Once I was elected President of the European Council, I decided to visit each member state every year, to meet bilaterally with each European leader. These exchanges are first and foremost an opportunity to listen: to remain closely attuned to the concerns, priorities and expectations of the members of the European Council, and of the citizens they represent. They also allow me to share my perspective on the challenges and opportunities ahead for our union. These visits take place at the beginning of the political season, provide a unique 360-degree view of the state of our union and help to ensure that the work of the European Council remains firmly anchored in the realities, priorities and aspirations across Europe. 
One of the defining features of European integration is that its most tangible benefits often go unnoticed precisely because they have become part of our everyday lives. We cross borders with ease. We share a single currency from Lisbon to Helsinki and from Dublin to Athens. We benefit from common standards that protect our environment, our health and our quality of life. We support one another in responding to natural disasters – as we have done during this summer’s devastating forest fires –, public health emergencies and other common challenges. And when we travel across Europe, we stay connected with family and friends without giving a second thought to mobile roaming charges. What has become ordinary in our daily lives is, in fact, the result of decades of a shared European endeavour.
This provides a strong foundation on which to continue to build Europe. In today’s geopolitical reality, a stronger, more resilient and more autonomous Europe is more important than ever.
That is why we are building the Europe of defence: to strengthen our ability to deter threats, protect our citizens and, ultimately, restore peace on our continent. A peace that has been shattered by Russia’s ongoing aggression against Ukraine. The EU has set itself the objective of decisively ramping up Europe’s defence readiness by 2030 by strengthening the European defence industry, reducing strategic dependencies and jointly developing priority military capabilities. What is crucial is that Europe’s necessary rearmament is pursued collaboratively, avoiding duplication and waste and, above all, ensuring that this historic effort strengthens the collective security and defence of Europe as a whole.
Building Europe’s strategic autonomy also requires a more competitive economy. That is why the European Union is making it easier to do business by cutting red tape, mobilising private investment to help businesses scale up and innovate, completing the single market, strengthening supply chains and diversifying trade relations, while ensuring access to critical raw materials and to affordable, clean and home-grown energy sources. In all these areas, the ‘One Europe, One Market’ agenda agreed by the European Council sets out concrete objectives to be delivered from now until the end of 2027. Beyond the geopolitical imperative, this is ultimately about making life more affordable for citizens, creating the conditions for more high-quality jobs and improving the resilience of Europe’s social market economy.
Defence and competitiveness, together with EU enlargement and our ongoing support for Ukraine, will be high on the agenda as I meet the European leaders during this year’s tour of capitals.
But among the key decisions before us this year, one stands above all others: reaching, by the end of the year, an agreement on the EU’s next multiannual financial framework – our long-term budget for 2028-2034.
Why must that agreement be reached before the end of 2026? Because we will then need about a year to put in place the necessary legislative and administrative framework – in Brussels and in the member states – to ensure the uninterrupted implementation of the next EU budget. This is simply sound planning. Otherwise, we risk disrupting funding for farmers, businesses, students, researchers and innovators.
For decades, the EU budget has supported sustainable and inclusive growth across our continent through investments in agriculture, our regions, research, and the green and digital transitions. It will continue to do so. At the same time, the budget must also reflect Europe’s evolving priorities, including defence, security and competitiveness.
Like national budgets, the EU budget must deliver on its priorities within the limits of finite resources. Most of it is financed through member states’ national contributions. We need to keep those contributions within reasonable limits. That is why a balanced and ambitious package of new common resources will be an essential part of an overall agreement.
I have been encouraged by the constructive spirit of discussions among leaders on the multiannual budget so far. I am confident that, in the end, we will find the right balance for our union, our citizens and our future. Because it is our shared responsibility to do so.
 
 
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GDP (Gross Domestic Product) growth in the OECD area increased slightly to 0.5% in Q2 2026, up from 0.4% in the previous quarter, according to provisional estimates (Figure 1). This reflected a mixed picture across the 30 OECD countries for which data were available. In Q2 2026, 27 countries recorded growth, but at varying rates, while 3 saw no change in GDP.
GDP growth in the G7 slowed to 0.3% in Q2 2026, down from 0.4% in Q1, reflecting slower growth in five G7 countries: Germany, from 0.4% to 0.2%; Italy, from 0.3% to 0.2%; Japan, from 0.5% to 0.3%; the United Kingdom, from 0.6% to 0.4%; and the United States, from 0.5% to 0.4%. In Japan, the slowdown mainly reflected stagnant private consumption, destocking and a decline in investment. In the United Kingdom, weaker private consumption and a decline in government consumption weighed on economic activity. In the United States, slower growth mainly reflected weaker export growth, destocking and a decrease in government consumption. By contrast, growth in Canada accelerated from zero in Q1 to 0.8% in Q2. In France, GDP returned to growth (0.2%) in Q2, following a contraction of 0.1% in Q1.
Among other OECD countries for which data were available, Ireland recorded the highest quarter-on-quarter GDP growth in Q2, at 3.9%, followed by Israel, at 3.6%. At the other end of the spectrum, GDP was unchanged in Austria, Belgium and Chile.
Year-on-year GDP growth in the OECD area increased to 2.3% in Q2 2026, up from 1.7% in Q1 (Table 2). Among G7 economies, the United States recorded the highest annual GDP growth, at 2.1%, while Japan recorded the lowest, at 0.5%.
Click here to access the interactive chart.
 
 
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€3.9 bn surplus for EU

Euro area
The first estimates of euro area balance showed a €8.6 bn surplus in trade in goods with the rest of the world in June 2026, compared with + €4.8 bn in June 2025.
The euro area exports of goods to the rest of the world in June 2026 were €272.5 billion, an increase of 14.4% compared with June 2025 (€238.2 bn).
Imports from the rest of the world stood at €264.0 bn, a rise of 13.1% compared with June 2025 (€233.4 bn).

In June 2026, the euro area balance registered a surplus of €8.6 bn, following a deficit of €9.0 bn in May 2026. Compared with June 2025, when the balance stood at a surplus of €4.8 bn, the latest figure represented an improvement of €3.8 bn. In the presence of a larger energy deficit, this increase was primarily driven by a higher surplus in chemicals and related products, and by surpluses in other manufactured goods as well as in food and drink. The surplus of machinery and vehicles also slightly improved.

€3.9 bn surplus for EU

In January to June 2026, the euro area recorded a surplus of €9.8 bn, compared with €82.2 bn in January-June 2025.
The euro area exports of goods to the rest of the world fell to €1 487.2 bn (a decrease of 0.2% compared with January-June 2025), and imports rose to €1 477.4 bn (an increase of 4.9% compared with January-June 2025).
Intra-euro area trade rose to €1 408.2 bn in January-June 2026, up by 4.7% compared with January-June 2025.
European Union
The EU balance showed a €3.9 bn surplus in trade in goods with the rest of the world in June 2026, compared with +€5.2 bn in June 2025.
The extra-EU exports of goods in June 2026 were €241.5 billion, up by 12.5% compared with June 2025 (€214.7 bn).
Imports from the rest of the world stood at €237.7 bn, up by 13.5% compared with June 2025 (€209.5 bn).

In June 2026, the EU balance registered a surplus of €3.9 bn, following a deficit of €13.9 bn in May 2026. Compared with June 2025, when the balance stood at a surplus of €5.2 bn, the latest figure represented a deterioration of €1.3 bn. This deterioration was primarily driven by a larger energy deficit, partly offset by a wider surplus in chemicals and related products.

In January to June 2026, the EU recorded a deficit of €14.9 bn, compared with €74.1 bn in January-June 2025.
The extra-EU exports of goods fell to €1 317.0 bn (a decrease of 2.1% compared with January-June 2025), and imports rose to €1 331.9 bn (an increase of 4.7% compared with January-June 2025).
Intra-EU trade rose to €2 200.6 bn in January-June 2026, +5.7% compared with January-June 2025.
Annex – Seasonally adjusted data
In June 2026 compared with May 2026, euro area seasonally adjusted exports increased by 0.9%, while imports decreased by 2.1%. The seasonally adjusted balance was €1.8 bn, an increase compared with May (€-6.1 bn).
In June 2026 compared with May 2026, EU seasonally adjusted exports increased by 0.4%, while imports decreased by 2.1%. The seasonally adjusted balance was €-4.9 bn, a narrowing compared with May (€-10.8 bn).
In April-June 2026, euro area exports rose by 5.6%, while imports rose by 8.6%. Intra-EA trade rose by 3.9%.During the same period, EU exports increased by 5.4%, while imports rose by 9.9%. Intra-EU trade increased by 4.0%
Click here to access the interactive charts and tables.

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Blog | The rise of AI has driven a blistering rally in the tech sector, bringing stock market valuations to levels last seen during the dot-com bubble. Although AI is reshaping the economy, do today’s high valuations bear the risk of an abrupt and painful setback in the euro area?
Valuations on the US stock market, as measured by the CAPE ratio, are currently close to their historical peak.[1] Euro area equity valuations have also risen, albeit to a lesser extent (Chart 1). Markets on both sides of the Atlantic reflect investors’ enthusiasm about artificial intelligence (AI) shaping the economy and driving profits. The extremely optimistic valuations raise questions: do today’s stock market prices reflect a rational bet on the transformative technology? Or are we seeing a remake of the dot-com bubble? We argue that economic research on past technological revolutions points to a worrisome conclusion: a correction of current stock market valuations is likely.
A sharp stock market correction would have severe consequences for the euro area, through two channels. One is euro area investors’ direct exposure to the Magnificent Seven stocks (hereafter Mag7) and the other is the degree of overexuberance in euro area stock markets themselves.[2] This post explains why a correction should be expected even if current valuations are rational, why that matters not only to the shareholders who would take the direct hit, and what it implies for the euro area specifically.
Chart 1
US and euro area stock market valuations

a) S&P 500 Index (cyclically adjusted price-to-earnings ratio)

b) Euro area Market Equity Index (cyclically adjusted price-to-earnings ratio)

(Index)

(Index)

Source: Datastream
Notes: Price-earnings ratio (monthly) from 1980 to 2026. Numerator: real (inflation-corrected) S&P Composite Stock Price Index (panel a) and Euro Stoxx 50 Price Index (panel b). Denominator: moving average over preceding ten years of real S&P Composite (panel a) and Market Equity (panel b) earnings.

Why do technological revolutions so often end in a boom and bust?
The current excitement surrounding AI has many historical precedents. To name just a few: the railway boom of the 19th century, the expansion of electricity and radio in the 1920s and the surge of the internet, or the “dot-com era”, in the 1990s. In each case, a genuinely transformative technology attracted investment, and the stock market valuations of firms that adopted it rose strongly before falling sharply. Economic research offers two complementary explanations.
First, the rational view argues that high valuations can be justified by extreme uncertainty about a new technology’s productivity.[3] Why has Nvidia’s share price risen 20-fold since 2022? Because investors rationally perceived that the company would become the next Google – with a highly uncertain and potentially large upside. In the worst case in such a scenario, investors lose their investment. But in the best case, the gains are large and genuinely hard to bound. This “option value” increases the stock valuations of early adopters, causing their price-to-earnings ratios to rise sharply.
Even if the technology succeeds, stock prices may eventually fall. Why? The nature of uncertainty shifts from a “single sector” to the “entire” economy. Initially, the new technology is like a small-scale experiment. If it fails, it’s unfortunate for that company, but the rest of the economy is unaffected. The risk can be diversified away. As adoption spreads, the same uncertainty becomes economy wide. If something then goes wrong with that technology, the whole economy suffers. This risk cannot be diversified, so investors demand a higher risk premium. However, this does not necessarily mean that profits will fall. Adoption itself is good news for cash flows, but the rising risk premium has the opposite effect and tends to prevail historically (Chart 2, blue line), unless profit growth is strong enough to compensate for that (Chart 2, yellow line). The exact timing is unknowable in advance. These boom-bust patterns are only identifiable with hindsight.
The second explanation for technology-driven boom and bust is the behavioural view. It holds that overconfident, overoptimistic investors bid up prices beyond fundamentals (see Chart 2, red line).[4] When overconfidence fades, prices can fall even more sharply than in the rational scenario.
Both views imply a boom followed by a correction, or a pullback from wherever valuations have risen, at some point in the future. This does not mean that today’s prices represent a ceiling. If AI proves to be transformative enough, valuations could still be much higher in the future, even after a correction. As mentioned previously, it is impossible to know in advance where we stand on this path. Furthermore, the case for expecting a correction is not dependent on whether today’s prices are rational or irrational. We should be aware of that and prepare. The rest of this blog post considers two ways in which such a correction might affect the euro area – wealth effects for euro area investors in US stocks and contagion to euro area stock markets.

Chart 2
Stylised boom-bust scenarios

(Index)

How exposed is the euro area to a fall in Mag7 prices?
The dominance of the Mag7 on widely held global indices (e.g. MSCI World) carries significant risks for euro area investors. Panel a) of Chart 3 shows that most euro area exposures to the Mag7 are via investment funds – mutual funds and exchange traded funds (ETFs) – rather than direct holdings. Using data on the underlying mutual fund investors, we can identify which euro area investors carry the greatest exposure to US technology equities (Chart 3, panel b). Euro area households, which are increasingly channelling funds into low-cost ETFs, have around €440 billion of exposures to US technology equities without necessarily being aware of the associated concentration risk. Insurance companies and pension funds also hold significant exposures to the Mag7.
This fund-based structure is itself a transmission channel. A sharp correction can force funds to sell assets to meet redemptions – first, liquid holdings and then, if the correction persists, distressed assets – pushing valuations down further and triggering more redemptions. This is why a Mag7 correction is a question of financial stability for the euro area, rather than just a private one. The more severe scenario is not the equity correction on its own but a correction that coincides with broader market instability that policymakers cannot easily calm: unlike in the dot-com episode, today’s starting point leaves markedly less room to cut interest rates or use fiscal policy to cushion the fallout.
Chart 3
Euro area investors’ Mag7 exposures

a) Direct exposures

b) Indirect exposures

(EUR billions)

(EUR billions)

Sources: ECB (SHSS and SHS-Look-through) and authors’ calculations.
Note: Holding amounts of the five largest investors in the euro area (market values, Q3 2025).

Is there overexuberance in euro area stock markets?
Beyond this exposure to the Mag7, is there also a risk of a home-grown correction? While euro area equity prices have risen substantially in recent years (Chart 1, panel b), valuation metrics such as price-to-earnings ratios remain considerably lower than in the United States (Chart 1, panel a). The euro area macroeconomic environment in the information and communication technology sector currently appears resilient compared with the times of the dot-com bubble. Productivity and markups in the sector are rising, the business climate in euro area digital services does not seem exuberant and euro area firms’ AI adoption is rising notably, only a few years after the launch of ChatGPT in 2022. The global AI boom has also sparked an ongoing and profound digital transformation across the euro area. The overall increase in digital investment in the euro area over the past decade was more than three times the cumulative growth in GDP over that period.
In sum, the euro area AI transformation is proceeding at a steady if unspectacular pace. On the one hand, euro area stock markets are dominated by “old economy” stocks, which show little of the AI excitement that we see in the US Mag7, reducing the risk of a future correction. On the other hand, euro area and US stock markets have historically been very highly correlated, meaning that a US correction will not leave the euro area unaffected.
Conclusion
Historical experience suggests that technological revolutions carry risks of a boom-bust cycle in asset prices, and this risk does not depend on today’s valuations being rational or irrational. The euro area’s smaller, less richly valued tech sector limits the risk of a home-grown crash. But this offers little reassurance: households, insurers and pension funds have significant exposures through global index trackers, and US equity stress has historically also had an impact on euro area stock markets. The effects of a US correction could extend beyond financial markets to euro area sentiment, financing conditions and hiring. A US AI fallout would not remain a US problem.
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.

The CAPE (cyclically adjusted price-to-earnings) ratio was developed by Robert Shiller. The S&P 500 CAPE is a measure of stock market valuations that compares share prices of the leading 500 US-listed companies with average inflation adjusted earnings over the previous ten years.

The Magnificent Seven stocks are a group of high-performing and influential companies in the US stock market: Alphabet, Amazon, Apple, Tesla, Meta Platforms, Microsoft and NVIDIA.

See Pástor, Ľ. and Veronesi, P. (2009), “Technological revolutions and stock prices”, American Economic Review, 99(4), pp. 1451-1483.

See, for example, Scheinkman, J. A. (2014), Speculation, trading, and bubbles, Columbia University Press, and Hong, H. and Stein, J. C. (2007), Disagreement and the stock market, Journal of Economic Perspectives, 21(2), pp.109-128.

 
 
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Governments have good reasons to use tariffs or sanctions for geopolitical purposes but should consider the trade-offs.
Governments worldwide increasingly are using economic policies, such as export bans, financial sanctions, and trade tariffs, to achieve noneconomic goals. The benefits of these geoeconomic policies can be significant, accomplishing a geopolitical purpose without threatening, or using, military force—and without the high human and economic costs of war. Perhaps the world should welcome this.
Yet coercive policies can be costly for nations that impose them. As appealing as it may be to use economic policies for coercive purposes, sometimes the benefits are not worth the cost.
Close connection
International politics and international economics have always been closely intertwined. The age of mercantilism that prevailed from the 15th to the early 19th centuries was explicitly organized around the interaction of economic and military prowess. In his 1618 work A Discourse of the Invention of Ships, Anchors, Compasse &c, the explorer Sir Walter Raleigh, a theorist and practitioner of English mercantilism, opines, “Whosoever commands the sea commands the trade; whosoever commands the trade of the world commands the riches of the world, and consequently the world itself.”
Mercantilist policies used military control over shipping routes and colonies to extract resources from trading partners and overseas possessions and used those resources to finance additional military spending. For several hundred years, the major powers’ conflicts and alliances were reflected in both their military and economic relations.
As Britain led the rich countries of Europe away from mercantilism and toward freer trade and financial flows in the early 19th century, the European powers increasingly separated economic policymaking from great-power politics. There were still occasional blockades and embargoes, and economic policies were often used as an instrument of colonial control. But the prevailing ideology and practice tended to keep economic and military policies relatively separate. This era of free trade saw very rapid economic growth by historical standards, which seemed to confirm the wisdom of divorcing economic from diplomatic relations.
However, as countries strove to catch up to Britain in the late 19th and early 20th centuries, geopolitical contention and a race for colonies brought geoeconomics back to the fore. Colonial powers tightened their control over their empires, Germany carved out a sphere of economic and political interest in central Europe, and the United States cemented its predominance in the Western Hemisphere during a period of rising economic nationalism that has parallels today.
The Cold War reinforced the connection between geopolitics and economics: The Western powers largely sealed off the Soviet Union and its allies from international trade and investment even as Western international economic integration grew dramatically. For their part, the Soviets and their allies, along with China, showed little interest in the world economy.
The end of the Soviet Union and the Cold War, along with the onset of full-scale globalization in the late 1980s and early 1990s, led most governments to conduct their international economic relations with little concern for military or other geopolitical considerations. As China and Vietnam, and later the former Soviet republics and their allies, joined the world economy, it seemed that global acceptance of economic integration had overcome the worst features of great-power politics.
Expectations at the start of the new millennium that international politics and international economics would stay separate have turned out to be wrong. Renewed competition among the major powers has encompassed their economic relations—think Western sanctions on Russia and ongoing trade conflicts between China and the United States. The global pandemic highlighted fears that long and complex supply chains could jeopardize countries’ access to essential goods. The full-scale Russian invasion of Ukraine has brought major military conflict to Europe in ways that many considered unthinkable. It is hardly surprising that governments are using economic policies to address the rising geopolitical tensions they face.
Benefits of coercion
Governments have good reasons to use economic policies for geopolitical purposes. Sanctions, embargoes, tariffs, and other such measures can coerce adversaries without the threat or use of force. They can impose costs on target countries and governments, induce powerful groups abroad to pressure their own governments to change course, and persuade allies to collaborate in compelling an adversary to make concessions.
The appeal of geoeconomic policies can be clear, although they may be difficult to measure. Many geopolitical goals are hard to quantify, and hard even to think of in monetary terms. How much is national security worth? What is the value of isolating an adversary, cementing an alliance, staving off a potential attack, avoiding a disastrous war?
While the benefits of geoeconomic policies may be intangible, many of the costs are more directly economic and amenable to analysis. Policymakers, analysts, and constituents should think about the trade-offs involved, about what a country may be giving up when it imposes sanctions or tariffs for geopolitical purposes. This does not mean that such policies should be avoided—only that both their benefits and their costs should be considered.
Coercive economic policies typically impose costs on the country that uses them. Those costs come in many varieties: Some examples follow.
Costs to economic efficiency. Almost by definition, geoeconomic policies move a country’s economy away from its most productive purposes. Restricting imports limits the country’s access to goods more efficiently produced elsewhere; restricting exports limits the country’s access to profitable foreign markets. Measures that restrict the movement of goods and capital can compromise a country’s comparative advantage and reduce its productive efficiency. This was, after all, the argument of pro-trade economists from Adam Smith to David Ricardo and John Maynard Keynes. As Keynes wrote, “The community as a whole cannot hope to gain by making artificially scarce what the country wants.”
Governments pursue geoeconomic policies because they are willing to sacrifice aggregate (economic) welfare for geopolitical purposes. Within this objective, there are specific constraints that highlight the trade-offs geoeconomic policy entails.
Costs to specialization. Specialization is central to productivity and economic growth. The division of labor is central to broader economic efficiency and, as Adam Smith wrote, “The division of labor is limited by the extent of the market.” Purposely giving up a broader market limits how much a national economy can usefully specialize.
There is a more explicit trade-off. More specialized economic activities are both particularly valuable and particularly vulnerable. They are valuable because specialized production is especially profitable, given its scarcity and specificity. They are vulnerable because the scarcity and specificity of specialized production also make it harder to replace. The more specialized the productive activity, the greater the challenge in doing without it—and the more dangerous it is to rely on it.
Governments will thus try to avoid dependence on the more specialized products of other nations. Diversifying economic ties provides some protection against economic and geopolitical shocks and helps limit vulnerability. But it can also limit an economy’s efficiency and that of its trading partners.
Costs to innovation. Just as artificially limiting a country’s market reduces its ability to specialize, it also reduces its incentives to innovate. Producers invest in research and development to gain advantages in markets, and the larger the market and the fiercer the competition, the greater the reason to do so.
On the other hand, export controls that restrict a target economy’s access to technology give the target strong reasons to innovate. Nazi Germany developed synthetic rubber and methadone when faced with an Allied blockade that cut it off from natural supplies of rubber and opium. While this may not have been the most efficient use of German resources, it did counteract the impact of the geoeconomic policies. More recent evidence shows that sanctioned countries have invested heavily in innovation: Russia, China, and Iran have all responded to sanctions by ramping up research and development to try to replace goods no longer available.
Costs to credibility. A country’s good reputation is valuable: It encourages other countries to commit to potentially risky arrangements in trade, finance, and investment. If geoeconomic policies such as sanctions and asset freezes violate implicit or explicit contracts, it causes other countries to question whether they can trust commitments with those imposing such policies. As trust erodes, other governments and private companies are less willing to risk economic commitments that might be violated. This can deprive a country of valuable trade, investment, and financial ties—many of which rely on partners’ reputation for reliability.
Costs to domestic politics. The costs and benefits of geoeconomic policies may not be evenly distributed within the population, which can lead to domestic political conflict. The negative effects of sanctions or export controls, for example, may be severe for businesses that lose important and profitable economic ties. On the other hand, successful geoeconomic policies may create particularly profitable opportunities for companies and industries that gain market access or favorable treatment. Domestic businesses that suffer from the imposition of geoeconomic policies may resent those that benefit from their success. Such policies may thus be harder to impose, less credible, or more politically controversial. The last thing national leaders want when they pursue what they regard as key geopolitical policies is domestic political backlash—and so they need to pay close attention to the domestic social costs of these policies.
Complete picture
Governments often adopt coercive economic policies in the midst of an immediate geopolitical struggle. The understandable focus on the near-term geopolitical goal—extracting concessions, forestalling harm—can obscure the longer-term economic costs. It may be difficult, in the heat of geopolitical conflict, for policymakers to keep in mind that sanctions can inflict lasting damage to the financial or commercial reputation of the sanctioner, damage that could outweigh the temporary geoeconomic advantage gained.
Geoeconomic policies may engender desirable behavior in other countries, but they have costs and involve trade-offs. Policymakers, analysts, and citizens need a clear picture of these costs. Geoeconomic policies can limit the efficient functioning of the economy, reducing incentives to specialize for maximum national productive efficiency. They can discourage domestic innovation but stimulate such activity by foreign rivals. They limit the activities available to national firms and industries. They can affect a country’s reputation for reliability and may damage its long-term economic prospects. And they may harm some industries or groups in the sending nation in favor of others, in ways that may be politically controversial.
Geoeconomic policies are a valuable tool of foreign policy whose benefits may be substantial, especially if they help avoid military conflict. There are times, however, when the costs may outweigh the benefits. We need a clear picture of the costs before we can determine whether the net benefits are positive.
 
 
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Overall, 92% of companies with physical points of sale accept cash
Cash acceptance rebounds after decline observed during and after pandemic
Cash widely valued for privacy and reliability, while acceptance of mobile payments rises sharply

According to the latest survey on the use of cash by companies in the euro area published today by the European Central Bank, cash acceptance has rebounded slightly.
In 2026, 92% of companies selling goods and services in physical locations in the retail trade, restaurants and cafés, hotels, and arts, entertainment and recreation sectors reported that they accept cash. This compares with 90% in 2024, suggesting that cash acceptance has rebounded after the decline observed during and after the pandemic.
Overall, cash is the most widely accepted payment method in the euro area. Acceptance of card payments remained broadly stable at 88% between 2024 and 2026, while acceptance of mobile payments rose sharply from 36% to 68% of companies over the same period.
At the same time, 25% of companies in the euro area report that they have taken steps to promote digital payments. The measures include investing in tills that accept cashless payments or reducing the number of tills that accept cash. In the euro area, 13% of companies have introduced self-checkout terminals.
When deciding which payment methods to accept, companies most often cite consumer preference, security and ease of handling as the main considerations. Compared with digital payment methods, they continue to see major advantages in accepting cash, such as privacy and reliability.
The survey covered 8,205 companies across all 21 euro area countries. Interviews were conducted between February and April 2026.
 
 
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From 12 August 2026, new rules on packaging and packaging waste apply in the EU. This will change the way products are packaged to protect the environment and people’s health. It will also create opportunities for businesses.
Packaging uses large quantities of raw materials and generates waste that ends up in landfills or the sea. Some chemicals used in packaging can also be harmful. The new rules address these issues by setting requirements for the manufacturing and composition of all packaging placed on the EU market. They also require packaging to be reusable or recoverable, meaning it can be used again or turned into something else after use. From 2030, certain single-use packaging will be banned where more sustainable alternatives are available, such as small ketchup packets or mini shampoo bottles in hotels.
The new measures will make packaging

less wasteful: plastic packaging must be made in part from recycled content, with increasing targets for 2030 and 2040
fully recyclable: all packaging must be recyclable by 2030, so its components can be used for something else afterwards
clearly labelled: clear labels and colours make it easier to sort trash for recycling – showing what it is made of, where to bin it, and how to return it for reuse
smarter: unnecessary packaging and empty space in deliveries will be reduced
easier to re-use, refill and collect: deposit and return systems will be boosted. Companies must make reuse or refill options available whenever possible, with no extra charge
fairer and safer: brands using non-recyclable or environmentally harmful materials will have to pay to clean them up. Harmful and cancer-causing ‘forever’ chemicals (PFAS) will be restricted in food packaging

The EU is working to protect and improve the environment and build a more circular, sustainable, and competitive economy. The law on packaging addresses the environmental challenges caused by packaging waste, harmonises rules for businesses across the single market, and creates opportunities for businesses involved in recycling and sustainable packaging solutions.
 
 
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Blog | Retail fuel prices have surged in 2026 following the outbreak of the conflict in the Middle East, driving up euro area energy inflation. In this blog, we examine the factors that drive fuel price dynamics at the pump.
Rising oil prices amid the conflict in the Middle East have put the public spotlight back on fuel costs and their potential impact on inflation. This blog post explains how changes in crude oil prices feed through to what consumers pay for petrol or diesel at the pump. To do so, we take three steps.
First, we break down prices into three components − crude oil, refining and distribution margins, and taxes − and show how these prices reacted to changes in oil prices within weeks and the pass-through was complete. Second, we explain why a 10% increase in oil prices does not automatically translate into a 10% increase in fuel prices, as taxes and other fixed cost components dampen the pass-through. And third, we examine the role of refining margins, which can at times amplify the impact of oil price shocks on fuel prices, household budgets and inflation.
Oil price rises are transmitted fast and fully to retail fuel prices
In general, the prices for refined fuel and crude oil move pretty much in lockstep from month to month, although refined products (in particular diesel) have outpaced crude at times since 2022. This is a first sign of the role played by refining margins, to which we will return later.
To better understand how the recent oil price shock made it to the price of diesel at the petrol station, we need to trace the transmission mechanism. Prices for Brent crude rose rapidly in March after the outbreak of the conflict in the Middle East, peaking at 138 US dollars per barrel in early April (Chart 1). This is almost double the level seen in late February. To produce diesel, crude oil is processed in a refinery. On this occasion, prices of diesel after the refining process rose even faster than prices of crude oil, peaking at 197 US dollars per barrel in April. This resulted in ever higher prices at the pump. By the first week of April, retail diesel prices averaged €2.18 per litre across the euro area compared with €1.63 per litre in late February – a sizeable jump of a third. Rising crude oil prices thus fed quickly into rising consumer prices, as they usually do. In general, the pass-through is fast, within one or two months, and complete. Rather than being absorbed by lower profit margins, an increase of €0.10 per litre in crude oil prices usually translates into an increase of €0.10 per litre in pre-tax pump prices.
While the pass-through from oil prices to pump prices is complete in levels, in relative terms retail prices increased less. To understand why, we need to look at all the other components that make up consumer prices. And this also helps us comprehend why diesel prices rose by €0.55 against only €0.35 for crude prices.

Chart 1
Developments in energy-related prices

a) Brent crude and refined petrol and diesel prices

b) Petrol and diesel prices and HICP

(US dollars per barrel)

(index: 2025 = 100)

Sources: LSEG, European Commission and ECB calculations.
Notes: In panel a), the latest observations are for 28 July 2026. In panel b), the levels for petrol and diesel reflect the impacts of crude oil prices, refining costs and margins distribution costs and, margins, excise duties and taxes, derived from the European Commission’s Weekly Oil Bulletin (WOB). HICP stands for the Harmonised Index of Consumer Prices measure of inflation. The latest observations are for June 2026 for HICP inflation and the week of 20 July for diesel and petrol prices.

In relative terms, retail prices increase less than crude prices
The prices of crude oil and refined diesel rose by over 90% between the end of February and the first week of April (peak since the outbreak of the Middle East conflict), whereas diesel prices at the pump increased by around “only” 34% (Chart 2, panels a and b).[2] Similar dynamics applied to petrol. The reason for this is that a large share of the retail price is fixed and does not move with oil market prices.[3]
Price elasticities – how much retail prices change in percentage terms when input prices change – vary along the five components that make up the price at the petrol station:

Crude oil is highly sensitive to both supply shocks (like the Middle East conflict) and demand shocks (like the COVID-19 pandemic). Since 2021 the crude oil component has averaged around €0.47 per litre of diesel, ranging from €0.28 to €0.80. At its most recent peak in the first week of April, it reached €0.73 (a 92% increase compared with the end of February).
Refining costs and margins are calculated as the difference between the contribution of refined product prices and the contribution of crude oil prices. This spread captures the additional costs and gross margins associated with all steps between crude oil arriving at the refinery and usable fuel leaving it. In the last week of February, they contributed €0.13 to the retail price of diesel, in line with the historical average from 2021. As mentioned above and detailed below, this price component was amplified during the recent energy shock (a 168% increase compared with the end of February).
Distribution costs and margins cover all activities between refining and the final sale of the product. These include transporting the product to the local retail outlet, marketing expenses and the costs of operating the outlet (e.g. rents and wages). Distribution margins absorbed part of the increase in diesel refining, falling by 14% compared with the end of February.
Excise duties are taxes levied at a fixed amount per litre that rarely changes, averaging €0.52 (diesel) and €0.66 (petrol) in the euro area since 2021. Several countries have temporarily cut excise duties to dampen the inflationary impact from the energy shock for consumers, as they did after Russia invaded Ukraine. These duties declined by around 8% compared with the end of February. In most cases, the latest measures expired in June this year.
Value added taxes (VAT) are levied as a fixed percentage of the pre-tax consumer price and excise duties (currently around 19-22% in most countries). Thus, they rise and fall with the pre-tax price but add no independent volatility. VAT accounts for roughly one-sixth of the retail price. The VAT component increased by 24% compared with the end of February (hence less than the retail price percentage change due to a cut of around 8% to the average VAT rate across the euro area, from 20.7% to 18.9%).

As excise duties and VAT together make up a big, largely fixed share of the price, a given percentage increase in crude oil prices translates into a much smaller percentage move at the station.
The renewed escalation of the conflict since early July has pushed pump prices back up, to around €1.98 per litre of diesel in the third week of July – with refining margins again playing an important role (Chart 2, panel d).
Chart 2
The journey: before and during the shock

a) Retail diesel price in the last week of February

b) Retail diesel price in the first week of April

(cent per litre)

(cent per litre)

c) Retail diesel price in the last week of June

d) Retail diesel price in the third week of July

(cent per litre)

(cent per litre)

Sources: LSEG, European Commission and ECB calculations.
Notes: The retail price reflects the impacts of crude oil prices, refining costs and margins distribution costs and margins, excise duties and taxes in the euro area, derived from the European Commission’s Weekly Oil Bulletin (WOB). The percentage changes in pump prices shown in panels b), c), and d) are calculated relative to pump prices in the last week of February shown in panel a).
The latest observations are for the week of 23 February 2026 in panel a), the week of 6 April 2026 in panel b), the week of 29 June 2026 in panel c) and the week of 20 July 2026 in panel d).

Why refining margins mattered this time
What is behind the big jump in absolute prices for diesel and petrol? This time, refining margins made a difference.
These margins may vary for a number of reasons, including:
(i) the varying refining processes according to the refined product requirements and the type of crude oil used;
(ii) the varying supply of and demand for various refined products – for example, when refineries are closed for maintenance or damaged in conflicts, or also when refined products from specific countries are under embargo for political reasons.
In the case of the recent energy shock, the closure of the Strait of Hormuz has affected a significant share of global refining capacity. Essentially, this led to a decline in global refined-product exports of around 4.5 million barrels per day in the second quarter of 2026.[4] This sharp supply crunch resulted in rapidly widening refining costs and margins, jumping from a monthly average of €0.10 per litre of diesel in February to €0.26 in March (Chart 3, panel a).
More recently, the renewed escalation of the conflict has led to another surge in refining costs and margins to near-record highs amid reduced refining capacity, contributing €0.35 to the diesel price and €0.23 to petrol for the first three weeks of July (Chart 3).[5] Looking ahead, based on refined diesel futures on 20 July, the contribution from margins is expected to peak in August before declining to €0.16 by the end of 2027, close to levels observed at the end of February 2026.

Chart 3
Decomposition of fuel prices in the euro area

a) Diesel

b) Petrol

(cent per litre)

(cent per litre)

Sources: LSEG, European Commission and ECB staff calculations.
Notes: Chart shows monthly averages. Refining and distribution costs and margins are calculated as the difference between pre-tax consumer prices and crude oil prices. The latest observations are for the week of 20 July.

What happens on the “way down”?
Crude oil prices fell significantly during the recent short-lived reopening of the Strait of Hormuz (18 June to 11 July), and retail diesel prices followed suit (Chart 2, panel c). Over the last few decades the “rockets and feathers” literature has discussed whether there is any evidence of asymmetry – whether retail prices fall less quickly (“feathers”) when oil prices come down compared with how fast they rise when oil prices go up (“rockets”). Earlier studies for the euro area failed to find any asymmetries or the overall picture was inconclusive.[6] However, more recent work suggests that the pass-through could be slower on the way down.[7] This could reflect lags in inventory replacement, uncertainty about the persistence of crude oil price changes or weaker competitive pressure when costs decline. Further analysis is therefore needed to establish whether and why asymmetries were observed during the recent shock.
Conclusions
The Middle East oil price shock has been significant and had a marked impact on retail fuel prices, with refining margins amplifying the effect. Overall, the Harmonised Index of Consumer Prices (HICP) for fuel drove the increase in the HICP for energy from -3.1% to 10.8% between February and May 2026 before it declined to 8.5% in June. As observed in the past, increases in the prices of crude and refined fuels passed through to retail prices rapidly, while temporary reductions in excise duties and taxes helped to alleviate the burden on consumers. When oil prices fell during the brief reopening of the Strait of Hormuz, pressures on retail fuel prices eased to some extent. The renewed escalation of the conflict has led to another sharp rise in fuel prices reflecting not only higher crude oil prices but also surging refining margins.
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.

The authors are grateful to research assistance by Johannes Schäfer.

While the elasticity of retail prices to oil prices changes over time and depends on the various components’ levels, an elasticity of around 0.3 (a 1% increase in oil prices leading to a 0.3% increase in retail prices) is in line with a short-term forecasting model for energy (and transport fuels) inflation in the euro area (Bańbura, M., Bobeica, E., Giammaria, A., Porqueddu, M. and van Spronsen, J. (2025), “A new model to forecast energy inflation in the euro area”, Working Paper Series, ECB, No 3062).

See Meyler, A. (2022), “Developments in consumer liquid fuel prices”, in Kuik, F., Adolfsen, J., Lis, E. and Meyler, A., “Energy price developments in and out of the COVID-19 pandemic – from commodity prices to consumer prices”, Economic Bulletin, Issue 4, ECB.

See Oil Market Report – May 2026, International Energy Agency.

According to International Energy Agency’s Oil Market Report – July 2026, global refinery runs are down 6 mb/d year on year, with Middle East export refineries yet to restart, Russian throughputs curtailed by attacks and Asia still running at reduced rates.

See, for example, Meyler, A. (2009), “The pass through of oil prices into euro area consumer liquid fuel prices in an environment of high and volatile oil prices”, Energy Economics, Vol. 31, Issue 6, November, pp. 867-881; Perdiguero-García, J. (2013), “Symmetric or asymmetric oil prices? A meta-analysis approach”, Energy Policy, Vol. 57, June, pp. 389-397.

For an analysis based on forecourt-level data for Germany, see, for example, Asane-Otoo, E. and Dannemann, B. (2022), “Rockets and Feathers Revisited: Asymmetric Retail Gasoline Pricing in the Era of Market Transparency”, The Energy Journal, Vol. 43, Issue 1, January. See also Cook, S. and Fosten, J. (2019), “Replicating rockets and feathers”, Energy Economics, Vol. 82, August, pp. 139-151; Wen, D., He, M., Wang, Y. and Zhang, Y. (2025), “Forecasting gasoline prices using oil prices: New evidence based on the rocket and feather hypothesis”, Energy, Vol. 335, 30 October.

 
 
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Year-on-year inflation in the OECD as measured by the Consumer Price Index declined to 4.2% in June 2026, down from 4.6% in May.
Year-on-year inflation in the OECD as measured by the Consumer Price Index (CPI) declined to 4.2% in June 2026, down from 4.6% in May (Table 1, Figures 1 and 2), following three consecutive monthly increases. Headline inflation declined in 20 OECD countries, rose in 6, and was stable or broadly stable in 12. In June, headline inflation was below or at 2.0% in nine OECD countries, and below 1.0% in three of them (Table 1).
Compared with May, energy inflation in the OECD fell by 4.0 percentage points (p.p.) in June, to 11.7% year-on-year, with declines in 24 of the 37 OECD countries with available data. Despite these declines, 10 countries recorded rising energy inflation, and 6 countries had energy inflation above 15%. Both food and core inflation (inflation excluding food and energy) declined by 0.2 p.p. in June to 3.4% and 3.6%, respectively.
In the G7, year-on-year headline inflation also decreased to 3.0% in June, down from 3.5% in May. The decline primarily reflected a 5.2 p.p. fall in energy inflation. Notably, headline inflation declined in every G7 country except Japan, where it edged up by 0.2 p.p. to 1.7%, mirroring a rise in energy inflation from below to close to zero. By contrast, a marked decrease in energy inflation in the United States drove headline inflation to 3.5% in June, down from 4.2% in May. Similar developments were also observed in France, where the greater number of days of seasonal sales in June 2026 than in June 2025 accentuated the decline (Figures 2 and 4). In Germany, the United Kingdom, and the United States, core inflation was the main driver of headline inflation. In contrast, in Canada, France, and Italy, the combined effect of food and energy prices was primarily responsible for headline inflation. In Japan, the contribution of core inflation was roughly equal to those of food and energy combined (Figure 3).
In the euro area, year-on-year headline inflation as measured by the Harmonised Index of Consumer Prices (HICP) fell to 2.8% in June, down from 3.2% in May, as energy inflation fell and food inflation reached its lowest level in five years. Eurostat’s flash estimate indicates that euro area year-on-year headline inflation remained broadly stable at 2.9% in July 2026. Energy inflation is estimated to have increased to 10.0% and core inflation to have remained broadly stable at 2.5%.
In the G20, year-on-year headline inflation fell to 4.1% in June, down from 4.3% in May. Headline inflation in China declined to 1.0%, from 1.2% in May, while it rose in Argentina, Indonesia and South Africa. It was stable or broadly stable in Brazil, India and Saudi Arabia (Table 2).
Click here to access figures.
 
 

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On 2 August 2026, new rules on the transparency of AI systems take effect.
AI is advancing quickly, making it increasingly difficult to distinguish AI-generated and manipulated content from human-created and authentic content. This creates new risks of misinformation and manipulation at scale, fraud, impersonation, and consumer deception.
The new transparency obligations will help people recognise when they are interacting with AI or are exposed to AI-generated content, so they can make informed decisions and better protect themselves from misinformation or deception.
Click here to access explanatory video.
Transparency obligations for providers and deployers of certain AI systems

Marking and labelling of AI-generated content: certain AI-generated or manipulated content must be clearly and visibly labelled and include machine-readable marks. The EU has created a set of icons that can be used for this purpose. This applies to

images, audio, and video content that resemble existing persons, objects, places, entities, or events (deepfakes)
emotion recognition and biometric categorisation tools
text published to inform the public on matters of public interest where there has been no human review or editorial control.

Transparency when interacting with an AI system: Users must be clearly informed when they are not interacting with a real person, but an AI system, for example a chatbot, AI agent, and avatar.

The Commission has published guidelines to assist providers and deployers of AI systems in meeting these transparency obligations. The guidelines explain how compliance can be demonstrated, including through adherence to a code of practice.
Enforcement of the rules and sanctions
National market surveillance authorities, the European AI Office (for systems under its supervision), and the European Data Protection Supervisor (when EU institutions are providers or deployers) are responsible for enforcing the transparency rules and may issue fines

up to €15 million, or 3% of global annual turnover, for companies
up to €750k for EU institutions, bodies, and agencies
with proportionality taken into account for small and medium-sized enterprises (SMEs) and small mid-cap companies (SMCs)

The AI Act entered into force on 1 August 2024. Its provisions apply in stages, with different obligations taking effect at different times. The Act creates a single market and harmonised rules for trustworthy AI in the EU and promotes AI innovation and uptake. It also addresses potential risks to people’s health, safety, and fundamental rights, while safeguarding democracy and the rule of law. Ensuring its effective implementation is now a key priority for the Commission.
 
 
 
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