Keynote speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the Goldman Sachs European Financials Conference 2026

Thank you for inviting me to speak today.
Europe is facing a set of unprecedented challenges.
The geopolitical environment is becoming increasingly fragmented. Europe remains overly dependent on external providers for energy, technology, security and key financial infrastructures such as payment systems and capital markets. Reducing these dependencies is no longer a choice, but a necessity to safeguard the European way of life.
Ensuring that our future is not determined elsewhere demands investment on an unprecedented scale. Consider that the green, digital and defence transitions will require an additional €1.2 trillion of spending per year between now and 2031.[1]
No single actor, no single sector and no single country can meet these challenges alone.
As fiscal space tightens, much of Europe’s investment needs will have to come from private investment, with capital markets playing a pivotal role.
In a bank-based financial system like Europe’s, strong, competitive and resilient banks are even more indispensable than they are elsewhere. They sustain the flow of finance to businesses, households and the broader real economy. It is therefore no surprise that the competitiveness of European banks has moved to the heart of the policy debate.[2]
Yet the competitiveness of the banking sector is not solely determined by capital, market integration, scale or regulation. It also hinges on whether banks can continue to serve their clients and provide critical services when disruption strikes. That is why today I will focus on operational resilience.
Resilience goes far beyond capital
When some people hear supervisors speak about resilience, they immediately think of financial resilience.
However, in a world of more frequent, sophisticated and disruptive cyber incidents, technology failures and growing dependencies on third parties, a bank can be well capitalised and highly liquid and yet still unable to operate.
A striking example of the importance of non-financial resilience is the ransomware attack that hit the New York branch of the Industrial and Commercial Bank of China in 2023 – the largest bank in the world by assets. Despite the bank’s financial strength, the incident disrupted the settlement of trades in the US Treasury market, one of the most systemically important markets globally. The bank had to rely on manual workarounds – including reportedly dispatching a courier with a USB stick across downtown Manhattan – to meet its obligations.
Another example is the CrowdStrike incident in 2024, when systems using a major operating platform crashed and displayed the “blue screen of death”. The disruption affected firms across sectors, including financial services.
At the same time, the threat environment is evolving rapidly with the rise of AI. One telling example involved criminals using AI-generated identities to create thousands of fake customers in order to obtain loans, causing millions in losses for the bank concerned.
We have also seen an increase in the number of cyberattacks reported by banks under our supervision in recent years.[3]
All these examples illustrate a fundamental point: a bank can have ample capital and liquidity but still face severe operational issues, or even fail, if it lacks preparedness and robust contingency planning for operational shocks. Today, resilience is not only about absorbing losses, but also about maintaining critical services – even under severe operational stress.[4]
This imperative to maintain operational resilience is all the more critical in banking – a sector built on trust in which cybersecurity failures can have profoundly damaging consequences.
Operational resilience firmly on the agenda of banks and supervisors
The good news is that banks and supervisors are not starting from scratch.
Over the past decade, cyberattacks on critical infrastructure – including energy and telecommunications providers, as well as banks – have become more frequent, more targeted and more sophisticated.[5]
Although cyberattacks are occurring everywhere, every day and at any time, and while notable incidents have affected financial services, we have not yet seen such events escalate into widespread disruption or threaten the viability of a major bank.[6]
This is not a coincidence.
The fact that financial services are among the sectors best prepared to deal with cyberattacks reflects years of capacity building in banks: in defence, detection and incident response and reporting. Moreover, governance arrangements have improved and there is a greater awareness of cyber risks, particularly among banks’ management bodies.[7]
Importantly, banks’ efforts have evolved in tandem with a stronger and sustained supervisory focus. Operational resilience and cyber risk have been a priority for European banking supervision for several years[8], during which we have worked closely with banks in both ongoing and on-site supervision.
For example, in 2024 we conducted a cyber resilience stress test on 109 banks, 28 of which underwent a more thorough assessment of their ability to respond to, and recover from, a severe but plausible cybersecurity incident. While the exercise confirmed that banks have frameworks in place to respond to and recover from severe cyber incidents, it also highlighted areas for improvement for certain banks. Since then, almost three-quarters of our findings identified by the stress test have been addressed, with banks notably strengthening their cyber resilience.
The Digital Operational Resilience Act (DORA), which entered into force last year, provides a regulatory framework that requires banks to foster a culture of continuous improvement in IT and cyber risk management. It has also enhanced the oversight of critical third-party providers, such as cloud service providers.[9]
In addition, DORA gave supervisors the task of testing whether a financial institution can detect, respond to and recover from sophisticated attacks that mirror real-world threats, thereby providing a more systemic and enforceable framework for resilience.[10]
Taken together, these efforts have raised the cost and complexity of successful attacks, effectively pushing up the “price of admission” and prompting many threat actors to target less well-prepared sectors instead.
There is, however, no room for complacency.
Advancements in AI are reshaping the threat landscape, fundamentally altering the balance and asymmetry between defenders and adversaries.
Put bluntly, if ensuring operational resilience was already critical a few years ago, it certainly is today – amid a rapidly evolving threat landscape shaped by frontier AI models.
Artificial intelligence: a structural shift in the cyber threat landscape
AI adoption is already widespread among Europe’s significant banks. Our annual data collection on banks’ use of innovative technologies shows that more than 85% of banks under European banking supervision use artificial intelligence.
Used responsibly, AI can help banks strengthen their operations, improve risk management and enhance IT security. But AI also vastly improves the capabilities available to malicious actors.
Until very recently, launching a sophisticated cyberattack required deep technical expertise, extensive reconnaissance and coding, and often weeks – or even months – of trial and error.
Not anymore.
A new generation of large-scale AI models is emerging, with increasingly advanced cybersecurity capabilities. If these tools become more widely accessible, they could enable a much broader range of malicious actors to carry out complex attacks with greater speed and precision.
Our current understanding is that tools of this kind are not simply another incremental improvement; they are a structural shift in the economics of cyber risk. Tools like Mythos appear to be significantly more advanced than existing tools in three important ways. First, they can discover and exploit vulnerabilities at a speed and scale far beyond what we have seen before. Second, they can combine seemingly minor vulnerabilities into serious attacks. And third, they can help reverse-engineer patches into exploitable vulnerabilities and, again, do so at unprecedented speed.
Together, these characteristics suggest that the “price of admission” will fall. The marginal cost of identifying and exploiting vulnerabilities in IT systems will decline, possibly by orders of magnitude. Cyberattacks that previously required significant expertise, time and resources may in future be achieved more quickly, at scale, and by a much broader set of potentially malicious actors. Current evidence suggests that these models may be effective not only against environments with weak levels of defense but also against standards that were once previously considered state of the art.
The direction of travel is unmistakable: the speed, scale and accessibility of advanced cyber capabilities are increasing, and the time available to defenders is shrinking.
Banks therefore need to prepare more quickly, more effectively and more consistently across the sector. In musical terms, andante may have previously been good enough, but now we need to move to presto.
The pivotal role of management bodies in addressing this strategic challenge
Most importantly, the challenges posed by new generations of AI models should not be viewed solely as a cybersecurity issue – they are a firm-wide strategic challenge with potential implications for banks’ safety and soundness. It is therefore essential that banks’ management bodies take clear ownership of the issue, ensuring that resources and tools are commensurate with its scale. This approach is vital to close cyber resilience gaps, enable timely patching and maintain strong cyber hygiene.
Moreover, the critical infrastructure on which banks depend – including cloud providers, telecommunications networks, payment systems and electricity and water supplies – could also become targets. As a result, scenarios that were once considered tail risks may become more likely, such as vulnerabilities in a single, widely used infrastructure quickly escalating into disruption across an entire sector, with knock-on effects on banks’ ability to operate. This makes it all the more important to both strengthen the oversight and monitoring of third-party dependencies and enhance information sharing across the financial system. Given that many of these threats are similar in nature, the timely exchange of information on vulnerabilities, incidents and mitigation measures is a cornerstone of collective resilience.
Considering that some banks’ preparedness is still weak this is also where we, as supervisors, have a role to play. The SSM will use its system-wide perspective to support institutions by pointing out areas of attention and good practices, which could prove particularly beneficial for smaller banks with less sophisticated IT environments[11].
In this spirit, last week we brought together supervised banks to discuss the implications of frontier AI models for banks’ resilience and the practical actions needed in response. As a next step we will send a so-called ‘’dear CEO letter’’ to all banks in which we aim to ask banks to take proactive measures to ensure the continued robustness and security of their systems in the face of these transformative challenges and will follow up with individual banks in a targeted manner.
Our aim is straightforward: to ensure that banks take the necessary steps now, before these technologies are more widely used by threat actors.
Strengthening operational resilience requires investment
Operational resilience is not a stand-alone issue that is separate from the current debate on banking sector competitiveness. It is part of the foundational elements that shape banks’ competitiveness.
If banks are unable to maintain their customers’ trust by providing a reliable service, their ability to compete in an increasingly digitalised financial system will be undermined. Ensuring operational resilience is therefore not only a safeguard – it is also key to remaining competitive, both today and in the years ahead.
Strengthening operational resilience requires multi-year investment in people, systems and governance. In short, it is not a quick fix, it is a moving target which calls for continuous effort and ongoing improvement.
Banks should therefore give careful consideration to bolstering operational resilience in their investment strategies. The currently strong bank profitability provides an opportunity to continue investing.
At the same time, the banking sector’s defensive capabilities are not evenly distributed, leaving parts of the system more exposed than others. While some larger banks have a size advantage when it comes to having the IT budgets that match the scale of the task, this may admittedly be more difficult for small and medium-sized banks.
This is, however, no reason for inaction. In a diverse banking system, where banks of different sizes and business models thrive and support the real economy, all banks must be able to ensure a sufficient level of operational resilience. This point is particularly important at a time in which further embracing proportionality in supervision and regulation has become a topical issue in the debate. There are undoubtedly areas where a more proportionate approach is worth pursuing.[12] Such enhanced proportionality, however, cannot come at a cost of prudent risk management.
Conclusion
Let me conclude.
Europe is facing enormous financing needs to boost its autonomy. We must finance the transition to a cleaner economy, strengthen our collective defence, build the industries of the digital age and support societies that are growing older.
To do so, we need strong and competitive banks. But banks can only play their role if they are resilient, including to operational threats.
Frontier AI models are changing the cyber threat landscape. They are lowering barriers for attackers, increasing the speed of exploitation and exposing weaknesses that were too often tolerated for too long.
This is not about creating a sense of alarm, but rather a sense of urgency
Because we cannot afford to be complacent. Our message as supervisors is simple: act early, invest decisively now, and do not wait for the next incident to reveal where your vulnerabilities lie.
Such a proactive approach will contribute to a thriving, diverse banking system that is capable of supporting the real economy through the digital, green and defence transitions.
A resilient and thriving banking system is not simply a nice to have. It will be imperative to tackle the challenges we are facing both today and in the years ahead.

 
 
Compliments of the European Central Bank 

Bouabdallah, O. et al. (2025), “Time to be strategic: how public money could power Europe’s green, digital and defence transitions”, The ECB Blog, ECB, 25 July.

The ECB has actively contributed to this debate, including through its recent response to the European Commission’s consultation on banking sector competitiveness; see ECB (2026), Eurosystem response to the EU Commission’s targeted consultation on the competitiveness of the EU banking sector, April. For more details on the importance of overcoming fragmentation to boost competitiveness, see Elderson, F. (2026), “Boosting prosperity through deeper integration”, keynote speech at the conference “Financing Europe: a new era of strategic investment”, Brussels, 12 May.

The number of cyber incidents reported by banks to the ECB rose sharply up to the end of 2024. The data for 2025 is not directly comparable because the incident reporting thresholds were changed following the entry into force of the EU’s Digital Operational Resilience Act (DORA). As a result of DORA, the ECB now receives ICT (non-cyber but operational) incident reports as well as ICT cyber incident reports. However, the latter are smaller in number than before because the reporting thresholds differ from those under the ECB’s former cyber incident reporting framework.

In practice, this means being able to prevent, withstand, respond to, recover and learn from operational shocks The Basel Committee on Banking Supervision defines operational resilience as follows: “the ability of a bank to deliver critical operations through disruption. This ability enables a bank to identify and protect itself from threats and potential failures, respond and adapt to, as well as recover and learn from disruptive events in order to minimise their impact on the delivery of critical operations through disruption. In considering its operational resilience, a bank should assume that disruptions will occur, and take into account its overall risk appetite and tolerance for disruption.” See paragraph 11 of the Basel Committee’s principles for operational resilience.

See Tuominen, A. (2025), “Improving banks’ resilience to hybrid threats”, speech at the conference “The Current Hybrid Threat Environment and Financial Stability”, jointly organised by Commerzbank and the European Centre of Excellence for Countering Hybrid Threats, Frankfurt, 18 November; Klaus, B. and Wendelborn, J. (2025), “Cyber threats to financial stability in a complex geopolitical landscape”, Financial Stability Review, ECB, May. At a global level, finance and insurance companies rank approximately fourth among the top ten industries affected by cyberattacks in volume terms, jointly with the educational services industry, and below the public administration, healthcare and technology industries; see the University of Maryland’s CISSM Cyber Events Database. In the European financial sector as a whole, banks are by far the entities experiencing the greatest number of cyberattacks. See European Union Agency for Cybersecurity (2025), ENISA threat landscape: finance sector, February.

Some incidents have disrupted payment channels, delayed customer services and, in a few cases, caused notable financial losses. But none has threatened the viability of a major bank or produced a systemic shock.

Some 86% of CROs cite cybersecurity and technology risk as a top priority for the next 12 months, whereas only 62% cite credit risk. Institute of International Finance (2026), Annual EY/IIF Global Bank Risk Management Survey – Shifting priorities: CRO agendas in a time of uncertainty and innovation, IIF, 24 February.

In addition to working with banks on their own preparedness. starting in 2023 the SSM organized cyber dry-runs to test our own preparedness to respond to large-scale cyber incidents. The simulations focused on detection, escalation, information sharing, and coordination capabilities during a systemic crisis, possibly when the ECB’s and the NCAs own ICT systems are also affected. This kind of activity is key for improving our own operational resilience, strengthening contingency plans and identifying areas where cooperation should be improved.

This is essential because banks increasingly rely on external providers for some critical functions that are difficult or impossible to replace, thereby exposing them to cascading effects from cyber incidents in the supply chain, even if they themselves have not been directly targeted.

Threat-led penetration testing (TLPT) under the EU’s Digital Operational Resilience Act (DORA).

Good practices do not describe or establish new regulatory requirements and have no legally binding effect. This means that a bank may be fully compliant with the applicable legal framework without implementing any of the good practices pointed by the ECB, provided that it follows other practices that are more appropriate to its particular risk profile, business model and circumstances.

Even if proportionality is already embedded in the European regulatory and supervisory approach, we see room to embrace it further. The small and non-complex institutions (SNCIs)regime, is the natural starting point, while maintaining the Single Rulebook, which ensures the risk-based nature of the prudential framework is retained for all banks. One could consider, for example, increasing the scope of eligible small banks through an increase of the €5 billion threshold of the SNCI regime as well as extending the scope of the simplified rules. Any simpler regime for smaller banks also needs to be accompanied by a credible, flexible and efficient crisis management framework for these institutions: See Elderson, F. (2026), “Boosting prosperity through deeper integration”, keynote speech at the conference “Financing Europe: a new era of strategic investment”, Brussels, 12 May; and ECB (2026), Eurosystem response to the EU Commission’s targeted consultation on the competitiveness of the EU banking sector, April.

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On Tuesday, the International Trade Committee gave its green light to two pieces of legislation implementing EU tariff commitments under the August 2025 EU-US Joint Statement.
MEPs on the International Trade Committee (INTA) approved the provisional agreement, reached on 2 May 2026 with the EU Council, implementing EU tariff commitments under the August 2025 EU-US Joint Statement.
The two legislative acts were adopted by 31 votes in favour, 6 against, and with 3 abstentions (adjustment of customs duties and opening of tariff quotas for the import of certain goods originating in the US); and 32 votes in favour, 6 against, and with 3 abstentions (non-application of customs duties on imports of certain goods).
The revised legislation strengthens several elements of the Commission proposals. It introduces a sunset clause, establishing that tariff preferences on industrial and agri-food imports will expire on 31 December 2029 unless renewed. It also includes safeguard mechanisms to protect the EU’s industrial and agricultural sectors, reinforces the suspension clause provisions, and sets clear conditions for tariff reductions on steel and aluminum derivatives.
Next steps
Parliament as a whole will vote on the two regulations on Tuesday 16 June in Strasbourg. It will then be the turn of Council to approve the agreed texts.
Once formally approved by the EU co-legislators, the new legislation will enter into force on the day after its publication in the EU’s Official Journal.
Background
On 27 July 2025, in Turnberry, Scotland, US President Donald Trump and European Commission President Ursula von der Leyen reached a deal on tariff and trade issues, outlined in a joint statement published on 25 August. On 28 August, the Commission published two legislative proposals aimed at implementing the tariff-related aspects of the statement. The first provides preferential access for US goods to the EU; the second extends the existing zero-tariff regime on imports of certain types of lobster.
 
 
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Watch the live webcast of the press conference.
The evolving conflict in the Middle East has become the dominant force shaping global economic prospects, prompting an energy shock that is driving inflationary pressures and is projected to have adverse impacts on growth, according to the OECD’s latest Economic Outlook.
Due to the uncertainty around the evolution of the conflict, the Outlook sets out two scenarios: a time-limited disruption scenario, in which energy production and trade in the Gulf economies progressively return to pre-conflict levels starting mid-2026, leading to a gradual unwinding of the disruptions; and a prolonged disruption scenario, which assumes that the current disruptions to energy production and exports in the Gulf economies persist well into 2027, with higher energy prices, intensifying risks of supply shortages and a tightening of global financial conditions, all of which carry broader and more long-lasting consequences for the global economy.
“The global economy entered 2026 with robust momentum, but the outlook has weakened significantly since the start of the conflict in the Middle East, with effects likely to be felt for some time. The longer the disruptions last, the larger the economic and social costs become,” OECD Secretary-General Mathias Cormann said. “Any fiscal support that countries provide in response to the shock need to be targeted towards those most in need and temporary, to avoid a further increase in public debt and preserve incentives to save energy. More broadly, countries need to lay the foundations for stronger growth and productivity by improving the business environment, enhancing skills, and unlocking the benefits of AI and other transformative technologies.”
Under the assumption of a lasting resolution of the conflict – the “time-limited disruption” scenario –the OECD projects global growth slowing from 3.4% in 2025 to 2.8% in 2026 before picking up to 3.1% in 2027.
GDP growth in the United States is projected at 2.0% in 2026 before slowing to 1.8% in 2027. In the euro area, growth is projected to remain modest at 0.8% in 2026 before picking up to 1.2% in 2027. China’s growth is projected to slow to 4.5% this year and 4.3% in 2027.
Under the “prolonged disruption” scenario, global growth slows to 2.1% in 2026 and 1.8% in 2027, leaving a lasting mark on many countries, especially in Asia, Europe and developing economies most vulnerable to the energy and food price shock. Growth in the OECD is projected at 0.9% in 2026 and 0.5% in 2027 (versus 1.5% in 2026 and 1.7% in 2027 under the “time-limited disruption” scenario).
Inflationary pressures are rising in both advanced and emerging market economies. The energy shock is leading to higher commodity prices, while indirect effects are boosting prices across the economy, notably for agricultural inputs and food. In the time-limited disruption scenario, annual consumer price inflation in the G20 economies is collectively expected to rise to 4.0% in 2026, from 3.4% in 2025, before easing to 3.1% in 2027 as energy and food price pressures fade. Inflation would rise significantly higher in the prolonged disruption scenario.

Throughout this uncertain period, central banks must remain vigilant, but the supply-driven rise in prices need not trigger a policy response, as long as inflation expectations remain well anchored. However, a monetary policy response may become necessary if broader price pressures intensify, or if growth weakens significantly. Governments face multiple spending pressures and need to take stronger efforts to ensure long-term debt sustainability. Energy price relief measures should be targeted and temporary and preserve incentives to reduce demand. Countries should also intensify efforts to diversify energy supply and improve energy efficiency to reduce vulnerabilities to future shocks.
“Governments have a range of near-term options for mitigating the effects of the energy supply crunch, particularly on the most vulnerable households and small firms,” OECD Chief Economist Stefano Scarpetta said. “But this crisis also demonstrates that the need to wean our economies off the dependency on fossil fuel imports is increasingly urgent.”
For the full report and more information, consult the Economic Outlook online.

 
 
Compliments of the Organisation for Economic Co-operation and Development

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Blog | The euro’s international use has grown in recent years, but largely by circumstance rather than by design. In a more contested global monetary system, Europe needs to act deliberately to strengthen the role of its currency – building on solid foundations, keeping pace with global shifts and matching policy ambition with concrete steps.
The international monetary system is becoming more contested. Major economies that once trusted the system to work on its own are now actively shaping the use of their currencies. Europe has so far been an exception. The global role of our currency has gradually gained ground in recent years, but largely by circumstance rather than by choice. This is no longer enough. In a changing global environment, the euro should serve a clearer purpose for Europe, and Europe should be willing to act to make this happen.
The international monetary system is becoming more contested. Major economies that once trusted the system to work on its own are now actively shaping the use of their currencies. Europe has so far been an exception. The global role of our currency has gradually gained ground in recent years, but largely by circumstance rather than by choice. This is no longer enough. In a changing global environment, the euro should serve a clearer purpose for Europe, and Europe should be willing to act to make this happen.
The starting point is favourable. Since the mid-2010s the composite measure of the euro’s international role has risen by around 1.5 percentage points. The euro’s share in global reserves is around 20%, much as it has been for two decades. But international debt issued in our currency reached close to €1 trillion last year, the highest annual level since the single currency was introduced. During several episodes in 2025, when investors looked for safety they bought euros and euro-denominated assets at the same time as they sold US dollars and Treasuries.
This progress rests on two foundations.
The first is structural. Europe is the most open major economy in the world, with exports of close to €4 trillion last year. Our resolve to uphold the rule of law even under unprecedented pressure, the independence of our central bank, our robust fiscal framework and the openness of our single market are structural qualities no longer universally on offer.
The second is that in the areas where Europe has acted with intent, results have followed. A consistent European framework on green and sustainable finance led to market leadership: the euro has overtaken the dollar to become the leading currency in the global green bond market for the first time. And instant payments are taking off at an exponential speed, underpinned by EU legislation and the pan-European fast payment system operated by the Eurosystem.
Where we have made choices, we have made progress. But more is now needed.
Nearly a third of China’s external trade is settled in renminbi, up from almost nothing a decade ago. The currency’s share in global trade financing has reached 8%, ahead of the euro. And more than 20% of French trade with China is now invoiced in renminbi. These developments reflect a deliberate policy by China to expand the role of its currency in the areas where it has economic weight to bring to bear.
And that shift is not confined to China. In the United States, recent legislation on dollar-denominated stablecoins underpins a deliberate effort to extend the currency’s network into the digital realm. US dollar stablecoins are marginal in international payments today, accounting for a fraction of a percent of cross-border flows. But the intent is to use new technology to further entrench an already dominant currency. The world’s largest economies are taking deliberate action. Europe cannot afford to be the one that does not.
The ECB is doing its part within its remit by contributing to macroeconomic stability – price stability, financial stability and a sound banking sector – and by ensuring the availability of euro liquidity. We have recently decided to expand EUREP, our repo facility for central banks, to support the smooth transmission of our monetary policy: starting this year, we will provide standing access to euro liquidity against high-quality euro-denominated collateral. Allowing a wider set of central banks around the world to address risks of euro liquidity shortages swiftly will boost confidence in using the euro globally.
We are also leading the way in ensuring central bank money is fit for the future. We will start issuing tokenised central bank money in September this year for the settlement of wholesale transactions. We are preparing to complement cash with its digital equivalent – the digital euro – for day-to-day payments. And for cross-border payments, we are working on interlinking our own fast payment system with those of other countries, in a way that respects their sovereignty. Together, these initiatives will ensure the euro remains at the technological frontier.
But boosting the broader determinants of a currency’s standing – economic strength, geopolitical weight and legal certainty – is down to the EU legislators. Delivering a genuine single market, a savings and investments union, higher productivity and the necessary capability to protect Europe’s external and energy security would boost confidence in its growth potential and resilience. The EU could also support the role of the euro in invoicing and trade finance, consistent with its leading role in global trade.
A stronger international role for the euro will not come about by itself. We will have to choose it, and put words into action.
 
 
Compliments of the European Central Bank 
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US policymakers are rebalancing economic efficiency with national security amid rising geopolitical risk. 

When it comes to international trade, countries have always weighed economic efficiency against national security. After World War II, they pursued free international trade through low tariffs in the belief that it was both economically efficient and politically stabilizing. World trade tripled as a share of GDP between 1950 and its peak in 2008, with about half of this trade in intermediate goods, reflecting the importance of cross-border production relationships. Although conflict continued, there were no global-scale wars like those that characterized the first half of the 20th century. Globalization and stability had won out.
The world is now reevaluating the role of economic interconnectedness in global affairs, mindful that more interconnection means more dependencies that adversarial nations can leverage to get their way in other areas of international relations. Resilient economies must be the response. A country must have access to the resources it needs to fight a protracted war. It must have a reliable supply of medicines, microchips, critical minerals, and other vital inputs, regardless of changing global alignment. And it must be able to rapidly increase production in response to an emergency such as COVID-19.
In the United States, President Donald Trump’s administration is working to de-risk supply chains and build domestic capacity in key industries to enhance economic resilience. This implies a modification of the policy of near unconditional openness that characterized the past.
These policies will, in some cases, reduce economic efficiency relative to a world in which we ignore geopolitical risk. These are the necessary costs of resilience. Economic modeling that recognizes the trade-off can guide policymakers. The challenge is to minimize the costs and ensure that crude protectionism is not enacted in the guise of national security.
Decades of fragility
For decades, international trade and investment progressed largely unchecked. In search of efficiencies, supply chains—and entire industries—moved abroad to their lowest-cost locations. Trade policy played a role, as did technological advances in communications, transportation, and logistics that made long-distance production relationships feasible. Differences in environmental and labor standards incentivized firms to relocate production to places that valued the environment and workers’ rights less.
The US-led international order provided the stability that helped these complex networks flourish. As supply chains stretched and concentrated, fragilities accumulated. These fragilities were always present but often manifested in limited or idiosyncratic ways.
A series of recent events raised awareness of these vulnerabilities and renewed interest in how economics and national security fit together.
COVID-19 supply-chain disruptions made it obvious to all that critical goods—things like pharmaceuticals, semiconductors, and medical supplies—came from a handful of countries and that major disruptions were both possible and painful. Supply-chain vulnerabilities surprised some companies. A Deloitte survey found that only 15 percent of chief procurement officers could see the risks beyond their direct suppliers.
Europe’s dependence on Russian energy reminded the world of the long-understood idea that economic integration can bind countries together in mutual restraint, but it produces leverage, too. In 2022 Russia accounted for 27 percent of EU oil imports and 45 percent of gas imports, according to the European Commission. By 2025, Russia accounted for 3 percent of oil and 13 percent of gas imports. Decoupling from Russian energy came at the cost of higher energy prices and slower economic growth. Higher energy bills cut incomes by about €1,000 per person in 2021–22, the Commission estimates.
Chinese export licensing controls imposed in April 2025 led to a shortage of rare earths and derivatives that threatened to shutter automotive, defense, electronics, and other production lines in the US and elsewhere. Six months later, China threatened to expand the scope and scale of its export controls in a stark reminder to the US of its vulnerability.
The US must now grapple with the national security risks that accompany key supply chains dominated by their adversaries. The geopolitical considerations of what we trade, and who we trade with, have become a priority.
This does not repudiate comparative advantage and the gains from trade; it is an acknowledgment that free trade is not always appropriate. Free trade in well-functioning markets is still the ideal and should be pursued wherever possible, particularly with allies. Yet many of the problems the US faces are the result of deliberate nonmarket forces, which distort production and consumption despite prevailing low tariff rates.

“The geopolitical considerations of what we trade, and who we trade with, have become a priority.”

Dangerous forces
Strategic state direction, subsidies, financial repression, protectionism, and regulatory arbitrage are political forces, not economic fundamentals. These policies are particularly dangerous when deployed by large adversarial countries. Economic thinking must account for more of these forces, and economists can increase their engagement with them.
Policymakers need frameworks to analyze the strategic considerations of their choices. Does a policy build leverage for the US or vulnerability? How can we identify which goods should be controlled for national security reasons while avoiding unnecessary protectionism? Which goods must be sourced domestically, and which can be imported from allies? How do we restart a domestic industry as efficiently as possible? Perhaps most important is the development of tools that clearly identify the trade-offs between economic efficiency and strategic objectives.
Economists already have many of the analytical tools needed, and these can inform decision-makers about the trade-offs and unintended consequences of policies. Tariffs and sanctions are perhaps the most studied policy levers, but price floors, stockpiles, export restrictions, and investment agreements are just some of the relevant policy instruments available. Tax policy, industrial policy, and regulatory infrastructure may appear to be domestic policy, but they are instruments of economic statecraft as well, and should be studied in that context.
There have always been economists studying geoeconomics, and more work is underway. The flagship conferences of The National Bureau of Economic Research and the American Economic Association regularly feature sessions on geoeconomic topics. The same is happening in academic and policy circles abroad. Economic research tends to lag large, fast-moving events, but it catches up quickly.
A new focus
This is the beginning of a long-term, broad-based change in focus for policymakers and analysts. The field of geoeconomics is all-encompassing, extending beyond international trade and national security. Controlling international payment networks and the dollar are geopolitical strengths for the US, yet nonaligned countries, having learned a lesson from sanctions on Russia, are creating alternative payment networks and finding ways to insulate themselves from a potential loss of access to the US-led financial system.
Countries are racing to lock down critical mineral assets across the world—sometimes competing with allies for resources. Future-defining technologies such as AI, quantum computing, and biotech are up for grabs and will continue to be subject to policy, both good and bad.
The change needed will not happen quickly. Redirecting supply chains and relocating production across countries will take decades. In the short term, changes in policy may cause prices to rise, cause some goods to become scarce, and require costly investments. These short-term costs exist, even if the long-term objective is worthwhile. The structure of US democracy creates further complications. Commitment to a long-term policy is difficult when a future administration can undo the policy of its predecessors, especially when the short-term costs accumulate.
A changing world has brought the trade-offs between economic efficiency and national security back to the forefront of political thought. A clear-eyed reappraisal of national security is welcome, but we must not abandon the economic principles that have made the US economy great, particularly free and competitive markets. Striking the right balance requires a continued effort from policymakers and the researchers who support them.

 
 
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Washington, May 29, 2026: The Heads of the International Energy Agency, International Monetary Fund, World Bank Group and World Trade Organization met on May 28 as part of the high-level coordination group established in April to maximize their institutions’ response to the energy, trade, and economic impacts of the war in the Middle East. Following the meeting, they issued the statement below: 
“The war in the Middle East is generating substantial and highly asymmetric impacts on energy supplies, food security, and economic activity across countries and regions. While the global economy continues to show resilience, the effects of the conflict are disproportionately affecting the most vulnerable countries through higher fuel and fertilizer prices, increased uncertainty, and risks to jobs and livelihoods. Higher fertilizer prices are of particular concern as many countries enter the planting season.
“At the same time, global oil inventories are being drawn down at a record pace in response to the major loss of supply through the Strait of Hormuz. If shipping flows do not return to normal, continued rapid depletion of global oil inventories ahead of peak summer oil demand in the Northern Hemisphere would present increasing risks for fuel security, market conditions, and broader economic resilience.
“We met to take stock of the impacts, discuss the situation in the most affected countries and regions, and coordinate our support to those in need. We also explored options to further enhance collective support through multilateral and bilateral actions.
“We highlighted the importance of closely monitoring fertilizer supply chains, energy and economic developments as well as policy responses. In this regard, we are tracking and analyzing measures taken by governments to address the economic impact of the conflict, with a view to promoting transparency, sharing lessons, and identifying emerging risks.
“We will remain in close contact as the situation evolves and continue coordinating our efforts to support the countries most affected and global economic stability.”
About the International Energy Agency
The International Energy Agency, the global energy authority, was founded in 1974 to help its member countries coordinate collective responses to major oil supply disruptions. Its mission has expanded and evolved since, and rests today on three main pillars: working to ensure global energy security; expanding energy cooperation and dialogue around the world; and supporting a secure, affordable and sustainable energy future. For more information, visit https://www.iea.org/.
About the International Monetary Fund
The IMF is a global organization that works to support economic growth and prosperity for all of its 191 member countries. It does so by supporting economic policies that promote financial stability and monetary cooperation, which are essential to increase productivity, job creation, and economic well-being. The IMF is governed by and accountable to its member countries. For more information, visit  https://www.imf.org
About the World Bank Group
The World Bank Group works to create a world free of poverty on a livable planet through a combination of financing, knowledge, and expertise. It consists of the World Bank, including the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). For more information, please visit www.worldbank.org, ida.worldbank.org/en/home, www.miga.org, www.ifc.org, and www.icsid.worldbank.org.
 
About the World Trade Organization (WTO)
The World Trade Organization is the international body responsible for governing global trade rules among its 166 members. It provides a forum for negotiating agreements, monitors trade policies, and ensures transparency and predictability. The WTO also helps settle trade disputes among its members and offers technical assistance to developing economies. Its objective is to facilitate the smooth flow of trade and support economic growth, stability and job creation. For more information, visit www.wto.org
 
 
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Europe’s startup and scaleup ecosystem has been growing steadily, according to the first-ever European Startup and Scaleup Scoreboard (ESSS) published today by the European Commission. 
The scoreboard reveals a clear trend: pro-startup policies drive real results. Since 2020, the baseline year for the Scoreboard, 20 out of 27 EU Member States have improved their performance, proving that targeted support for founders fuels innovation, job creation, and economic growth.
Where policy leads, founders follow
The Scoreboard highlights a direct link between innovation-friendly regulations, access to talent, and venture capital – and the success of startups and scaleups. Front-runner countries – Estonia, Sweden, Finland, the Netherlands and Denmark – perform well above the EU average (from 40 to 60 percentage points) in 36 measuring indicators, showing how bold policies translate into thriving ecosystems:

Estonia leads in digital infrastructure and early-stage funding, with 615 venture capital-backed companies per million inhabitants – the highest in the EU.
Sweden excels in talent and later-stage financing, producing 409 unicorns per million inhabitants – more than any other EU nation.
Finland combines strong R&D investment with high patenting activity, proving that innovation and commercialisation go hand-in-hand.

Policy gaps hold back innovation
While the ESSS 2026 celebrates progress, it also reveals untapped potential in rising countries (Greece, Latvia, Bulgaria, Slovakia, Romania), which score 30 percentage points below the EU average in the same 36 measuring indicators. Three key challenges stand out:

Weak venture capital access: Later-stage funding is scarce, forcing high-growth companies to look abroad for capital.
Scaling bottlenecks: Fragmented regulations and slow administrative processes delay expansion, costing time and momentum
Brain drain: Talent leaves for more dynamic ecosystems, draining local innovation.

From results to action
The Scoreboard’s results and analysis will help shape a series of strategic actions aimed at further strengthening Europe’s startup and scaleup ecosystems – particularly the upcoming European Innovation Act.
The Commission has put forward a number of initiatives to attract and retain talent and respond to the needs of innovative companies. This includes EU Inc., a proposal for a new single set of corporate rules for companies to operate across the EU; the European Business Wallet to simplify cross border business operations; and the EU Visa Strategy, with measures to support the EU’s global competitiveness, attract and retain talent, and make legitimate travel easier, faster and more predictable for tourists and business travellers.
Background
The European Startup and Scaleup Scoreboard is one key deliverable of the EU Startup and Scaleup Strategy, ‘Choose Europe to Start and Scale’, which was published exactly a year ago to make Europe the best place to launch and grow global technology-driven companies.
The Strategy sets out 26 concrete measures that are designed to accelerate the journey from innovation to commercial success and empower entrepreneurs across the EU. To track this progress, the new Scoreboard evaluates national ecosystems across six key pillars:

Innovation-friendly regulation
Better financing for startups and scaleups
Fast market uptake and expansion
Support for the best talent in Europe
Access to infrastructure, network and services
Impact

To ensure a rigorous assessment, the scoreboard tracked 36 distinct performance indicators from 2020 through 2025. The analysis combines official public data from Eurostat and the Joint Research Centre with private market tech insights from Dealroom and the European Startup Nations Alliance. To reflect the most up-to-date definitions and data, the underlying datasets were finalised in early 2026.
Based on their final index scores, EU countries are ranked into four distinct performance tiers:

Front-runners: performing above 125% of the EU average
High-performing: 100% to 125% of the EU average
Catching-up: 70% to 100% of the EU average
Rising: Below 70% of the EU average

 
 
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Despite disruptions to trade related to the current crisis in the Middle East, G20 merchandise trade expanded strongly in Q1 2026. Measured in current US dollars, both exports and imports increased by 5.3% quarter-on-quarter compared with Q4 2025, driven partly by trade of semiconductors and other high-tech products in East Asia. Preliminary estimates indicate that G20 trade in services1 expanded modestly, with exports rising by 1.7% and imports by 1.5% (Figures 1 and 3).
In North America, merchandise trade exports from the United States rose by 9.3%, driven by non-monetary gold and petroleum products, while imports increased by 8.1%, partly reflecting higher purchases of computers and telecommunications equipment. Canada’s exports increased by 2.4%, supported by energy products, notably natural gas and crude oil, while imports rose by 5.3%, concerning mainly metal products. In Mexico, both exports and imports increased by 4.1%. East Asian economies recorded strong trade growth. China’s exports rose by 13.5%, led by semiconductors and high-technology products, while imports increased by 16.7%, partly reflecting computer purchases. Japan’s exports increased by 5.9%, supported by ships and non-ferrous metals, while imports rose by 4.8%, driven in part by raw materials, non-ferrous metal ores and semiconductors. Korea’s exports surged by 22.7%, supported by semiconductors and wireless communication devices, while imports increased by 7.0%, reflecting semiconductor purchases. In the European Union, exports and imports rose more modestly by 1.1% and 1.5% respectively. Germany’s exports and imports both increased by 1.9%, partly reflecting trade in precious stones and metals. Italy’s exports increased by 3.2%, led by metals and pharmaceuticals, while imports rose by 2.9%, notably in metals and automobiles. In the United Kingdom, exports rose by 3.0% and imports by 5.3%, partly driven by trade with the European Union in office machinery. Brazil’s exports were broadly flat, while imports rose by 4.2%, notably in mechanical appliances and fertilisers.
International trade in services expanded modestly in Q1 2026. Among G7 economies, services exports rose by 2.3% in the United States, driven by maintenance and repair, ICT, and insurance services, while imports increased by 2.5% due to stronger spending on transport and intellectual property products. Similarly, in Canada, exports rose by 1.9%, supported mainly by higher travel and transport receipts, while imports grew sharply (4.1%) on the back of increased expenditures in government and other business services. Germany recorded marked growth in services exports (4.6%), supported by travel, insurance, and financial services, while imports rose by 3.0%, reflecting higher travel spending abroad. French services exports were stable, as higher transport and travel receipts were offset by lower revenues from financial services, while imports declined by 1.6%, partly due to reduced transport payments. The United Kingdom recorded modest increases in both exports and imports, with import growth largely driven by other business services. Japan’s services exports fell by 1.2%, mainly reflecting weaker travel and intellectual property receipts, while imports rose by 2.6%, led by transport and other business services. Conversely, in Korea, services exports rose sharply (6.4%), with strong travel receipts, while imports fell by 2.2%, as lower travel payments more than offset higher transport expenditures (freight in particular). In Türkiye, services exports fell by 7.2%, mainly due to insurance and other business services. In China, services imports rose by 3.3%, partly driven by higher transport and travel payments.
Click here to access the interactive charts.
 
 

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Blog | Geopolitical shocks influence consumer expectations about inflation and growth. This blog explores how the wars in Ukraine and Iran affect the way households think about the economy and shows how the scars of past experiences amplify reactions to subsequent geopolitical conflicts.
Recent movements in euro area consumers’ inflation and growth expectations show that geopolitical shocks influence households’ economic beliefs. Drawing on the ECB’s Consumer Expectations Survey (CES)[1], this blog post compares households’ reactions to the 2022 invasion of Ukraine with their responses to the 2026 war in Iran. It also explores how the current shock interacts with the “scars” left by earlier periods of high inflation and geopolitical tensions. The results show that repeated geopolitical shocks reinforce fears about stagflation, with short-term expectations being especially sensitive. As consumers are highly attentive to economic news, the findings also highlight the crucial role of communication and of maintaining trust in the ECB to limit spillovers to longer-term inflation expectations.

How geopolitical conflicts influence consumer expectations: insights from two wars
Russia’s invasion of Ukraine triggered a sharp rise in energy prices, intensified concerns about stagflation and exacerbated the already elevated inflationary pressures of the post-pandemic recovery. In addition, the ensuing prolonged conflict and subsequent geopolitical shocks have created an environment of heightened macroeconomic uncertainty. Even if there are important differences in the economic consequences of the two conflicts, the war in Iran is likely to influence euro area households’ expectations through quite similar channels.[2] These include higher energy prices and reinforced macroeconomic uncertainty.
The most recent CES data from March 2026 show that consumer inflation and growth expectations are highly responsive to geopolitical conflicts.[3] In the immediate aftermath of the onset of the war in Iran, data reveal a pattern of reinforced beliefs about stagflation. Chart 1 shows a sharp rise in inflation expectations alongside a marked decline in growth expectations following the outbreak of both conflicts.

Chart 1
Inflation and growth expectations around the onset of two wars

(y-axis: inflation expectations 12 months ahead; x-axis: economic growth expectations 12 months ahead; mean values, percentage points)

Sources: ECB Consumer Expectations Survey (CES: EA-11) and authors’ calculations.
Notes: Population-weighted data. The chart depicts euro area average expectations about changes in prices in general and economic growth one year ahead. Both expectation series have been processed (winsorised) at the most extreme two percentiles to account for outliers. From April 2022 onwards, the sample also includes data from five new countries included in the survey: Ireland, Greece, Austria, Portugal and Finland. The underlying data are collected as part of the monthly CES survey module (see the ECB’s CES web page).

In March 2026, one month after the outbreak of the Iran war, consumers revised their mean (median) inflation expectations upwards by about 2.5 (1.5) percentage points. At the same time, growth expectations went down by about 1.2 percentage points. There are, however, notable differences from the situation in 2022 following the Russian invasion of Ukraine. First, mean (median) inflation expectations in February 2026 were 0.6 (0.7) percentage points below those of four years earlier and had been slightly declining before the shock. Second, growth expectations were more pessimistic in February 2026 than in February 2022 (Chart 1). Overall, the general shift towards a more stagflationary outlook is, so far, somewhat less pronounced than after Russia’s invasion of Ukraine. The current data, however, provide only a snapshot. Future CES rounds will show how these beliefs evolve as more information on the Iran conflict becomes available.
The three-year-ahead mean (median) inflation expectations recorded in the CES also show an uptick of 0.87 (0.44) percentage points in March 2026 following the outbreak of war in Iran, compared with an increase of 0.94 (0.85) percentage points following the invasion of Ukraine (Chart 2). Importantly, however, additional background analysis also highlights a significant shift in the distribution of medium-term inflation expectations in January 2026 compared with January 2022, indicating that consumers increasingly expected higher inflation over the medium term at the outset of the Iran war. The recent revisions in March therefore started from a higher level compared with the situation in 2022.

Chart 2
Inflation perceptions and expectations

(Mean values, percentage points)

Sources: ECB Consumer Expectations Survey (CES: EA-11) and authors’ calculations.
Notes: Population weighted data. Each bar reports the average for euro area consumers. All series have been winsorised at the most extreme two percentiles to account for outliers. From April 2022 onwards, the sample also includes data from five new countries included in the survey: Ireland, Greece, Austria, Portugal and Finland, (see the ECB’s CES web page).

When looking ahead, consumers tend to extrapolate from their short-term to their medium-term inflation expectations, and they may have yet to witness the full pass-through to prices at the retail level. As a result, there is certainly a risk of further upward revisions in medium-run inflation expectations in the future. Likewise, in a context of heightened uncertainty and volatility, consumers’ expectations may also overreact to some news. Conversely, this implies the possibility of a downward correction in expectations, especially if the situation stabilises.
The “double scar”: how past experiences amplify current reactions
Many households now carry cumulative experience from the post-pandemic and Ukraine-related inflation episodes. By early 2026, euro area households had lived through both the biggest inflation surge of recent times and a major war in Europe. Research shows that both experience and memory can have a pervasive influence on economic behaviour.[4] So there is good reason to believe that consumer expectations are shaped not only by current developments, but also by memories of these recent adverse events. Such “scars” may increase consumers’ sensitivity to new shocks. This makes stagflationary scenarios – rising prices and declining growth – more pronounced and persistent in their beliefs. And it could reinforce macroeconomic uncertainty and ultimately influence consumer spending.[5]
We provide two pieces of evidence to suggest that the earlier inflation surge and recent geopolitical conflicts are weighing on consumers’ current thinking.
First, the memories of the recent inflation episode have renewed consumers’ attention to inflation (Chart 3). While research shows that consumers are more attentive to inflation in high‑inflation environments and relatively inattentive when inflation is low and stable[6], CES results show thatin January 2023, when euro area inflation was 8.6%, almost half of the surveyed consumers reported that they were paying attention to price changes. This share had declined only modestly, to 41%, by August 2025, even though inflation was close to the ECB’s target. This suggests that recent high inflation has had a scarring effect: consumers who experienced the inflation surge are keeping a close eye on price developments, even as conditions normalise. Following the outbreak of the Iran war, and despite actual inflation remaining close to the ECB’s definition of price stability, attention to prices bounced back to almost 50% in March 2026. This again indicates that households quickly recalled the earlier conflict‑driven inflation surge.

Chart 3
Attention to inflation over time

(Percentage of consumers (left-hand scale) and percentage points (right-hand scale))

Sources: ECB Consumer Expectations Survey (CES: EA-11); experimental data, European Commission (Eurostat) and European Central Bank calculations based on Eurostat data, and authors’ calculations.
Notes: Population-weighted data. Each bar depicts the share of consumers for each self-assessed level of inflation attention. Consumers are asked how much attention they currently pay to changes in prices in general. Respondents can choose out of five options. 1 – Almost no attention, 2 – A little attention. 3 – Some attention, 4 – Much attention and 5 – A great deal of attention. Data is collected as part of special purpose survey modules. The bars show the share of respondents by attention level on the right axis: low (1–2), medium (3) and high (4-5). The dots represent EA HICP inflation rates in each of the respective survey months.

Second, the data show that consumers continuously fear that ongoing geopolitical risks will threaten their financial situation. Chart 4 shows that wars weigh on consumer sentiment: 35% of consumers reported being quite concerned (8 or higher on a 0-10 scale) in May 2022, with 25% of consumers reporting the same levels of concern in December 2024. This share remained elevated in December 2025. Consumers were therefore already highly concerned about the impact of geopolitical tensions on their own well-being shortly before the new conflict. As detailed in our earlier work[7], prolonged geopolitical conflict can inhibit consumer spending and create a drag on economic growth. In addition, it may also generate wage pressure if workers seek to compensate for the deterioration in their financial situation.
Taken together, this evidence suggests that consumers are experiencing the war in Iran with a potential “double scar”. One from the recent surge in inflation, the other from the prolonged effects of earlier geopolitical tensions. These two scars may reinforce each other and are likely to shape consumer expectations and behaviour in the coming months, as conflicts and heightened macroeconomic uncertainty persist.

Chart 4
Consumers’ concerns about geopolitical conflict

(Percentage of consumers)

Sources: ECB Consumer Expectations Survey (CES, EA-11), experimental data and authors’ calculations.
Notes: The chart reports population-weighted shares of respondents by their reported level of geopolitical concern. In December 2024 and December 2025, respondents were asked how concerned they were about the impact of current geopolitical events on their households’ financial situation over the 12 months that followed. In May 2022, the question referred specifically to the war in Ukraine and its expected impact on the respondents’ households’ financial situation. Responses were recorded on an 11-point scale from 0 (not concerned at all) to 10 (extremely concerned) and grouped as follows: low (0-2), medium (3-7) and high (8-10). Data were collected in special-purpose modules.

Trust and communication are important anchors for consumer expectations
Recent research using the CES shows that trust in the ECB plays an important role in anchoring inflation expectations. It also moderates significantly how households adjust inflation expectations in response to geopolitical conflict and energy shocks. Encouragingly, CES data suggest that trust in the ECB has improved as inflation has gone down, with trust standing at a relatively higher level in February 2026 than in February 2022.
When the central bank is perceived as credible and trustworthy, households are more likely to view deviations of inflation from target as temporary. And they are more likely to expect monetary policy to successfully stabilise inflation.[8] In contrast, low trust weakens this anchoring, leading to stronger and more persistent upward revisions in inflation expectations. In line with this, CES data show that following the outbreak of both conflicts, consumers with higher trust in the ECB revised their inflation expectations upwards by considerably less, on average, than those with lower trust.
Additional research shows that when households understand monetary policy better, public perception of central bank credibility strengthens.[9] The fact that consumers are currently highly attentive to inflation suggests that they are also more likely to follow economic news and developments. The current environment offers a window of opportunity for effective engagement with consumers, which can thereby reinforce central bank credibility, trust and public understanding of monetary policy.
From a policy perspective, these results underline that communication and credibility are integral to the transmission of monetary policy in the face of geopolitical shocks and their aftermath. Overall, the evidence suggests that trust in the ECB acts as a buffer against the de-anchoring of inflation expectations – maintaining credibility and effective communication therefore remain essential, especially in volatile macroeconomic and geopolitical environments.
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.
 

For background on the CES, see also ECB (2021), “ECB Consumer Expectations Survey: An Overview and First Evaluation”, Occasional Paper Series, No 287, and Georgarakos, D. and Kenny, G. (2022), “Household spending and fiscal support during the COVID-19 pandemic: Insights from a new consumer survey”, Journal of Monetary Economics 129: S1-S14. The authors would like to thank the ECB CES team involved in collecting and processing the data and Ipsos for carrying out the survey.

The Ukraine war primarily drove a sharp rise in European gas prices, which quickly fed into electricity costs. Meanwhile, the Iran war has mainly pushed up crude oil prices, affecting transportation and heating costs.

See Coibion, O., Georgarakos, D., Gorodnichenko, Y., Kenny, G. and Meyer, J. (2025), “Geopolitical Risks and Their Implications for Consumer Expectations and Spending”, VoxEU/CEPR.

See Malmendier, U. and Nagel, S. (2016), “Learning from Inflation Experiences”, Quarterly Journal of Economics, 131(1), pp.53-87 and Salle, I., Gorodnichenko, Y. and Coibion, O. (2024), “Lifetime memories of inflation: Evidence from surveys and the lab”, National Bureau of Economic Research, No w31996; see also Barkhausen, D. (2025), “Hyperinflation: trauma and its reconstruction”, The ECB Blog, ECB, 20 June.

See Coibion, O., Georgarakos, D., Gorodnichenko, Y., Kenny, G. and Weber, M. (2024), “The effect of macroeconomic uncertainty on household spending”, American Economic Review, 114(3), pp.645-677; and Coibion, O., Georgarakos, D., Gorodnichenko, Y., Kenny, G. and Meyer, J. (2025), “Geopolitical Risks and Their Implications for Consumer Expectations and Spending”, VoxEU/CEPR.

See Weber, M., Candia, B., Afrouzi, H., Ropele, T., Lluberas, R., Frache, S., Meyer, B., Kumar, S., Gorodnichenko, Y., Georgarakos, D. and Coibion, O. (2025), “Tell Me Something I Don’t Already Know: Learning in Low‐and High‐Inflation Settings”, Econometrica, 93(1), pp.229-264.

See Gorodnichenko, Y., Georgarakos, D., Kenny, G. and Coibion, O. (2025), “The impact of geopolitical risk on consumer expectations and spending”, National Bureau of Economic Research, No w34195.

See Christelis, D., Georgarakos, D., Jappelli, T. and van Rooij, M. (2020), “Trust in the Central Bank and Inflation Expectations”, International Journal of Central Banking.

See Ehrmann, M., Georgarakos, D. and Kenny, G. (2025), “Credibility gains from central bank communication with the public”, European Economic Review, 177, 105069.

 
 
 
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Euro area
The first estimates of euro area balance showed a €7.8 bn surplus in trade in goods with the rest of the world in March 2026, compared with +€34.1 bn in March 2025.
The euro area exports of goods to the rest of the world in March 2026 were €265.3 billion, a decrease of 5.5% compared with March 2025 (€280.6 bn).
Imports from the rest of the world stood at €257.4 bn, a rise of 4.4% compared with March 2025 (€246.5 bn).
In March 2026, the euro area trade balance registered a surplus of €7.8 bn, down from €11.1 bn in February 2026.
Compared with March 2025, when the surplus was €34.1 bn, the latest figure represents a sharp decrease of €26.3 bn. This decline was primarily driven by substantial reductions in the surpluses of the chemicals and related products group and the machinery and vehicles group. The first group recorded the most pronounced drop, with its surplus nearly halving, from €41.8 bn in March 2025 to €18.9 bn in March 2026, while the second group saw a less steep but still significant decline, with its surplus falling from €17.6 bn to €9.7 bn over the same period.
In January to March 2026, the euro area recorded a surplus of €16.6 bn, compared with €55.4 bn in January-March 2025.
The euro area exports of goods to the rest of the world fell to €713.1 bn (a decrease of 6.5% compared with January-March 2025), and imports fell to €696.5 bn (a decrease of 1.5% compared with January-March 2025).
Intra-euro area trade rose to €685.5 bn in January-March 2026, up by 1.9% compared with January-March 2025.
European Union
The EU balance showed a €5.9 bn surplus in trade in goods with the rest of the world in March 2026, compared with +€34.0 bn in March 2025.
The extra-EU exports of goods in March 2026 were €233.9 billion, down by 8.7% compared with March 2025 (€256.1 bn).
Imports from the rest of the world stood at €228.0 bn, up by 2.7% compared with March 2025 (€222.1 bn).
In March 2026, the EU trade balance stood at a surplus of €5.9 bn, down from €9.1 bn in February 2026. This decline was influenced by a widening deficit in the energy group, which deteriorated from €-21.9 bn in February 2026 to €-28.6 bn in March 2026, partially offset by the increase of surplus in the chemicals and related products group, which moved from €14.9 bn to €17.6 bn over the same period.
Compared with March 2025, when the EU recorded a surplus of €34.0 bn, the latest figure represents a sharp decrease of €28.1 bn. This decline was primarily driven by substantial reductions in the surpluses of the chemicals and related products group and the machinery and vehicles group. The chemicals and related products group saw its surplus nearly halve, dropping from €40.8 bn in March 2025 to €17.6 bn in March 2026. Similarly, the machinery and vehicles group experienced a significant decline, with its surplus falling from €21.6 bn to €11.3 bn over the same period.
In January to March 2026, the EU recorded a surplus of €8.4 bn, compared with €50.7 bn in January-March 2025.
The extra-EU exports of goods fell to €630.0 bn (a decrease of 8.9% compared with January-March 2025), and imports fell to €621.6 bn (a decrease of 3.0% compared with January-March 2025).
Intra-EU trade rose to €1 068.4 bn in January-March 2026, +2.7% compared with January-March 2025.
Annex – Seasonally adjusted data
In March 2026 compared with February 2026, euro area seasonally adjusted exports increased by 2.1%, while imports increased by 3.5%. The seasonally adjusted balance was €3.5 bn, a fall compared with February (€6.5 bn).
In March 2026 compared with February 2026, EU seasonally adjusted exports increased by 1.5%, while imports increased by 3.2%. The seasonally adjusted balance was €0.1 bn, a fall compared with February (€3.6 bn).
In the first quarter of 2026 euro area exports to non euro area countries rose by 0.4%, while imports rose by 1.6%. Intra euro area trade rose by 0.7%.During the same period, EU exports to non-EU countries decreased by 0.1%, while imports rose by 1.7%. Intra-EU trade increased by 0.9%.
Click here to access the interactive charts and tables. 
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