By: Era Dabla-Norris, Raphael Lam, Francisco Roch
Prudent anchors, corrective mechanisms, and supportive institutions can help countries comply with their fiscal rules and commit to sound public finances
Countries have increasingly adopted fiscal rules and frameworks that aim to give clarity and predictability to government spending. But these rules have not been as effective in keeping deficits and debt within their intended limits. As we show in a new report, about 40 percent of advanced economies and nearly two-thirds of emerging markets exceed their own fiscal limits.
Strong and effective fiscal rules are essential to address mounting challenges confronting countries—from record debt and increasing spending pressures on defense to aging populations and development and social needs. With these challenges, public finances are being stretched thin. Here fiscal rules can help: they lay out numerical limits on spending, deficits, or debt, and act as guardrails to promote discipline and signal commitment to sound public finances.
This is not a new idea. Fiscal rules have been used since the mid-1980s, and their use has increased over the last two decades. Today, more than 120 countries have them, according to the IMF Fiscal Rules and Fiscal Council database, covering 122 economies and 54 fiscal councils.

Our report tracks the evolution of fiscal rules and how countries comply with them. In the early years, we find that rules were too rigid and constrained responses to economic downturns. Greater flexibility was eventually introduced and proved effective, allowing governments to provide necessary support for ailing economies, particularly in severe crises such as the pandemic. However, the severe shocks were a significant test for fiscal rules, with many countries’ deficits and debt exceeding their own limits. More than two-thirds of countries have revised their fiscal rules, often making them more flexible without considerably safeguarding public finances.
Effective guardrails
For fiscal rules to be effective, they must strike a careful balance: they should safeguard fiscal sustainability while leaving adequate room and flexibility for priority spending. Our analysis shows that effective rules need to have several elements: they are based on a clear and appropriate target or fiscal anchor to guide policy; they have a robust way to correct course when spending pressures or adverse shocks put the rules off track; and there are supportive fiscal institutions to guide and support their implementation.
First, a prudent fiscal anchor—for example a debt-to-GDP ratio or a medium-term budget balance target—should be tailored within a risk framework to a country’s debt capacity and exposure to shocks. To be credible, they must be easy to monitor,clearly communicated to the public, and closely linked to annual budgets.
Second, when thresholds are breached, countries need clear procedures to get back on track. Pre-defined triggers, timelines, and policy responses can help return to fiscal rule limits—such as requiring governments to submit fiscal plans or take corrective actions—and restore discipline. Some countries go further, using progressive triggers that activate stricter measures, for example as debt nears critical levels.
This mechanism is not just good policy—it also helps countries lower their financing costs. An analysis of six countries (Armenia, Costa Rica, Cyprus, Czech Republic, Poland, and Slovak Republic) shows that well-designed correction mechanisms helped lower the cost of issuing debt by about 0.3 percentage points within six months and 0.75 percentage points within a year, compared to similar economies without effective fiscal rules.

Third, fiscal rules work best when countries have effective institutions to support and implement them. Specifically, medium-term fiscal frameworks should translate fiscal rules into multi-year plans and align short-term budgetary decisions with long-term debt goals.
Fiscal councils can also act as nonpartisan watchdogs, producing and/or evaluating government forecasts, monitoring compliance, and informing the public about the state of government finances. For example, the fiscal council in the Netherlands assesses government forecasts and evaluates the cost of policy initiatives, while providing valuable information to the public. Our analysis shows that countries with more independent fiscal councils tend to experience smaller deficits and better compliance with rules. The bottom line is this: linking annual budgets with medium-term fiscal frameworks and independent oversight can both strengthen policy credibility and make fiscal rules more effective.
Balancing discipline and spending pressures
Governments are facing increasing and legitimate demands to invest in infrastructure, public services, and economic security. Aging societies will require more spending on healthcare and pensions, and many countries are ramping up defense spending.
Putting in place fiscal rules is not inconsistent with these goals. But careful calibration and design of these rules is very important. Low-debt countries may ease their limits to support growth-enhancing spending as long as their debt remains within debt stabilizing limits. By contrast, high-debt countries need to match any new spending with revenue increases and/or reallocate existing expenditures to avoid adding to fiscal and debt risks.
As these pressures intensify, countries must strengthen—not weaken—their commitment to fiscal discipline and ensure that public finances remain a source of stability, not vulnerability.
 
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State launches New Renewable Energy Solicitation
Directive Prioritizes Shovel-Ready Projects Eligible for Federal Tax Credits To Save New Yorkers Money

As part of New York’s all-of-the-above energy strategy, Governor Kathy Hochul today announced a coordinated set of actions to accelerate the deployment and construction of reliable and clean energy across New York State that will help stabilize energy prices. Recognizing the near-term need for power to meet increasing electricity demand as well as economic development needs and the importance of adapting to shifting federal policies, Governor Hochul is launching a new solicitation for renewable energy and directing state agencies to work together to responsibly advance shovel-ready renewable energy projects as quickly as possible. These efforts are designed to support New York ratepayers by using sunsetting federal clean energy tax credits to bring down costs.
“While the federal government takes us backward on energy policy, New York will not be thwarted in its commitment to clean energy. By directing our state agencies to move projects across the finish line, we are seizing every opportunity to leverage federal incentives, reduce costs for ratepayers, and build a more resilient, sustainable and reliable energy grid,” Governor Hochul said. “Together, these actions are expected to unlock billions in private investment, create thousands of good-paying jobs, and build a durable energy economy that benefits New Yorkers for decades to come.”
New York’s current pipeline of large-scale renewable energy is comprised of 102 solar, land-based wind, hydroelectric and offshore wind projects operating and under development that will deliver over 9.7 gigawatts of clean power to the grid when completed – enough energy to power over 3 million New York homes. The development of projects as a result of this solicitation is expected to spur over five billion dollars in clean energy investments and create more than 2,500 family-sustaining jobs in the energy economy across New York.
New York State Energy Research and Development Authority President and CEO Doreen M. Harris said, “New York is all about progress and we are not stopping. We are going to continue building out our energy economy and growing our already robust land-based renewables portfolio. This solicitation will serve as another building block to help ensure a continuous pipeline of viable large-scale projects as part of New York’s versatile clean energy future.”
2025 Land-Based Renewable Energy Solicitation (Tier 1 RFP)
NYSERDA today launched the 2025 Land-Based Renewable Energy Solicitation seeking to procure eligible large-scale wind, solar, and other renewable energy projects to support advancement of clean energy deployment while delivering reliable energy to all New Yorkers.
The solicitation is designed to advance late-stage large-scale renewable energy projects ready to commence construction in New York. It incorporates best practices and lessons learned from prior procurements, including key provisions on component cost indexing, labor provisions, stakeholder engagement requirements, disadvantaged community commitments, and agricultural land preservation to ensure an equitable energy transition that benefits all New Yorkers. To expedite contracting, NYSERDA has also streamlined bid requirements, with full details outlined in the solicitation documents.
The process for submitting proposals into the land-based renewables solicitation will be conducted in two steps:
• Eligibility applications are due on October 21, 2025.
• Final proposals from eligible participants are due on December 4, 2025, by 3 p.m.
For details, please visit the Large-Scale Renewables Solicitation page. Conditional award notifications are expected to be issued to proposers in February 2026, followed by an announcement of selected projects once the awarded contracts have been executed.
Directive to Focus on Projects that May Qualify for Existing Federal Tax Credits
State agencies will intensify efforts to advance shovel-ready renewable energy projects, with a focus on qualifying projects that seek to access existing federal tax credits that will expire. This whole-of-government approach will responsibly streamline permitting, interconnection, financing, and contracting processes to ensure that as many projects as possible reach construction quickly, providing clean power to New York homes and businesses.
New York State Public Service Commission Chair and CEO Rory M. Christian said, “We stand ready to assist our sister agencies in the development of appropriate clean energy projects in New York State. Governor Hochul’s very timely announcement will help ensure a continuous development of renewable energy projects that will help spur the creation of much needed clean energy which will strengthen the reliability of our electric grid while creating good-paying jobs.”
New York State Department of Environmental Conservation Commissioner Amanda Lefton said, “Renewable energy development is one of the most important keys to reducing harmful pollution, generating green jobs, and creating more sustainable communities here in New York and across the country. Governor Hochul’s directive announced today will help further accelerate clean energy momentum already underway by comprehensive policies, programs, and investments that continue to make New York State a national leader in zero-emission energy production. DEC continues to work with our partner agencies to ensure efficient permitting processes that support these efforts.”
State Senator Kevin Parker said, “Accelerating renewable energy projects is critical to ensuring New York families have access to clean, affordable, and reliable power when they need it most. Every day we move forward means more jobs created, more communities protected from rising costs, and more progress toward a healthier environment. While uncertainty in Washington threatens to slow the clean energy transition, New York is proving that we will not wait we will lead. I remain committed to making sure our state continues to deliver for working families and disadvantaged communities, advancing projects that strengthen our energy future and our economy.”
Assemblymember Deborah Glick said, “Thank you, Governor Hochul, for recognizing that New Yorkers need an expanded grid with reliable, clean energy and lower costs. With our current federal government working hand in glove with the fossil fuel industry, it is important for New York to fully utilize the remaining federal tax credits to realize as many renewable energy projects as possible. This will not only be better for the environment, but will provide cleaner, more reliable, and less expensive energy and reduce our reliance on the more volatile and polluting fossil fuel industry.”
State Senator Peter Harckham said, “This is exactly the kind of forward-thinking climate action New York needs. Renewable energy projects are a major economic opportunity waiting to be unlocked. Expediting the Land-Based Tier 1 Renewable Energy Solicitation will mean more good-paying jobs for New Yorkers, lower utility bills for ratepayers and cleaner air for all. Thank you to Governor Hochul and NYSERDA for moving this critical work forward.”
New York League of Conservation Voters President Julie Tighe said, “While the federal government retreats, New York continues to march forward with reliable, affordable clean energy. NYSERDA’s plan to accelerate the construction and deployment of renewables is a critical step forward that will cut pollution, create good-paying jobs, and make our communities healthier and our grid more resilient. We applaud Governor Hochul for prioritizing the clean energy transition and showing the country what strong state leadership looks like.”
New York State AFL-CIO President Mario Cilento said, “Today’s announcement marks another significant step toward ensuring energy reliability and moving us closer to achieving New York’s renewable energy goals. We look forward to continuing to work with NYSERDA to ensure these projects adhere to robust labor standards and protections, creating pathways to solid union careers as we continue to advance toward a clean energy future.”
New York State Building Trades President Gary LaBarbera said, “The continued advancement of clean energy development in New York State represents significant progress in establishing our green economy and the good paying union careers that come with it. The deployment of these projects will not only help us reach our standard-setting climate goals and deliver reliable clean energy to all New Yorkers, but it will also open up countless opportunities for hardworking people to pursue the middle class and support their families. We applaud NYSERDA for their ongoing work to streamline these crucial energy initiatives and look forward to our continued collaboration in pushing these projects forward.”
Alliance for Clean Energy New York Executive Director Marguerite Wells said, “Wind and solar projects are ready to meet the moment and provide affordable power to New Yorkers. We applaud Gov. Hochul for advancing these clean energy technologies at a time when we need them most. Against a backdrop of rising costs and the ever-present realities of climate change, renewables can revitalize upstate economies, provide much-needed power, and do so in an efficient and cost-effective manner.”
Natural Resources Defense Council Managing Director of Power Kit Kennedy said, “Building clean energy projects quickly and fairly is crucial for cutting electricity costs and creating quality jobs for New Yorkers. Every action that New York State takes to speed up renewable energy deployment helps achieve these goals. With the federal government in full retreat and denial, New York’s climate leadership is more important than ever.”
New York Solar Energy Industries Association Executive Director Noah Ginsburg said, “As the federal government eliminates support for affordable clean energy, states need to act quickly to protect electric ratepayers and the clean energy workforce. New York Solar Energy Industries Association (NYSEIA) applauds Governor Hochul for taking action to accelerate renewable energy project development and construction. These actions will ensure that New York leverages federal funding for clean energy projects today while setting the stage for cost-effective permitting and interconnection tomorrow.”
Advanced Energy United New York Policy Lead Kristina Persaud said, “We commend Governor Hochul for delivering clean, reliable, and affordable energy to New Yorkers. Large-scale renewable projects don’t just keep energy costs in check—they also strengthen our electric grid and create good jobs across the state. This procurement keeps New York on track to meet our nation-leading clean energy targets and reaffirms the Empire State’s commitment to building a clean, affordable energy future.”
For more than fifty years, NYSERDA has been a trusted and objective resource for New Yorkers, taking on the critical role of energy planning and policy analysis, along with making investments that drive New York toward a more sustainable future. The launch of this solicitation continues to fuel the advancement of innovative technologies and solutions that will benefit New York residents as well as businesses.
New York State’s Climate Agenda
New York State’s climate agenda calls for an affordable and just transition to a clean energy economy that creates family-sustaining jobs, promotes economic growth through green investments, and directs a minimum of 35 percent of the benefits to disadvantaged communities. New York is advancing a suite of efforts to achieve an emissions-free economy by 2050, including in the energy, buildings, transportation, and waste sectors.
 

Compliments of the New York State Governor’s Office

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By Claudia Mann

Good statistics are accurate, timely, consistent and comparable. Only then can they be the unbiased reality check needed for responsible decision-making. The ECB blog looks back at past mistakes and what Europe has learned from them.

We are often asked: how independent are European statistics, really? Following recent international headlines, this question has gained new momentum. To answer it, let me take you back to Europe’s own “deficit drama” in statistics, explain how it was resolved, and illustrate how the governance we now have in place is a rock-solid safeguard for accountability, markets and policymaking.
From deficit revisions to stronger statistics
The credibility of European statistics came under scrutiny in 2009 when Greece revised its government deficit statistics sharply upwards. This was not just a fiscal matter – it highlighted the broader challenges involved in ensuring trust in official numbers.
“Στέργει γὰρ οὐδεὶς ἄγγελον κακῶν ἐπῶν”(Nobody likes the man who brings bad news), Antigone 276-277, Sophocles
The European response was substantial: to maintain trust, European legislation gave Eurostat – the statistical office of the Union – and the national statistical offices stronger verification powers in 2010. Eurostat also received mandatory access to government accounts, the right to carry out on-site inspections, and new laws strengthened sanctions for misreporting. Today, there is full transparency concerning the real magnitude of government spending – or, as the saying goes, we now call a spade a spade.
However, subsequent legal proceedings initiated in 2010 by the Greek judicial authorities against Andreas Georgiou, then head of the Hellenic Statistical Authority (ELSTAT), drew wide international attention. He was accused of allegedly conspiring to artificially inflate the 2009 government deficit figures while these numbers were validated by Eurostat. These legal proceedings were widely considered to have a substantial political context.[1] This case was one reason for the reinforcement of statistical independence through the regulation on the European Statistical System partnership in 2015.[2] The new law not only clarified Eurostat’s coordination role, but also explicitly strengthened the call for national statistical authorities and their heads to be professionally independent. Notably, it brought in safeguards to ensure that appointments and dismissals are transparent and based only on professional criteria.
Two systems, one culture of quality
Before discussing more lessons on good statistics, let’s take a look at the architecture of public statistics in Europe. European official statistics are produced by two systems: the European Statistical System (ESS), composed of Eurostat and the national statistical offices, and the European System of Central Banks (ESCB), made up of the ECB and the national central banks. Central banks often compile balance of payments statistics, financial accounts and government debt data. Statistical offices compile figures on inflation, GDP and the government deficit.
These two systems work under different laws and structures. Yet cooperation runs deep – from working groups to high-level committees – and the methods, processes and results are highly transparent. To guarantee trust, the ESCB follows its own Public Commitment on European Statistics[3], which is equivalent to the Code of Practice adopted by the ESS[4]. Both ensure that statisticians – be it in the central banks or statistical institutes – work under identical principles of independence, soundness and quality.
Figure 1

Two statistical systems working closely together in multilateral settings such as the Committee on Monetary, Financial and Balance of Payments Statistics (CMFB)

Source: ECB.

Certainly, our governance is complex, multilateral and sometimes feels intrusive. This, however, is a strength. Our thinking is exposed to many stakeholders early on. So, any attempt at manipulation would not only be unlawful – it would be practically impossible. A bit like trying to make fake honey in front of an entire beekeeping club – too many people would notice. And once exposed, your reputation would be damaged beyond repair.
HICP: a solid, independent benchmark
But why are we so keen to have reliable statistics in the first place? To showcase this, let’s take a closer look at one of the cornerstones of statistics, where figures which are essential for monetary policy are compiled outside of the bank. The HICP (Harmonised Index of Consumer Prices) is the official measure of inflation in the euro area, showing how the average prices of goods and services bought by households change over time. It is compiled by Eurostat and the national statistical offices. The diverse sample behind the HICP takes into account what we buy, how much, and where we do that, be it in a supermarket or an online shop. The index reflects realistic consumption patterns estimated from national accounts, household budget surveys and transaction data. To ensure its accuracy, these weights are updated annually. To reflect what consumers actually pay, the HICP also includes taxes and discounts. For this, each month millions of individual prices are collected to calculate the EU HICP from all Member States, thereby ensuring a robust and representative outcome. It is also one of our most timely indicators: we already have the euro area (and EU) flash estimate for the reference month on the last day of the month or shortly thereafter. This provides policymakers with crucial real-time information which is fundamental for their decisions.
Though essential for its policy, the ECB (ESCB) does not calculate the HICP. That is the exclusive responsibility of the ESS – and rightly so. We use the data as a core reference indicator; we are not the calculator. This separation gives assurance to markets, the public and policymakers that the methodology behind the inflation measure guiding monetary policy is not influenced by the central bank.
Chart 1

Development of the Harmonised Index of Consumer Prices in the euro area

Left-hand scale: HICP monthly index with reference baseline 2015=100; right-hand scale: year-on-year rate of change in percentage.

Source: Eurostat.

For another tangible example, consider the €STR, the euro short-term rate, which replaced EONIA as part of the global reforms that followed the LIBOR manipulation scandals. The LIBOR case showed how fragile benchmark interest rates can be, as they often rely only on price quotes and not on actual transactions or a sufficient number of transactions. The global response of public authorities to the LIBOR manipulation led to a shift towards more robust rates, based on real trades with stronger methodology and governance. In the euro area the newly developed €STR benchmark rate replaced EONIA.
EONIA was an overnight transaction-based lending rate administered by the European Money Markets Institute (EMMI), a private benchmark provider. With the application of the EU Benchmarks Regulation[5], it no longer complied with the new standards – mainly because of the lack of sufficient underlying transactions and the high concentration of contributions. The ESCB therefore developed the €STR, which reflects the wholesale euro unsecured overnight borrowing costs of banks located in the euro area, and entrusted its production to the ESCB’s statistical function, building on its solid reputation.
Since 2 October 2019 the €STR has been published Monday through Friday at 08:00, based on transactions from the previous day. It is a major achievement, building on our long-term investments in daily micro data collections. The daily collection of money market data is more than a technical exercise: it supports the analysis of euro money markets and monetary policy transmission, provides early signals of potential fragmentation and reveals market expectations. This again is crucial information for those who decide on monetary policy.
Chart 2

Evolution of €STR rates since its introduction

Source: ECB.

What makes for good statistics?
As the HICP and the €STR show, good statistics are accurate, timely, consistent and comparable. And, above all, they can be put to use where they are needed. For this, statistics need to be reliable.
The independence of statisticians and statistical offices from direct political or market pressure is one precondition for good statistics, and in the case of central banks, this independence is firmly safeguarded too. Equally important are transparent and robust statistical processes, which allow for sources and methods to be scrutinised, as illustrated by the ECB’s annual methodology reviews for the €STR. Finally, sound quality management ensures that errors are corrected, and improvements are made when necessary. This is why in the above-mentioned reviews we maintain a dedicated transparency page on errors.[6]
Statistics are a pillar of accountability
Independent statistics are not an academic concern. They are a pillar of accountability and effective policy. Without appropriate governance to ensure their relevance and quality, markets and people cannot trust the figures on which their choices depend.
Thanks to the rules we have in place – from the Treaty to the Code of Practice – and thanks to our deeply rooted culture of multilateral cooperation, policymakers, market participants and journalists can be confident that European statistics are compiled to the highest standards, free from interference or meddling. That trust is indispensable for our work and for Europe’s success.
The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.
Check out The ECB Blog and subscribe for future posts.
For topics relating to banking supervision, why not have a look at The Supervision Blog?

OPINION of the European Statistical Governance Advisory Board (ESGAB), concerning professional statistical independence and staffing resources in the Hellenic Statistical Authority (ELSTAT).
Regulation (EU) 2015/759 of the European Parliament and of the Council of 29 April 2015 amending Regulation (EC) No 223/2009 on European statistics.
Public commitment on European statistics by the ESCB.
European Statistics Code of Practice.
Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014.
See the €STR Transparency on errors page on the ECB’s website.

 
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The European Commission is taking action against several EU Member States that have failed to notify the Commission of measures they have adopted to transpose EU Directives into their national laws. The deadline to transpose these Directives has expired recently. The Commission is sending a letter of formal notice to these Member States, giving them two months to reply and complete the transposition of the Directives. If they fail to do so, the Commission may pass to a next step and issue a reasoned opinion. The Member States in question have failed to fully transpose four EU directives related to financial stability, home affairs and health. The Commission is urging them to take immediate action to bring their laws in line with EU requirements.
Commission calls on Member States to ensure comprehensive access to information of beneficial ownership to prevent money laundering and terrorist financing
The European Commission decided to open infringement procedures by sending a letter of formal notice to Belgium, Denmark, Germany, Estonia, Greece, Italy, Cyprus, Croatia, Poland, Slovakia and Sweden for failing to fully notify national measures transposing the 6th Anti-Money Laundering Directive (Directive (EU) 2024/1640) to guarantee comprehensive access to information of beneficial ownership of legal entities, trusts or similar arrangements. The 6th AML Directive mainly deals with organisational and institutional issues of the anti-money laundering and countering the finance of terrorism preventive framework, which are addressed respectively to the Member States, their supervisory authorities, and Financial Intelligence Units. The provisions of the Directive must be transposed by different dates. In general, Member States must transpose the major part of the Directive by 10 July 2027, when the 4th Anti-Money Laundering Directive as amended by the fifth one (Directive (EU) 2015/849) will be repealed. By the first deadline, 10 July 2025, Member States had to guarantee comprehensive access to information of beneficial ownership of legal entities, trusts or similar arrangements (including access by persons with a legitimate interest). To date, 11 Member States have not declared full transposition by this first legal deadline. The gradual implementation of the 6th Anti-Money Laundering Directive is key to preventing any vulnerabilities of their financial systems and ensuring that all Member States consistently and effectively uphold their anti-money laundering standards. The Commission is therefore sending letters of formal notice to Belgium, Denmark, Germany, Estonia, Greece, Italy, Cyprus, Croatia, Poland, Slovakia and Sweden, which now have two months to complete their transposition and notify their measures to the Commission. In the absence of a satisfactory response, the Commission may decide to issue a reasoned opinion.
Commission calls on Member States to fully transpose the European Single Access Point (ESAP) Omnibus Directive to ensure investors’ access to corporate public information 
The European Commission decided to open infringement procedures by sending a letter of formal notice to Bulgaria, Estonia, Spain, France, Croatia, Italy, Latvia, Lithuania, the Netherlands,  Austria, Portugal, Poland, Romania, Slovenia and Sweden for failing to fully transpose the European Single Access Point (ESAP) Omnibus Directive (Directive EU 2023/2864) in relation to the changes introduced in the Transparency Directive (Directive 2004/109/EC). The ESAP Omnibus Directive is part of the ESAP legislative package that facilitates the creation of a centralised mechanism offering easily accessible, comparable and usable public information to investors and other stakeholders. The legislative package foresees three phases of ESAP development. The first phase will begin in July 2026 when the information published according to the Transparency Directive, as well as to Regulation (EU) 2017/1129 (Prospectus Regulation) and Regulation (EU) No 236/2012 (Short Selling Regulation) will start to be submitted to the national competent authorities for the purpose of making it available on ESAP. For that first step, Member States had to transpose the changes introduced in the Transparency Directive by 10 July 2025. The Commission is therefore sending letters of formal notice to  Bulgaria, Estonia, Spain, France, Croatia, Italy, Latvia, Lithuania, the Netherlands,  Austria, Portugal, Poland, Romania, Slovenia and Sweden, which now have two months to complete their transposition and notify their measures to the Commission. In the absence of a satisfactory response, the Commission may decide to issue a reasoned opinion.
Commission calls on Member States to fully transpose the new rules as regards the minimum depth of markings on firearms and essential components
The European Commission decided to open infringement procedures by sending a letter of formal notice to five Member States (Bulgaria, Czechia, Poland, Portugal and Finland) for failing to notify national measures  transposing the Commission Implementing Directive (EU) 2024/325. Member States had to transpose the Implementing Directive into national law and to notify the measures to the Commission by 22 July 2025. The act amends Commission Implementing Directive 2019/68 and establishes a new rule regarding the minimum depth of markings of firearms and essential components to be 0.08mm. The technical requirement is added to the existing standards of the current Implementing Act, which does not specify a minimum depth of markings. A minimum depth at EU level ensures a level playing field for producers and facilitates trade in the internal market. The minimum depth set also corresponds with the standards applicable in the most important markets in third countries, ensuring compatibility for the export of firearms. Marking ensures traceability of firearms and is key to the safety and security of EU citizens. The Commission is therefore sending letters of formal notice to the five Member States concerned. They will have two months to complete their transposition and notify their measures to the Commission. In the absence of a satisfactory response, the Commission may decide to issue a reasoned opinion.
Commission calls on Member States to fully transpose the Directive to ensure harmonisation in the area of plant health
The European Commission decided to open infringement procedures by sending letters of formal notice to Denmark, Cyprus, Luxembourg, Malta, Austria and Slovakia for failing to fully transpose Commission Directive (EU) 2025/145 as regards the listing of pests of plants on fruit plant propagating material and fruit plants intended for fruit production. Member States had to transpose this Directive into national law by 31 July 2025. The Directive aims to align the rules for marketing fruit plant material and fruit plants for production with plant health rules. Full implementation of the legislation is key to continuing harmonisation among all Member States in the area of plant health. The Commission is therefore sending letters of formal notice to Denmark, Cyprus, Luxembourg, Malta, Austria and Slovakia, which now have two months to complete their transposition and notify their measures to the Commission. In the absence of a satisfactory response, the Commission may decide to issue a reasoned opinion. 
 
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Member states’ representatives (Coreper) approved today the Council’s positions on several Commission proposals which form part of the so-called ‘Omnibus IV’ legislative package and contain two main elements:
• two proposals (directive and regulation) on digitalisation and common specifications aiming to digitalise existing physical requirements by implementing the ‘digital by default’ principle and introduce a procedure for the Commission to draw up common specifications in a number of legal acts, and
• two proposals (directive and regulation) aiming to extend certain mitigation and support measures available for small and medium enterprises (SMEs) to companies that have outgrown the SME definition, the so-called small mid-cap enterprises (SMCs)
“Too many European companies spend too much time navigating complex rules. With today’s agreement, we take an important step to change that. Whether it’s simplifying digital documentation or helping small businesses grow, this is about building a more competitive Europe. There is more work ahead – but these agreements show that simplification is no longer just a promise, it’s now a practice.”
Marie Bjerre, Minister for European affairs of Denmark
“With this agreement, we are showing the way towards a more digital Europe with fewer burdens for our businesses. This is absolutely crucial for Europe’s future in a world where countries like the USA and China are pulling ahead. By harnessing the potential of technology, we can remove very concrete burdens for our companies. At the same time, we are showing flexibility towards businesses that have grown large but should become even larger and create the solutions of the future here in Europe.”
Morten Bødskov, Minister for Industry, Business and Financial Affairs
Objectives of the proposals
On digitalisation and common specifications, the proposals aim to amend 20 pieces of EU product legislation under single market rules on digitalisation and common specifications.
They follow up on a broader strategy to prioritise digital formats with the aim of eliminating paper-based requirements in product legislation. In particular, the proposal foresees the digitalisation of the EU declaration of conformity, as well as the exchanges between competent national authorities and economic operators.
The proposal additionally gives the possibility for manufacturers to provide instructions for use to users in digital format instead of paper. Furthermore, the proposal introduces alternative solutions to prove the compliance of a product with EU rules via ‘a common specification’ in situations where harmonised standards are not available. This will offer more legal certainty, reduce costs, and increase competitiveness.
On small mid-cap enterprises, the main objective is to extend certain mitigation and supporting measures available for SMEs to companies that have outgrown the SME definition. These companies are considered to play a vital role in the EU economy, providing 6% of overall employment and are prominently present in key EU competitiveness sectors, such as electronics, aerospace and defence, energy, energy-intensive industries and health. Defining a new category of small mid-cap companies should help to:
• avoid a cliff-edge and enable smooth transition of SMEs into SMCs
• allow SMCs to keep the same beneficial environment as when they were SMEs
• give better incentives to SMEs to scale up
Main elements of the Council’s amendments
On SMCs, the original Commission proposal identifies this new category of companies as enterprises with fewer than 750 employees and either up to €150 million in turnover or up to €129 million in annual balance sheet total. In its mandate, the Council raised these thresholds to enterprises with fewer than 1000 employees and either an annual turnover of up to €200 million or up to €172 million in annual balance sheet total.
On digitalisation and common specifications, the Council has broadly retained the thrust of the Commission proposals, while amending several technical elements specific to the respective legislative acts.
The Council has also introduced further clarifications regarding the access to digitally available information and to a company’s ‘digital contact’. The text also ensures that, in cases where there is a risk of serious harm to consumers, safety information is always available in paper form.
The Council aligned the texts on common specifications with the approach agreed in the ‘Toy Safety’ regulation (Article 14) earlier this year. The text clarifies that the common specifications should only serve as a fallback option when harmonised standards are not available or insufficient, hence promoting coherence across the EU acquis.
Finally, the Council has extended the transposition deadlines of the directive to 24 months to give member states sufficient time to implement the amendments.
Next steps
Following today’s approval of the Council’s negotiating mandates by Coreper, the presidency will start negotiation with the European Parliament as soon as possible to reach a final agreement.
Background
In October 2024, the European Council called on all EU institutions, member states and stakeholders, as a matter of priority, to take work forward, notably in response to the challenges identified in the reports by Enrico Letta (‘Much more than a market’) and Mario Draghi (‘The future of European competitiveness’).  The Budapest declaration of 8 November 2024 subsequently called for ‘launching a simplification revolution’, by ensuring a clear, simple and smart regulatory framework for businesses and drastically reducing administrative, regulatory and reporting burdens, in particular for SMEs. Between 26 February and 9 July 2025, as a follow-up to EU leaders’ call, the Commission put forward six ‘Omnibus’ packages, aiming to simplify existing legislation on sustainability, investment, agriculture, small mid-caps enterprises, digitalisation and common specifications, defence readiness and chemical products.
On 21 May 2025, the Commission adopted its fourth Omnibus package. The package contains a proposal for a directive and for a regulation on mid-caps, a proposal for a directive and a regulation as regards the digitalisation and alignment of common specifications amending 20 pieces of EU product legislation under single market rules, as well as an amendment of the regulation on batteries regarding the due diligence requirements. The regulation and directive on mid-caps amend a total of 8 existing pieces of legislation: the general data protection regulation (GDPR), the anti-dumping regulation, the anti-subsidies regulation, the prospectus regulation, the batteries regulation, the F-gases regulation, the markets in financial instruments directive (MiFID) and the critical entities resilience directive.
 
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“Check against delivery”
Monsieur le Président, cher Emmanuel,
Honourable Dean,
Esteemed Professors,
Ladies and Gentlemen,
It is an honour to be here in the Sorbonne – surrounded by some of the brightest minds in the world. Dear Emmanuel, you once said that before being a university, the Sorbonne was an idea. An idea of scientific excellence, collaboration and – if I may add – of opportunity. And no story encapsulates this better than that of Maria Salomea Skłodowska-Curie, also known a Marie Curie. In her homeland of Poland, then under Russian occupation, women were barred from universities. So, she and her sister joined underground night schools, dreaming of freedom through knowledge. That was at the end of the 19th century. Her journey would eventually bring her to La Sorbonne. Here she was allowed to study and do her research. She ultimately revolutionised medicine and physics. Maria Skłodowska-Curie became the first woman to win a Nobel Prize, the first person to win a Nobel Prize twice, and the only person to win a Nobel Prize in two different fields. And her discoveries and her work on radiation saved millions of lives. I start with this story not just because we are here in the Sorbonne – or even because it shows how scientific excellence can change the course of destiny. But because this is also a story about freedom. Freedom to learn and invent. It is a story about openness. Openness to turn ideas into groundbreaking discoveries. And it is a story about collaboration beyond borders. And this is exactly what Europe and the world need more today. Because I am convinced that science remains the fuel of progress and growth for our societies. Without the ideas and breakthroughs that come from scientific research, progress sooner or later stagnates.
Unfortunately, as your discussions have shown today, the role of science in today’s world is questioned. The investment in fundamental, free and open research is questioned. What a gigantic miscalculation. I believe that science holds the key to our future here in Europe. Without it, we simply cannot address today’s global challenges – from health to new tech, from climate to oceans. And as I look around the room – and at all the young people here – I know we are far from having run out of new ideas or bright minds. In fact, the truth is we have barely scratched the surface of the knowledge that science can offer us. So more than ever we need to stand up for science. Science that is universal – shared by all humanity – and that is unifying. Because the pursuit of knowledge and the yearning to understand how things work are values that bring us together as people, as it has done today. We can all agree that science has no passport, no gender, no ethnicity or political party. And as such it does play a crucial role in connecting people and creating a shared future in today’s fractured world. We believe that diversity is an asset of humanity and the lifeblood of science. It is one of the most valuable global goods and it must be protected.
That is why I am here today, to say that Europe will always choose science. And Europe will always make the case for the world’s scientists to Choose Europe. Scientific endeavour runs deep through European history – from Pythagoras and Aristotle in Ancient Greece to Galileo and Copernicus in the Renaissance period or to Koch or Pasteur in latter centuries. The oldest university in Europe was founded in Bologna, where teaching started as far back as 1088. And Europe was the home of the Scientific Revolution which saw one of the most consequential transformations in human history – thanks to breakthroughs in mathematics, astronomy, biology and much more. That tradition lives on today. Europe already has the second highest scientific output in the world. It is home to over 2 million researchers – one quarter of the world’s total. We lead in green tech, health, economics, business and social sciences. We excel in areas of scientific research and technologies that are pivotal to our future – from aerospace to robotics, from automotive to engineering, from biotechnologies to pharmaceuticals, just to name a few.
And we have a huge number of natural advantages that help set us apart. The first is sustained and stable investment from Europe and its Member States. Europe runs the world’s largest international research programme, Horizon Europe. It has a firepower of over EUR 93 billion. Over the last 40 years, the European Union has funded 33 Nobel Prize laureates. European support has made possible breakthroughs in genome sequencing and mRNA vaccines. It spurred the development of cutting-edge microchips, and even led to the first image of a black hole. These examples show what we all know – the return on investment in science is unparalleled. We have worldclass research infrastructure. From particle physics to molecular biology, and from space exploration to nuclear fusion. This helps make Europe a leader in fundamental research.
We have a world-leading supercomputing infrastructure, EuroHPC, and we are investing massively in AI, quantum and digital research. Finally, we also have a proud tradition of open and collaborative science. We uphold the principles of open science, open education and data sharing. Our European Research Council is run not by politicians, but by scientists, for scientists. Our Horizon Europe programme is a magnet for global cooperation. From the UK to Switzerland, from Canada to South Korea, more and more countries want to join it. We see scientists from across the world collaborating here in Europe. Take CERN as a case in point. Founded 70 years ago to carry out cutting-edge research that no individual nation could do alone, it is today the world-leading laboratory for high-energy particle physics and related technologies. Researchers from over 100 nationalities working together for the good of humanity. This is how science should work, and it is why scientific freedom and collaboration must always be at the heart of our institutions and our infrastructure.
Ladies and Gentlemen,
Europe has everything that is needed for science to thrive: we have the stable and sustained investment; we have the infrastructure; we have the commitment to open and collaborative science, we have a social market economy that delivers access to good schools, education and healthcare for all. But at the same time, we have to be alert and work on our deficiencies. We know that researchers still face too much – or too complex – bureaucracy here in Europe compared to some other parts of the world. We know that the path from fundamental research to business and to market is not straightforward or fast enough here in Europe. We know that we need to offer the very best a longer-term perspective. We are ready to tackle this head on.
We want Europe to continue to be at the forefront of fundamental research. We want Europe to be a leader in priority technologies from AI to quantum, from space, semiconductors and microelectronics to digital health, genomics and biotechnology. We want scientists, researchers, academics and highly skilled workers to choose Europe. And this is why today I am presenting the first elements of our Choose Europe Initiative.
The first priority is to ensure that science in Europe remains open and free. This is our calling card. We must do everything we can to uphold it – now more than ever before. We want to strengthen the free movement of knowledge and data across Europe – just as we do for goods, talents and capital across our Single Market. And we want to enshrine freedom of scientific research into law in a new European Research Area Act. Because as threats rise across the world, Europe will not compromise on its principles. Europe must remain the home of academic and scientific freedom.
The second element of Choose Europe is financing. Science is an investment – and we need to offer the right incentives. This is why I can announce that we will put forward a new EUR 500 million package for 2025-2027 to make Europe a magnet for researchers. This will help support the best and the brightest researchers and scientists from Europe and around the world. We aim to create a new seven-year ‘super grant’ under the ERC to help offer a longer-term perspective to the very best. Through the ERC, we are already supporting researchers who relocate to Europe with a top-up beyond their grant. We are now doubling the amount they can receive this year. And I want to extend this support for 2026 and 2027.
At the same time, we must also focus on the next generation. This is why we are also increasing support to early career scientists through our Choose Europe pilot under Maria Skłodowska-Curie. Those that choose Europe will benefit from higher allowances and longer contracts. We will expand this support over the next two years, with targeted incentives in frontier fields, like AI. For the mid- and long-term: together with our Member States, we want to reach the 3% of GDP target for investment in research and development by 2030. And we will put forward ambitious proposals on research and innovation funding in the next long-term budget. Because we know that an investment in science is an investment into our future.
The third part of Choose Europe is the need to fast-track the pathway – from breakthrough science to transformative innovation and business opportunities. This is why we will put forward a first ever European Innovation Act and a Startup and Scaleup Strategy, to remove regulatory and other barriers, and to facilitate access to venture capital for innovative European startups and scaleups.
Last but not least: We have to make it easier and more attractive to come to Europe for research. We will better link up researchers with research institutions. We will speed up the process around entering and staying in Europe. We already have an excellent platform that links researchers worldwide with thousands of jobs in Europe, as well as providing visa support and career guidance. We now want to support public and private institutions to better link up to highly skilled workers and researchers, and to speed up and simplify the entry for top researchers. Because bringing the best from across the world is about bringing out the best of Europe.
Ladies and Gentlemen,
Europe has made its choice. We are choosing to start a new age of invention and ingenuity. We are choosing to put research and innovation, science and technology, at the heart of our economy. We are choosing to be the continent where universities are pillars of our societies and our way of life. We are choosing to be the continent where innovation serves humanity, where global talent is welcomed. Because as the history of the Sorbonne and our excellent universities show, progress thrives on freedom, openness and collaboration. So, to every researcher, at home or abroad, to every young girl and boy who dreams of a life in science, as Maria Skłodowska-Curie once did, our message is clear: Choose Science. Choose Europe.
 
Compliments of the European CommissionThe post European Commission | Closing speech by President von der Leyen at the ‘Choose Europe for Science’ event at La Sorbonne first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

ECB establishes an innovation platform with around 70 market participants on new platform
Participants to test digital euro payment functionalities and explore innovative use cases
Findings to be shared in report later this year

The European Central Bank (ECB) has established an innovation platform to collaborate with European stakeholders in the context of the digital euro project. almost 70 market participants – including merchants, fintech companies, start-ups, banks and other payment service providers – have signed up to work with the ECB to explore digital euro payment functionalities and use cases. Following a call for interest published in October 2024, the ECB received over 100 applications from around 70 participants, who joined one or both of the workstreams “pioneers” and “visionaries”.
The innovation platform simulates the envisaged digital euro ecosystem, in which the ECB provides the technical support and infrastructure for European intermediaries to develop innovative digital payment features and services at European level.
The pioneers workstream is investigating how conditional payments in digital euro (i.e. transactions that are made automatically when predefined conditions are met, such as the delivery of a package bought online) could be implemented from a technical standpoint. It is also developing potential use cases for day-to-day payments.
Pioneers will be exploring how to integrate the simulated digital euro interfaces with their platforms. The ECB is providing participants with technical support and specifications, such as an application programming interface, to conduct independent work on use cases of their choice. Pioneers will summarise their findings in a report, which the ECB will review thoroughly to inform its work on the digital euro project.
The visionaries workstream is conducting research on new digital euro use cases and how they could help address societal challenges, such as digital financial inclusion. For instance, the ability to open a digital euro wallet in any post office could guarantee free access to digital euro services, even for people without a bank account or access to digital devices.
Visionaries will share and discuss their proposals with the ECB in dedicated workshops that will run until May 2025.
“We welcome the huge amount of interest that market participants have shown in this exciting initiative,” said Executive Board member Piero Cipollone. “The breadth and creativity of the proposals highlights the digital euro’s potential as a catalyst for financial innovation in Europe, including the development of new solutions that further enhance the payment experience for Europeans and create market opportunites”.
Findings from both workstreams will be published by the ECB in a report to be published later this year.
 
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By Vanessa Gunnella, Giovanni Stamato and Alicja Kobayashi
Published as part of the ECB Economic Bulletin, Issue 3/2025.
This box examines how the tariffs that the United States introduced on Chinese products in 2018 influenced euro area trade patterns. It looks at whether euro area exporters were able to gain market share in the United States as their competitiveness increased vis-à-vis their Chinese counterparts. It also assesses how Chinese export patterns changed, highlighting how Chinese exports were diverted from the United States to alternative markets, including the euro area. Examining the outcomes of these past measures can give an indication of the potential channels through which current US tariffs on Chinese goods could affect the euro area.
Trade tensions in 2018 led to a significant decline in Chinese exports to the United States, which prompted Chinese exporters to seek other markets. The US Administration implemented numerous tariff and non-tariff measures targeting Chinese goods, significantly increasing trade restrictions from 2018 onwards. As a result of the measures, the effective tariff rate on Chinese imports to the United States increased by almost 18 percentage points. This escalation caused a marked decrease in aggregate Chinese exports to the United States, with China’s share of the US import market declining substantially from its level in 2017. Although the COVID-19 pandemic makes it difficult to disentangle the effects of the increased trade restrictions, it appears that Chinese exporters sought alternative markets when the US tariffs hit. This included shifting trade towards the euro area, with China’s market share of euro area imports growing more rapidly in the years after the tariffs were imposed (Chart A).

Chart A
Import market shares and US import restrictions on China

(left-hand scale: percentages; right-hand scale: number of measures in place)

Sources: Trade Data Monitor, Global Trade Alert and ECB staff calculations.
Notes: The green line shows the cumulated number of tariff and non-tariff measures imposed on Chinese imports by the United States. For the market shares, trade in goods is considered.

A detailed analysis of product-level trade data reveals that the US tariffs had a significant impact on Chinese exports, with products possibly being diverted to the euro area. By analysing granular six-digit product-level trade data, we can identify Chinese goods that were affected by US tariffs and assess the resulting trade diversion.[1] Our findings indicate that exports of the affected products to the United States decreased significantly, contributing to a substantial decline in China’s market share in the United States. Chart B, panel a, shows how these tariff-affected products – which include clothing, IT equipment, auto parts and furniture – primarily drove down China’s share of US aggregate imports. Concurrently, these products found alternative markets, such as neighbouring countries in Asia and, notably, the euro area (Chart B, panel b).[2] Indeed, it appears that, from 2019, goods subject to US tariffs were redirected to the euro area, significantly boosting China’s market share. While COVID-19-related products like medical equipment and electronics – such as computers and related IT equipment – may have reinforced this trend during the pandemic, the structural change in trade flows persisted afterwards.

Chart B
Changes in import market shares

(percentage point change since 2017)

Sources: Trade Data Monitor, Peterson Institute for International Economics, and ECB staff calculations.
Notes: Products subject to tariffs are Chinese products affected by US import tariffs, as reported in official documents. Shares are computed using import values. The latest observations are for the fourth quarter of 2023.

The euro area, however, did not increase its market share in the United States. With tariffs applied to Chinese imports to the United States, euro area goods would have been more price competitive in US markets. Yet, compared with 2017, the euro area did not substantially increase its share of the US import market. Developments in market shares do not seem to be related to the US tariffs on China (Chart B, panel c). Other countries with export baskets that are more similar to China’s may have been able to increase their market share in the United States as supply chains were reconfigured to reduce direct US sourcing from China.[3]
Empirical results from a gravity model confirm that some of China’s exports to the United States were redirected to the euro area. A structural gravity model on bilateral sector-level trade flows in manufacturing from 2012 to 2023 is used to assess the trade diversion effects.[4] The results (Chart C) confirm a significant decrease in Chinese exports to the United States. This was related to the trade measures, as these roughly doubled in number over the time interval considered, dampening US imports from China by around 10%. Chinese exports were largely redirected towards South and South-East Asian countries, the euro area and other global markets. The trade restrictions imposed by the United States on Chinese goods led to a statistically significant increase of 2%-3% in euro area imports from China.

Chart C
Empirical evidence of the effect of US import restrictions on Chinese exports

(effects, percentages)

Sources: UN Comtrade, ADB-MRIO, Global Trade Alert, Egger and Larch RTA database and ECB staff calculations.
Notes: The bars represent the coefficient of US restrictions on imports from China, interacted with dummy variables for bilateral flows from 2019 from a sector gravity regression. The effects are computed by multiplying the estimated elasticities by the observed change in US restrictions on Chinese imports since 2019. Blue bars denote statistically significant elasticities. The dependent variable is nominal exports in goods. Estimation is performed using the Poisson pseudo-maximum likelihood estimator. The sample period is 2012-23 and includes 62 countries and 15 sectors. We account for bilateral/sector time-varying controls, including bilateral sector time-varying trade-restrictive measures, sector time-varying border effects, sector-exporter/sector-importer-year fixed effects and exporter-importer-sector fixed effects. Standard errors are clustered by country pair and sector.

As global trade dynamics shifted, China strategically redirected its exports, with the euro area emerging as a key alternative market owing to the structural similarities between Chinese exports to the United States and those to the euro area. Similarity metrics (Chart D) illustrate that, of China’s trading partners, the euro area was considered to be among the most similar to the United States. This made redirecting trade towards the euro area a natural channel for Chinese exporters attempting to find alternative markets. In parallel, China redirected trade even more strongly to other countries, particularly in Asia. However, this appears to be for different reasons, as the similarities between Chinese exports and the imports of certain South and South-East Asian countries were much less pronounced. Rather, the redirection of Chinese exports to these countries may have reflected efforts to reconfigure Chinese supply chains towards neighbouring countries.[5]

Chart D
Similarity between China’s exports to the United States and its exports to other regions

(index value)

Sources: Trade Data Monitor; Finger, J. M. and Kreinin, M. E., “A measure of export similarity’ and its possible uses”, The Economic Journal, Vol. 89, No 356, pp. 905-912, December 1979; and ECB staff calculations.
Notes: The chart shows the export similarity index (ESI) by Finger and Kreinin. The ESI values range from 0 to 100, indicating the degree of similarity of export structures. Higher values suggest greater similarity in the sectoral composition of exported goods. North America comprises Canada and Mexico, and South/South-East Asia comprises India, Indonesia, Thailand and Vietnam.

Empirical findings confirm that the euro area did not increase its exports to the United States. The gravity model is used to explore how US imports were reconfigured as restrictions on Chinese exports were imposed. Results from the gravity regression show that, as Chinese exports to the United States decreased, South and South-East Asian countries increased their exports to the United States as global supply chains shifted production to China’s neighbours, confirming the findings in the previous paragraph. The gravity model shows that euro area exports to the United States did not increase significantly (Chart E). This result again reflects export similarities. In 2018 the composition of exports from South and South-East Asian countries to the United States was very similar to that of Chinese exports to the United States. Interestingly, as other South and South-East Asian countries replaced China in the United States, their export baskets became increasingly similar, confirming that these countries progressively substituted China as US trading partners. Conversely, among the United States’ major trading partners, the composition of the euro area’s export basket was the least similar to China’s.

Chart E
Empirical evidence of the impact of restrictions on US imports from China

(effects, percentages)

Sources: UN Comtrade, ADB-MRIO, Global Trade Alert, Egger and Larch RTA database and ECB staff calculations.
Note: See notes to Chart C.

Trade barriers are being raised further, which has consequences for the euro area. A renewed period of trade tensions between the United States and China could have negative effects for euro area net trade and growth. However, any trade diversion effects will greatly depend on the configuration of US bilateral trade barriers and the responses to them. In addition, it is crucial to consider that trade structures have evolved over the past seven years, which could result in effects that differ from those observed in previous periods.

See Haberkorn, F., Hoang, T., Lewis, G., Mix, C., and Moore, D., “Global trade patterns in the wake of the 2018-2019 U.S.-China tariff hikes”, FEDS Notes, Board of Governors of the Federal Reserve System, 12 April 2024.
See Bown, C. P., “Four years into the trade war, are the US and China decoupling?”, PIIE RealTime Economics Blog, 20 October 2022.
See Alfaro, L. and Chor, D., “Global supply chains: The looming ‘great reallocation’”, Working Paper Series, No 31661, National Bureau of Economic Research, September 2023 and Freund, C., Mattoo, A., Mulabdic, A. and Ruta, M. “Is US trade policy reshaping global supply chains?”, Journal of International Economics, Vol. 152, 104011, November 2024.
The regression controls for pandemic-period effects by including a) time-varying sectoral border effects in trade costs, which capture all global unobservable factors affecting international trade compared with domestic; and b) exporter and importer sector-time fixed effects, which control for any sector-specific dynamics in countries’ exports and imports, including sector-specific demand or supply factors like those observed during the pandemic. Price levels are also taken into account by means of country-time fixed effects.
See Freund, C., Mattoo, A., Mulabdic, A. and Ruta, M., op. cit. The paper finds that countries that have replaced China in the US market are also experiencing faster import growth from China. In Xue, S., Trade Wars with FDI Diversion, Princeton University, August 2024, the author finds that countries like Vietnam, which are more susceptible to trade diversion, exhibited relatively higher inward foreign direct investment stocks following the China-US trade war.

 
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By Clémence Berson and Marco Weissler
Published as part of the ECB Economic Bulletin, Issue 3/2025.
In most euro area countries, average hours worked (AHW) per employee have been falling since 2020 and remain below their pre-pandemic levels. The decline was particularly strong in 2020 owing to policy measures to reduce the spread of COVID-19.[1] National accounts data show that, in the fourth quarter of 2024, AHW were still 1.8% lower than a decade before (Chart A) despite the proportion of part-time workers remaining broadly stable over the same period. This decline has been accompanied by rising employment. Over the past decade, employment across the euro area has grown by 13.1% – approximately 19.9 million people. Therefore, total hours worked increased despite the decrease in AHW per employee. In this box, we use data from the European Union Labour Force Survey (LFS) to assess the extent to which the fall in AHW was driven by workers working zero hours (e.g. because of holiday or sick leave) or long hours (e.g. because of overtime) during the reference week.[2]

Chart A
Contribution of average hours worked to change in total hours worked since 2014

(percentage changes)

Sources: Eurostat and national accounts.

Labour supply and labour demand factors have both played a role in the decline of AHW. The economic cycle has a direct impact on hours worked. Before laying off employees, firms first use the intensive labour margin and reduce the number of hours worked by employees. Consequently, lower labour demand can lead to labour hoarding, whereby firms decide to retain their workforce even when the workforce is not working at full capacity, considering the demand drop to be transitory and firing and re-hiring to be too costly.[3] On the other hand, lower labour supply can reduce AHW, for example owing to changing working preferences or higher levels of sick leave and parental leave.[4] If these effects are particularly pronounced for certain demographics (e.g. younger or older employees) or in certain sectors of the economy, compositional effects could have an impact on AHW.
The decline in AHW has largely been driven by the reduced proportion of employees working long hours and the higher proportion working zero hours during the reference week.[5] Detailed data from the LFS up to 2023 confirm the decline in AHW (Chart B), while also highlighting significant differences across countries. Overall, in 2023 AHW (as measured by the LFS)remained 0.6 hours per week, or 1.8%, below their 2014 level. This gap is mainly attributable to a decline in the proportion of employees working long hours (defined as more than 49 hours per week) – from 6.5% to 3.7% of all employees. Although these employees represent only a small proportion of the total workforce, the sharp reduction in their working time has affected the euro area average.[6] Moreover, employees working zero hours had a large impact on AHW during the pandemic. While in 2022 around one-third of the decline in AHW was due to employees working zero hours, their contribution was broadly neutral in 2023, in line with the reduced rate of employees taking sick leave. If we exclude employees working long or zero hours, AHW were 0.1 hours higher in 2023 than in 2014, having remained broadly stable over that period.[7]

Chart B
Average hours worked of all employees and excluding employees working zero/long hours

(hours per week)

Sources: Eurostat and Labour Force Survey.
Notes: The data include employees aged 20-64. The lines show average hours worked during the reference week. “Long hours” is defined as more than 49 hours per week.

The proportion of employees working zero hours has mostly subsided from its pandemic peak. The proportion of employees who did not work during the reference week partially returned to its pre-pandemic level following the peak observed during the pandemic (Chart C). However, it remained elevated, mainly in Spain and France (4 and 1 percentage points higher respectively in 2023 than in 2014). Both countries saw changes in labour regulation, facilitating the entry of marginal employees through permanent seasonal contracts in Spain and apprenticeships in France. These employees more frequently work irregular hours (e.g. during the off-season or training periods) and therefore have more zero-hour working weeks. As previously mentioned, the proportion of employees working zero hours is also still being affected by slightly elevated rates of sick leave and parental leave.

Chart C
Proportion of employees working zero hours and main reason for working zero hours

(percentages and percentage point contributions)

Sources: Eurostat and Labour Force Survey.
Note: The data include employees aged 20-64.

The proportion of people working long hours has continued its declining trend from before the pandemic and has recently fallen faster than the proportion preferring to work long hours. While some employees still aim to work significantly more hours than they actually work (e.g. part-time employees), the proportion of employees who prefer to work long hours is declining (Chart D).4 This trend is largely consistent across euro area countries and also among self-employed workers. While around 29% of self-employed people are working long hours, less than 4% of employees do so.[8] Over the last decade these proportions have declined by 7 and 2 percentage points respectively. Preferences for working long hours have been falling broadly in line with actual long hours worked. This suggests that the fall in long hours worked is at least partly supply-driven and is likely persistent. However, the decline in this proportion after the pandemic was slightly stronger than that in the proportion of workers who prefer to work long hours. This suggests that the fall in AHW has not been entirely driven by reduced preferences for working long hours but may also have been partially affected by low labour demand, which might recover cyclically.

Chart D
Proportion of workers working long hours and preferring to work long hours

(percentages)

Source: Eurostat.
Note: The data include workers aged 20-64.

Relative to 2014, employees working long hours are more often working in the public sector and are less often university-educated than employees working non-long hours. The largest compositional shift was driven by the increase in the rate of high-income earners among employees working long hours. While 59% of all employees working long hours in 2014 were in the top three income deciles, this proportion increased to 68% in 2023 (Chart E). At the same time, a greater proportion of employees with high AHW are working in the public sector than a decade ago, while a smaller proportion are working in the trade and industry sectors. In addition, the proportion of university-educated employees increased among employees working long hours, but to a lesser extent than for the overall economy.

Chart E
Changes in proportion among all employees working/not working long hours since 2014

(percentage point changes)

Source: Eurostat and ECB staff calculations.
Notes: The data include employees aged 20-64. “Not working long hours” is defined as 0-49 hours per week. High- (low-) income employees are employees in the top (bottom) three income deciles. The bars show the change in the proportion of all employees working (not working) long hours who belong to each category. For instance, the proportion of employees working in the public sector increased by 3.3 percentage points for employees working long hours, while it decreased by 0.2 percentage points for employees not working long hours.

See the article entitled “Hours worked in the euro area”, Economic Bulletin, Issue 6, ECB, 2021.
The LFS asks “In total, during the week from Monday 2025 to Sunday 2025, how many hours did you actually work in your main job?” using a reference week for the date. If the employee was absent for the full week (because of holiday, sickness, maternity/paternity leave, etc.), the answer is set to 0. Owing to data concerns in Slovakia and Ireland, we dropped both countries from the euro area aggregate. We classify employees who worked zero hours or more than 49 hours during the reference week as employees with “zero hours” or “long hours” respectively. While these categories only accounted for around 12% and 4% of all employees in 2023, they have a strong impact on the AHW relative to that of employees working “core hours” (1-49 hours per week).
See Baptista, P., Bates, C., Dias da Silva, A., Dossche, M. and Weissler, M., “Those who work less worry more: the effect of lower workloads on consumption”, The ECB Blog, ECB, 20 February 2024.
See Arce, O., Consolo, A., Dias da Silva, A. and Mohr, M., “More jobs but fewer working hours,” The ECB Blog, ECB, 7 June 2023, and Astinova, D., Duval, R., Hansen, N.-J., Park, B., Shibata, I. and Toscani, F., “Dissecting the Decline in Average Hours Worked in Europe”, IMF Working Papers, No 2024/002, IMF, 12 January 2024.
See the article entitled “Explaining the resilience of the euro area labour market between 2022 and 2024”, Economic Bulletin, Issue 8, ECB, 2024.
On average, employees with long hours worked 57 hours per week in 2023 – well above the overall average of 31 hours.
Astinova et al., op. cit., show that AHW have tended to fall and converge across European countries. This convergence has mostly been driven by a decline in the proportion of employees working long hours. AHW for employees working less than 50 hours per week have not converged in recent years.
This proportion varies considerably across occupations. Among managers, the proportion of employees with long hours reached 14% in 2023 (down from 24% in 2014).

 
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WASHINGTON — On the 29th of April, the Office of the United States Trade Representative, together with the United States Department of the Treasury, hosted representatives of the European Commission in Washington for the seventh meeting of the Joint Committee established under the 2017 U.S.-EU Agreement on Prudential Measures Regarding Insurance and Reinsurance (“the Agreement”). The Agreement is a “covered agreement” under the Dodd-Frank Act for the United States and is an agreement under Articles 114 and 218 of the Treaty on the Functioning of the European Union for the European Union. It addresses reinsurance, group supervision, and the exchange of insurance information between supervisors. At the meeting, both sides provided updates regarding the implementation and administration of the Agreement, reaffirmed its importance, and concurred that the Agreement is functioning well.
 
Compliments of the Office of the United States Trade RepresentativeThe post Office of the US Trade Representative | United States and European Union Hold Seventh Joint Committee Meeting under the Bilateral Agreement on Prudential Measures Regarding Insurance and Reinsurance first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.