously faced with infrastructure development and principles they would like to see from future infrastructure initiatives. UN Special Envoy for Climate Action and Finance Mark Carney and World Bank Group President David Malpass spoke on the imperative of mobilizing investment  from the private sector, international financial institutions and multilateral development banks, including through country platforms, to achieve these goals.
President Biden, President von der Leyen, and Prime Minister Johnson endorsed five key principles for infrastructure development:

Infrastructure should be climate resilient and developed through a climate lens.

We commit to build resilient, low- and zero-carbon infrastructure systems that are aligned with the pathways towards net-zero emissions by 2050, which are needed to keep the goal of limiting global average temperature change to 1.5 degrees Celsius within reach. Further, we commit to viewing all projects carried out through infrastructure development partnerships through the lens of climate change.

Strong and inclusive partnerships between host countries, developed country support, and the private sector are critical to developing sustainable infrastructure.

Infrastructure designed, financed, and constructed in partnership with those whom it benefits will last longer, be more inclusive, and generate greater and more sustainable development impacts. We will consult with stakeholders—including representatives of civil society, governments, NGOs, and the private sector to better understand their priorities and development needs.

Infrastructure should be financed, constructed, developed, operated, and maintained in accordance with high standards.

We resolve to uphold high standards for infrastructure investments, promoting the implementation of the G20 Principles for Quality Infrastructure Investments as the baseline. Environmental, Social and Governance standards help safeguard against graft and other forms of corruption; mitigate against climate risks and risks of ecosystem degradation; promote skills transfer and preserve labor protections; avoid unsustainable costs for taxpayers; and, crucially, promote long-term economic and social benefits for partner countries.

A new paradigm of climate finance—spanning both public and private sources—is required to mobilize the trillions needed to meet net-zero by 2050 and keep 1.5 degrees within reach.

The world must mobilize and align the trillions of dollars in capital over the next three decades to meet net-zero by 2050, the majority of which will be needed in developing and emerging economies. Mobilizing capital at this scale requires a collaborative effort from all of us, including governments, the private sector, and development finance institutions, as well as better mechanisms to match finance and technical assistance with country projects, including through country partnerships.

Climate-smart infrastructure development should play an important role in boosting economic recovery and sustainable job creation.

Infrastructure investment should also drive job creation and support inclusive economic recovery. We believe our collective efforts to combat the climate crisis can present the greatest economic opportunity of our time: the opportunity to build the industries of the future through equitable, inclusive, and sustainable economic development worldwide.
President Biden, European Commission President von der Leyen, and Prime Minister Johnson called on countries around the world to make similar commitments and take action to spur a global transformation towards reliable, climate-smart infrastructure.
Compliments of the European Commission.
The post U.S. President Biden, European Commission President von der Leyen and UK Prime minister Johnson announce Commitment to addressing climate crisis through infrastructure development first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Excellencies, Ladies and Gentlemen, Fellow leaders,
I welcome and endorse the World Leaders’ Summit Statement on the Breakthrough Agenda. And the European Union is proud to support all four breakthroughs on power; road transport; steel; and hydrogen. I am especially glad that on this COP26, finally, we prioritise the importance of innovation. Because it is only through innovation that we are going to get to our goal of net zero. And therefore, scientists and innovators, entrepreneurs and investors, that is whom we have to bring together. They are central for the innovation, they are central to move towards an economy that gives more to the planet than it takes away.
For Europe, the European Green Deal is the driving force behind scaling up innovation. It is the Commission and the Member States’ governments that, of course, must provide legal frameworks and funding for cutting-edge technologies, such as direct air captures or zero-emission shipping. And of course, it is the private sector that we have to bring along too, to invest, to scale up the technologies that are already at the horizon, like renewable hydrogen or precision and carbon farming. It is reform and regulation, and investment that we have to bring together, public and private.
But we should not forget the third driving force behind all of this, and these are our citizens, these are our people, who are asking us to deliver, to finally bring together all the things that are necessary, that we move up to a true circular economy. And we know that we all have to transform our way of living, our way of working, as well as our way of producing and consuming. That is only possible through innovation. And only through innovation will we be able to take our people along. Investment on one hand, concrete action on the other hand.
Horizon Europe, the world’s largest, publicly funded multinational research and innovation programme is worth EUR 85 billion. Horizon Europe will devote at least 35% of its budget to climate objectives. And to be very concrete, just last month, we launched new Horizon Missions. One is to have 100 climate neutral cities in Europe by 2030. And I am very glad that we see finally the revival of Mission Innovation. Mission Innovation is the striving example of global engagement. All governments pool their investments in clean energy research and innovation. It is over 95% of total government investment that we have finally in Mission Innovation. And it is good that it is back on the scene. We needed this and it is good that we have it now.
In our new global mission on climate neutral smart cities, we will work together with Global Covenant of Mayors. All this, dear friends, Ladies and Gentlemen, is concrete action on the ground. And in this context, I am also very pleased to launch today, together with Bill Gates and the European Investment Bank, the EU-Catalyst Programme. It is worth USD 1 billion. It is a programme that will finance industries, breakthrough innovation to bring the newest climate technologies to the market in Europe. Immediately after this session, Bill and I will launch this new initiative.
Fellow leaders,
Ladies and Gentlemen, my friends,
It is innovation that leads the way. It is what citizens want from us and we will not disappoint them. The global race for net zero is on and there is no better race to win.
Thank you.
Compliments of the European Commission.
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European Commission President von der Leyen and United States President Biden agreed today to start discussions on a Global Arrangement on Sustainable Steel and Aluminium. This marks a new milestone in the transatlantic relationship, and in EU-US efforts to achieve the decarbonisation of the global steel and aluminium industries in the fight against climate change. The two Presidents also agreed to pause the bilateral World Trade Organization disputes on steel and aluminium. This builds on our recent successes in rebooting the transatlantic trade relationship, such as the launch of the EU-US Trade and Technology Council and the suspension of tariffs in the Boeing-Airbus disputes.
Steel and aluminium manufacturing is one of the highest carbon emission sources globally. For steel and aluminium production and trade to be sustainable, we must address the carbon intensity of the industry, together with problems related to overcapacity. The Global Arrangement will seek to ensure the long-term viability of our industries, encourage low-carbon intensity steel and aluminium production and trade, and restore market-oriented conditions. The arrangement will be open to all like-minded partners to join.
Furthermore, following the United States’ announcement that they will remove Section 232 tariffs on EU steel and aluminium exports up to past trade volumes, the European Union will take the steps to suspend its rebalancing measures against the United States. The two sides have also agreed to pause their respective WTO disputes on this issue.
European Commission President Ursula von der Leyen said: “The global arrangement will add a powerful new tool in our quest for sustainability, achieving climate neutrality, and ensuring a level playing field for our steel and aluminium industries. Defusing yet another source of tension in the transatlantic trade partnership will help industries on both sides. This is an important milestone for our renewed, forward-looking agenda with the US.”
Executive Vice-President and Commissioner for Trade Valdis Dombrovskis said: “We have today agreed to hit the pause button on our steel and aluminium trade dispute, while hitting the start button on cooperating on a new Global Arrangement on Sustainable Steel and Aluminium. This is another significant step in the wider reset of transatlantic relations. The US decision to restore past trading volumes of EU steel and aluminium exports means we can move on from a major irritant with the US. It gives us breathing space to work on a comprehensive solution to tackle global overcapacity. The EU will therefore reciprocate this de-escalation by suspending our own rebalancing measures. We can now focus on a more forward-looking transatlantic trade agenda, while also working on a final, lasting outcome to this issue.”
Background
In June 2018, the US Trump administration introduced tariffs on €6.4 billion of European steel and aluminium exports, and further tariffs in January 2020 that affected around €40 million of EU exports of certain derivative steel and aluminium products. The EU introduced rebalancing measures in June 2018 on US exports to the EU in a value of €2.8 billion (a similar EU response followed the second set of US tariffs in 2020). The remaining rebalancing measures, affecting exports valued up to €3.6 billion, were scheduled to enter into force on 1 June 2021. The EU suspended these measures until 1 December 2021 in order to give space for the parties to work together on a longer-term solution. Following today’s announcement by the US, these measures will not be introduced.
Compliments of the European Commission.
The post EU and US agree to start discussions on a Global Arrangement on Sustainable Steel and Aluminium and suspend steel and aluminium trade disputes first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

What is the Global Arrangement on Sustainable Steel and Aluminium?
The arrangement is intended to facilitate the decarbonising of the steel and aluminium industries, as well as addressing the issue of overcapacity in these industries caused by non-market practices in some economies.
The EU and US have agreed to start discussions on this Arrangement as soon as possible, and conclude them within two years. We want to make this Arrangement open to all like-minded economies.
How will the Arrangement help achieve decarbonisation?
Each participant in the arrangement should undertake to facilitate trade in steel and aluminium that meets relevant standards, for instance as regards low-carbon intensity.
They should ensure that domestic policies support the production of steel and aluminium with low carbon intensity.
In addition, they should consult on government investment in decarbonisation, and refrain from non-market practices that contribute to high carbon intensity steel and aluminium production.
How will the Arrangement restore market-oriented conditions in the steel trade?
Each participant will promote trade in carbon friendly steel and aluminium.
Each participant will ensure that domestic policies encourage “Green Steel and Aluminium production”.
Participants would undertake to apply measures in line with their trade defence rules.
Moreover, they will refrain from non-market practices that contribute to non-market oriented capacity.
They will also screen inward investments from non-market-oriented actors in accordance with their respective domestic legal framework.
Is this Arrangement exclusive to the EU and the US?
No; the EU and the US will encourage other like-minded economies to participate.
Will you negotiate one arrangement for both sectors or two separate arrangements?
This is not yet decided, and will depend upon further consultations between the EU and US and with the respective industries.
What did the US do with the Section 232 tariffs?
The US has announced that it will no longer apply the Section 232 tariffs on a certain amount of EU exports of steel and aluminium (under “tariff-rate quotas” (TRQs)), effective as of 1st December 2021.
These TRQs amount to the historical volumes of EU steel and aluminium exports to the US.
What are “historical volumes”?
The volume of EU steel and aluminium that was exported to the US prior to the imposition of the 232 measures in 2018.
What is the EU doing in response?
The EU intends to suspend its rebalancing measures against the US that were introduced in June 2018 in response to the US Section 232 tariffs on steel, aluminium and derivative products. It will also suspend the increase in rebalancing measures set for 1 December.
In addition, the EU has agreed with the US that both sides will hit the pause button on their respective WTO cases against each other.
What are the “rebalancing measures”?
The US tariffs applied towards the EU from June 2018 affected €6.4 billion of European steel and aluminium exports, and further tariffs applied from February 2020 affected around €40 million of EU exports of certain derivative steel and aluminium products.
In response, the EU introduced rebalancing measures in June 2018 on US exports to the EU in a value of €2.8 billion.
The remaining rebalancing measures, affecting exports valued up to €3.6 billion, were scheduled to enter into force on 1 June 2021. The EU suspended these measures until 1 December 2021 in order to give space for the parties to work together to reach a longer-term solution.
Following today’s announcement by the US, all these measures will be suspended.
What are the next steps?
The EU will initiate its decision-making procedure under the EU Trade Enforcement Regulation with a view to suspend the rebalancing measures. The decision-making involves an examination and voting procedure with Member States.
How will this help EU workers and business?
The removal of the Section 232 tariffs on historical volumes of EU exports of steel and aluminium should reduce costs for steel and aluminium exporters, helping to support the sustainability of two industries that together employ 3.6 million people in the EU.
Compliments of the European Commission.
The post Questions and Answers: EU-US negotiations on trade on steel and aluminium first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The United States and the EU have today taken joint steps to re-establish historical transatlantic trade flows in steel and aluminium and to strengthen their partnership and address shared challenges in the steel and aluminium sector. As a part of that partnership, they intend to negotiate for the first time, a global arrangement to address carbon intensity and global overcapacity.
The European Union and the United States have a shared commitment to joint action and deepened cooperation in these sectors and are taking joint steps to defend workers, industries and communities from global overcapacity and climate change, including through a new arrangement to discourage trade in high-carbon steel and aluminum that contributes to global excess capacity from other countries and ensure that domestic policies support lowering the carbon intensity of these industries.
In a demonstration of renewed trust, and reflecting long-standing security and supply chain ties, the United States will not apply section 232 duties and will allow duty-free importation steel and aluminium from the EU at a historical-based volume and the EU will suspend related tariffs on U.S. products.
As a first step, the United States and the EU will create a technical working group charged with developing a common methodology and share relevant data for assessing the embedded emissions of traded steel and aluminum.
The global arrangement reflects a joint commitment to use trade policy to confront the threats of climate change and global market distortions, putting their workers and communities at the center of the trade agenda. The global arrangement will be open to any interested country that shares our commitment to achieving the goals of restoring market-orientation and reducing trade in carbon intensive steel and aluminium products.
Compliments of the European Commission.
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Today, the Commission has taken action to improve the cybersecurity of wireless devices available on the European market. As mobile phones, smart watches, fitness trackers and wireless toys are more and more present in our everyday life, cyber threats pose a growing risk for every consumer. The delegated act to the Radio Equipment Directive adopted today aims to make sure that all wireless devices are safe before being sold on the EU market. This act lays down new legal requirements for cybersecurity safeguards, which manufacturers will have to take into account in the design and production of the concerned products. It will also protect citizens’ privacy and personal data, prevent the risks of monetary fraud as well as ensure better resilience of our communication networks.
Margrethe Vestager, Executive Vice-President for a Europe Fit for the Digital Age, said: “You want your connected products to be secure. Otherwise how to rely on them for your business or private communication? We are now making new legal obligations for safeguarding cybersecurity of electronic devices.”
Thierry Breton, Commissioner for the Internal Market said: “Cyber threats evolve fast; they are increasingly complex and adaptable. With the requirements we are introducing today, we will greatly improve the security of a broad range of products, and strengthen our resilience against cyber threats, in line with our digital ambitions in Europe. This is a significant step in establishing a comprehensive set of common European Cybersecurity standards for the products (including connected objects) and services brought to our market.”
The measures proposed today will cover wireless devices such as mobile phones, tablets and other products capable of communicating over the internet; toys and childcare equipment such as baby monitors; as well as a range of wearable equipment such as smart watches or fitness trackers.
The new measures will help to:

Improve network resilience: Wireless devices and products will have to incorporate features to avoid harming communication networks and prevent the possibility that the devices are used to disrupt website or other services functionality.

Better protect consumers’ privacy: Wireless devices and products will need to have features to guarantee the protection of personal data. The protection of children’s rights will become an essential element of this legislation. For instance, manufacturers will have to implement new measures to prevent unauthorised access or transmission of personal data.

Reduce the risk of monetary fraud: Wireless devices and products will have to include features to minimise the risk of fraud when making electronic payments. For example, they will need to ensure better authentication control of the user in order to avoid fraudulent payments.

The delegated act will be complemented by a Cyber Resilience Act, recently announced by President von der Leyen in the State of the Union speech, which would aim to cover more products, looking at their whole life cycle. Today’s proposal as well as the upcoming Cyber Resilience Act follow up on the actions announced in the new EU Cybersecurity Strategy presented in December 2020.
Next Steps
The delegated act will come into force following a two-month scrutiny period, should the Council and Parliament not raise any objections.
Following the entry into force, manufacturers will have a transition period of 30 months to start complying with the new legal requirements. This will provide the industry with sufficient time to adapt relevant products before the new requirements become applicable, expected as of mid-2024.
The Commission will also support the manufacturers to comply with the new requirements by asking the European Standardisation Organisations to develop relevant standards. Alternatively, manufacturers will also be able to prove the conformity of their products by ensuring their assessment by relevant notified bodies.
Background
Wireless devices have become a key part of the life of citizens. They access our personal information and make use of the communication networks. The COVID-19 pandemic has dramatically increased the use of radio equipment for either professional or personal purposes.
In recent years, studies by the Commission and various national authorities identified an increasing number of wireless devices that pose cybersecurity risks. Such studies have for instance flagged the risk from toys that spy the actions or conversations of children; unencrypted personal data stored in our devices, including those related with payments, that can be easily accessed; and even equipment that can misuse the network resources and thus reduce their capability.
Compliments of the European Commission.
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