Artificial Intelligence (AI) is transforming how businesses operate, reshaping public services, and revolutionising science. AI has the potential to improve our lives in many ways. As the global race to harness its potential heats up, the European Commission has put forward two strategies that will help Europe stay ahead in AI industry and science respectively. 
The Apply AI Strategy sets out how to speed up the use of AI in key industries and the public sector. It will be used to help the EU unlock its societal benefits – from more accurate healthcare diagnoses to enhancing the efficiency and accessibility of public services. The strategy also addresses some of the key challenges by
• accelerating time-to-market – the time from concept to availability on the market – through linking infrastructure, data, and testing facilities
• strengthening the EU workforce to be AI-ready across sectors
• bringing together Europe’s leading AI actors through a new Frontier AI initiative
To coordinate this work, the Commission is launching the Apply AI Alliance, a forum bringing together industry, the public sector, academia, social partners and civil society. Meanwhile, an AI Observatory will monitor AI trends and assess sectorial impacts.
In parallel, the Commission has launched the AI Act Service Desk to help ensure smooth implementation of the AI Act, the world’s first comprehensive AI law.
Alongside Apply AI, the AI in Science Strategy focuses on putting the EU at the forefront of AI-driven research and scientific innovation. At its centre is RAISE – the Resource for AI Science in Europe – a virtual European institute that pools and coordinates AI resources for developing AI and applying it in science.
Strategic actions include
• measures to attract global scientific talent and highly skilled professionals to ‘Choose Europe‘
• €600 million from Horizon Europe to enhance access to computational power for science, which will secure access to AI gigafactories for EU researchers and startups
• plans for doubling Horizon Europe’s annual investments in AI to over €3 billion, including doubling funding for AI in science
• support for scientists to identify strategic data gaps and gather, curate, and integrate the datasets needed for AI in science
Back in April 2025, the Commission launched the AI Continent Action Plan, a plan that set the path for Europe to become a global leader in AI. The Apply AI and the AI in Science strategies are the next step in delivering this ambition and in positioning the EU to accelerate the use of AI in key sectors and science.
 
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NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data today released the September 2025 Survey of Consumer Expectations, which shows that households’ inflation expectations increased at the short- and longer-term horizons and were unchanged at the medium-term horizon. Despite a small rebound in the expected job finding rate, labor market expectations continued to deteriorate with consumers reporting lower expected earnings growth, greater likelihoods of losing jobs, and a higher likelihood of a rise in overall unemployment. The survey was fielded from September 1 through September 30, 2025.
The main findings from the September 2025 Survey are:
Inflation
• Median inflation expectations in September increased at the one-year-ahead horizon to 3.4% from 3.2% and at the five-year-ahead horizon to 3.0% from 2.9%. They remained steady at the three-year-ahead horizon at 3.0%. The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at the one-year and five-year horizons and was unchanged at the three-year horizon. The increase in the year-ahead measure was largest for those with at most a high school education and those with household incomes under $50,000.
• Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—declined at the one-year horizon, was unchanged at the three-year horizon, and rose at the five-year horizon.
• Median home price growth expectations remained unchanged at 3.0% for the fourth consecutive month.
• Median year-ahead commodity price change expectations increased by 0.3 percentage point for food (to 5.8%) and for gas (to 4.2%), 0.5 percentage point for the cost of medical care (to 9.3%), and by 1.0 percentage point for rent (to 7.0%). The year-ahead expected change in the cost of a college education declined by 0.8 percentage point to 7.0%. The reading for expected food price growth is the highest since March 2023.
Labor Market
• Median one-year-ahead earnings growth expectations decreased by 0.1 percentage point to 2.4% in September, the lowest reading since April 2021.
• Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased 2.0 percentage points to 41.1%.
• The mean perceived probability of losing one’s job in the next 12 months increased by 0.4 percentage point to 14.9%, above the trailing 12-month average of 14.1%. The mean probability of leaving one’s job voluntarily, or the expected quit rate, in the next 12 months increased by 1.8 percentage points to 20.7%.
• The mean perceived probability of finding a job in the next three months if one’s current job was lost rebounded somewhat from a series low of 44.9% in August to 47.4% in September, while remaining well below the trailing 12-month average of 51.0%.
Household Finance
• The median expected growth in household income was unchanged at 2.9% in September, equaling the trailing 12-month average.
• Median nominal household spending growth expectations declined by 0.3 percentage point to 4.7%, falling below the trailing 12-month average of 4.9%.
• Perceptions of credit access compared to a year ago were largely unchanged while expectations for future credit availability improved, with the net share of respondents expecting it will be easier versus harder to obtain credit a year from now increasing slightly.
• The average perceived probability of missing a minimum debt payment over the next three months decreased by 0.5 percentage point to 12.6%, remaining well below the trailing 12-month average of 13.5%.
• The median expectation regarding a year-ahead change in taxes at current income level increased by 0.2 percentage point to 3.6%.
• Median year-ahead expected growth in government debt increased by 0.9 percentage point to 7.5%.
• The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months increased by 0.6 percentage point to 24.9%.
• Perceptions about households’ current financial situations compared to a year ago improved somewhat with a larger share of respondents reporting that their households were better off compared to a year ago. Expectations about year-ahead financial situations deteriorated slightly with a smaller share of respondents reporting that their households are expecting to be better off a year from now.
• The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 0.9 percentage point to 39.8%, well above the trailing 12-month average of 38.0%.
About the Survey of Consumer Expectations (SCE)
The SCE contains information about how consumers expect overall inflation and prices for food, gas, housing, and education to behave. It also provides insight into Americans’ views about job prospects and earnings growth and their expectations about future spending and access to credit. The SCE also provides measures of uncertainty regarding consumers’ outlooks. Expectations are also available by age, geography, income, education, and numeracy.
The SCE is a nationally representative, internet-based survey of a rotating panel of approximately 1,200 household heads. Respondents participate in the panel for up to 12 months, with a roughly equal number rotating in and out of the panel each month. Unlike comparable surveys based on repeated cross-sections with a different set of respondents in each wave, this panel allows us to observe the changes in expectations and behavior of the same individuals over time. For further information on the SCE, please refer to an overview of the survey methodology here, the FAQs, the interactive chart guide, and the survey questionnaire.
 
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By Marijn Bolhuis, Arindam Roy, Patrick Schneider, Zhao Zhang
Stronger fiscal and monetary policy frameworks and more developed local currency debt markets have supported emerging market resilience
Emerging market economies have held up remarkably well in recent years, even after periods of global financial turbulence. While favorable external conditions (in other words, good luck) often helped, it’s clear that good policies matter.
In the past, “risk-off” episodes—when global investors indiscriminately sold riskier assets—often hit emerging markets especially hard. They triggered sharp capital outflows and tighter financial conditions, causing currencies to plunge and inflation to surge.
That picture has significantly changed recently. Many emerging markets have weathered shifts in global risk appetite better than before. Capital outflows have been smaller, borrowing costs more contained, growth steadier, and inflation lower.
Improved policy frameworks—such as credible monetary policy, more independent central banks and more transparent fiscal policy—played an important role, as we show in a chapter of the new World Economic Outlook. Comparing typical risk-off episodes before and after the global financial crisis, our analysis concludes that improved policy frameworks contributed to smaller output losses and lower inflation.
Better frameworks also improved confidence and trust among investors. Local currency bond markets have deepened in many emerging markets, contributing to greater financial resilience. This helped reduce both currency mismatches and the risk of sudden capital outflows.
Yet risks remain: external conditions can quickly deteriorate, recent global shocks have eroded fiscal space, the post-pandemic inflation surge has pushed up inflation expectations, and political pressures could undermine hard-won credibility.
The presence of fiscal rules has also not prevented the buildup of debt in many emerging market economies—in large part due to limited compliance with the rules. The result: debt structures and vulnerabilities to global shocks differ widely across countries, as we discuss in the new Global Financial Stability Report.

Improved frameworks
Our analysis shows that monetary policy implementation has improved, and the credibility of central banks has strengthened. In the past, many emerging economies were reluctant to let their exchange rates move freely. But with better-anchored inflation expectations and stricter macroprudential regulation, countries have increasingly allowed the exchange rate to act as a shock absorber, and central banks could shift their focus toward stabilizing economic activity.
Meanwhile, central banks have bolstered their independence—both from fiscal dominance (when monetary policy had to accommodate fiscal needs) and from US monetary policy that determined domestic borrowing conditions. That means countries can now rely less on costly foreign exchange interventions.
Emerging markets have also made significant improvements to fiscal frameworks, which enabled governments to respond more effectively to shortfalls in demand. This has helped stabilize economies during global downturns and respond more forcefully whenever higher debt and interest rates pose a risk.
Comparing risk-off episodes before and after the global financial crisis shows that economic output was 1 percentage point higher than it would have been otherwise, with improved frameworks explaining slightly more than 0.5 percentage point, and favorable external conditions accounting for the rest. Inflation was 0.6 percentage points lower, thanks to the more effective policies.

Financial resilience and risks
But, here too, strengthened policies have helped.
Large emerging markets with strong policy frameworks and growing domestic savings have been able to rely more on local currency debt issuance and strong demand from domestic investors, especially nonbank financial institutions. As a result, the share of debt issued in local currency and owned by foreign investors has fallen to multiyear lows in many countries.

Greater domestic ownership of local currency debt reduces the sensitivity of emerging market debt to global shocks, according to new analysis in the Global Financial Stability Report. With more domestic ownership, bond yields rise less than they would otherwise in a risk-off scenario.
The stabilizing effect of domestic investors on bond yields appears to be especially true for banks. Our analysis shows that a risk-off shock is associated with a 19-basis-point increase in local currency yield spreads, but a one-standard-deviation increase in domestic bank ownership share mitigates that effect to 11 basis points. Greater ownership by domestic nonbank financial institutions can also be beneficial under certain circumstances.
However, improved financial stability and resilience have not been evenly shared. Smaller emerging markets and frontier economies have needed to rely on more expensive and less stable forms of financing, such as short-term domestic debt and international US dollar bonds. Efforts to further deepen local currency bond markets across a broader spectrum of countries would help build resilience.
Higher domestic ownership is also not without risks. In countries with low savings, narrow investor bases, and poor financial market infrastructure, excessive sovereign debt holdings can lead to problems. For example, large holdings of sovereign debt by banks can reduce their capacity to lend to the private sector, which may in turn reduce economic growth. In addition, sovereign defaults can lead to large losses in the banking sector, ending in expensive and difficult bank bailouts.
Continued commitment
Even though recent experiences have been encouraging, emerging markets will continue to be tested because uncertainty remains elevated. Progress across countries has been uneven and fiscal space is stretched in some cases.
Countries should prioritize efforts to improve the implementation and credibility of their policy frameworks, preserve central bank independence, and rebuild spending capacity for when it is needed (for example during an economic downturn). IMF capacity development can also help support local currency bond market development.
With continued reforms and stronger foundations, emerging markets can turn hard-won resilience into long-lasting stability.
 
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Addressing the informal leaders’ meeting in Copenhagen, President of the European Parliament Roberta Metsola highlighted the following topics:

On simplification:
Making things easier is what the European Parliament is all about. We are committed to make life better, fairer and easier for the industry, for families, for farmers. At a time when too often the world feels like it is on fire, we want to make sure Europe remains the best and safest place to be. A few weeks ago, Parliament and the Commission signed a new Framework Agreement, committing to our simplification agenda. Parliament will vote on the revisions of the CSRD – Corporate Sustainability Reporting Directive – and the CSDDD – Corporate Sustainability Due Diligence Directive in October, just as we will on the Omnibus II Investment Simplification Package [InvestEU], the revision of the Visa Suspension Mechanism and our position on the Common Agriculture Policy Simplification Omnibus. This will mean more jobs, more stability and ultimately, more security. Things are moving, but we need to keep pulling the same rope. Let’s work together.
On defence:
We don’t need to reinvent the wheel. What we need is to pool our resources, our funding, and our know-how. And the European Parliament gets that. We are now ready to reach an agreement on EDIP – the European Defence Industry Programme – at the next trilogue on 7 October, which we hope will be the last one.
On Ukraine and drones:
I was in Kyiv to reaffirm the European Parliament’s steadfast support for the Verkhovna Rada and the Ukrainian people. You could see how drones have really become a primary weapon of war. President Zelenskyy made it clear that Ukraine is ready – they have field experience and the industrial capacities to produce even more. What they lack however, is financing. What was once covert is now overt – and here, we can really count on Ukraine’s expertise.
On phasing-out Russian gas and energy:
The European Parliament has taken a clear stance: ending the purchase of Russian gas and energy strikes at the very core of Russia’s war machine – and we stand by that. Naturally, phasing out our dependencies must be accompanied by a clear plan.
On Middle East:
The plan to end the Gaza conflict put forward by the President of the United States, and endorsed by Gulf and Arab States, is an important breakthrough. It offers a real framework towards peace, stability and reconstruction in Gaza.
If Hamas accepts this peace plan, it will mean that the guns fall silent; that the suffering would end. Hostages could come home. More aid could reach those who desperately need it. It would guard against mass displacement, and it would make sure Hamas has no role in Gaza’s future governance.
The plan can bring security for Israel, and it can give Palestinians a real perspective for their legitimate aspirations towards self-determination and Statehood. It keeps the possibility of a two-state solution alive. And it provides hope – real hope – to an entire region that has seen too little of it.
On Migration:
When it comes to establishing an EU list of Safe Countries of Origin and revising the Safe Third Country Concept, we hope to conclude them by the end of the year. The new Returns Regulation, by early next year. Things are moving.
 
President Metsola’s full speech is available here.
 

Compliments of the European Parliament
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Steel and plastics sectors lead in emission savings potential.
Circular economy measures could significantly contribute to abating greenhouse gas emissions in energy-intensive industries, such as steel, aluminium, cement and concrete, and plastics — sectors that currently account for nearly 15% of the European Union’s total emissions. Moreover, integrating circularity measures in these industries would improve the EU’s energy and economic security by reducing import dependency.
Circularity measures could cut emissions significantly
A new JRC report shows how circular economy practices would contribute to substantially reducing greenhouse gas emissions in sectors such as plastics, steel, aluminium, cement and concrete. Improved materials management, including reduction, reuse and recovery measures, could help EU industry reduce between 189 and 231 million tonnes of CO₂ equivalent per year. Circularity measures could be particularly effective in reducing emissions in the steel sector (by 64 to 81 million tonnes of CO₂ equivalent per year) and the plastics sector (75 to 84 million tonnes of CO₂ equivalent per year).
Reducing energy needs and fossil fuel imports
Circularity measures in these four sectors would also lower EU-wide fossil fuel energy demand by nearly 4.7% compared to 2023.  The EU-wide consumption of electricity would fall by a similar rate. All in all, this could reduce reliance on imported fossil fuels and critical materials necessary for electricity generation, while enhancing the EU’s resilience amid global energy volatility.
Strengthening economic security
Beyond environmental benefits, circular economy strategies would improve the EU’s trade balance by about 4%, corresponding to 35 billion euro. This gain stems from reduced imports of raw materials such as iron ore (decreasing by 22%) and bauxite (lowered by 11%), as well as fossil fuels, with plastics contributing the largest share of the surplus.
Making change happen
The report includes recommendations to help policymakers and industry make informed decisions about circular economy measures that can support the EU’s transition to a more sustainable and competitive economy.
Policy recommendations include promoting technologies to improve the quality of recycled materials, reducing the use of resources through more efficient design, and steering market demand via Green Public Procurement instruments.
These strategies align with EU goals to enhance sustainability and competitiveness, whilst mitigating macroeconomic risks from global dependencies.
Background
The JRC report Capturing the Potential of the Circular Economy Transition in Energy-Intensive Industrieslooks at the potential of circular economy levers to decrease the environmental impact of the steel, aluminium, cement and concrete, and plastics industries by 2050, while improving energy and economic security. The impacts of the circular economy are quantified relative to an alternative scenario without circular economy strategies. In this alternative scenario in the year 2050, the policy mix to reach climate neutrality does not resort to circular economy measures and the industries investigated still show hard-to-abate greenhouse gas emissions. These findings are further developed in four JRC reports focused on the individual industries.
The EU Competitiveness compass, published in January 2025, and the Clean Industrial Deal, published in February 2025, emphasise the importance of circular economy in creating a more sustainable, resilient and competitive European industrial sector, that in turn supports the EU’s climate goals, while promoting more efficient technologies and job creation.
 

Compliments of the European Commission
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DG TRADE launched a new platform aimed at boosting transparency in mineral supply chains.

This new tool, named ReMIS (Responsible Mineral Information System), allows economic operators to register and share their due diligence policies and initiatives to ensure responsible sourcing of metals and minerals. It will enable them to share best practices with the broader public and showcase their efforts to increase transparency in their supply chain.
ReMIS is part of the EU policy on the responsible sourcing of minerals, including the EU’s Conflict Minerals Regulation. Participation in ReMIS is voluntary and has no impact on any legal obligations that economic operators may have under EU due diligence legislation, including the Conflict Minerals Regulation.
The platform is open to all economic operators involved in the mineral supply and value chains, from upstream to downstream. Entries on ReMIS can cover a wide range of minerals and metals, including 3TG (tin, tantalum, tungsten, and gold), as well as any other mineral or metal.
The use of ReMIS will enhance transparency and confidence in the mineral and metal supply chains, reinforcing the EU’s commitment to responsible sourcing.
Economic operators must register to use the ReMIS platform. The public can consult the information provided on the ReMIS public portal.

Compliments of the European Commission

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Blog post by By Anastasia Allayioti, Giada Bozzelli, Paola Di Casola, Caterina Mendicino, Ana Skoblar and Sofia Velasco | Uncertainty is a key force shaping economic conditions. This post shows that heightened uncertainty about economic policy in the United States significantly affects firm lending in the euro area. This weighs on investment and reduces the effectiveness of monetary policy.
Periods of heightened economic policy uncertainty exert significant pressure on economic outcomes. They dampen business confidence, delay investment decisions and constrain credit conditions. When firms can’t be sure how or when regulations, tariffs or other economic policies might be implemented or change, they tend to fall into “wait and see” mode. While waiting for greater clarity, firms react to heightened uncertainty about economic policy by postponing investment decisions, while banks contract credit supply to manage potential risks.
This post takes a closer look at how economic policy uncertainty affects euro area corporate lending and the effectiveness of monetary policy in the euro area. We find that increased uncertainty about economic policies – stemming, among other things, from trade policy developments in the United States – spills over into the euro area, by reducing lending via both loan demand and loan supply. Consequently, high levels of uncertainty also make policy rate cuts less effective.
A rising ride of uncertainty
The Economic Policy Uncertainty Index, which measures the frequency of use of policy-related terms in major newspapers, has reached record highs in recent years.[1] Events like Brexit, the COVID-19 pandemic and the war in Ukraine have each contributed to these surges in uncertainty. More recent events are adding further volatility. Geopolitical risk and uncertainties surrounding US trade policy have led to peak levels in economic policy uncertainty (EPU), both in the United States and in the euro area (Chart 1). Meanwhile, financial market volatility has remained low.[2] Historically, episodes of high economic policy uncertainty have coincided with more volatile financial markets. However, recent data shows a divergence: economic policy uncertainty spikes while market volatility stays subdued. This has prompted us to examine whether policy uncertainty alone, without financial market turbulence, disrupts lending and investment.

Chart 1
Economic policy uncertainty (EPU) and financial market volatility

Sources: Baker, Bloom and Davis (2016), Bloomberg and ECB calculations
Notes: The US EPU and EA EPU are estimated by Baker, Bloom and Davis (2016). The EA EPU is constructed as a GDP weighted average of country-level indices.
The latest observation is for August 2025 (monthly observations).

Policy uncertainty affects lending
Our analysis shows that economic policy uncertainty, no matter if caused at home in Europe or in the United States, can significantly impact corporate lending in the euro area. Spikes in uncertainty stemming from monetary, fiscal, financial or trade policy developments in the United States spill over into the euro area via financial and trade linkages. To quantify the associated effects, we use a structural Bayesian Vector Autoregression (VAR) model. This allows us to assess how unexpected changes in US economic policy – which are exogenous to the euro area – affect lending conditions in the euro area via multiple transmission channels.[3]
Using aggregate euro area data since 2003, our results show that a one standard deviation shock in the model leads to a slowdown in loan growth, with effects building over time and peaking at about 0.5 percentage points roughly two years after the initial shock (Chart 2, panel a). So, when unexpected changes happen, banks give out fewer and fewer loans.[4]
The impact of uncertainty is even more severe during episodes of high financial market volatility. When volatility goes up, investors demand higher compensation for risk – known as a “volatility risk premium” – further amplifying the negative effect of policy uncertainty. Our estimates suggest that this amplifying effect would add significantly to the contraction in lending, by about 0.3 percentage points (Chart 2, panel a). Together, these results reinforce the finding that policy uncertainty – especially when coupled with financial stress – can hinder the flow of credit and slow down economic activity just when stimulus is most needed.

Chart 2
Economic policy uncertainty, lending to firms and monetary policy effectiveness

Sources: Baker, Bloom and Davis (2016), ECB and ECB calculations.
Notes: Panel a): The results are based on data on aggregate EA bank lending to firms since 2003 and a macro-financial structural Bayesian quantile model identified through recursive ordering. The panel illustrates the impact of a one standard deviation shock to US EPU on the peak effect of the shock on euro area loans to non-financial corporations. High financial market volatility indicates levels in the top quintile of realisations of the VSTOXX. Panel b): The results are based on bank-level data since 2007 for a representative sample of 80 euro area banks, and a structural Bayesian VAR model identified through a recursive ordering approach. The panel illustrates the effect of a one standard deviation shock to US EPU on peak differences of the shock on bank loan volumes (annual growth rates) across banks with high and low reserves over assets and non-performing loan ratios. High and low categories refer to the top 40% and bottom 40% of the corresponding indicator. Panel c): The results are based on euro area firm-level data since 2013. The panel illustrates the percentage difference in the impact of a policy rate surprise on firms’ investment following an increase in US EPU faced by euro area firms of one standard deviation from its median. The results are based on panel regression using firm-level data, with time and country fixed effects, using monetary policy surprises from Altavilla et al. (2019) interacted with the uncertainty measure.
The latest observations are for the first quarter of 2025 (panel a), February 2025 (panel b) and 2024 Q4 (panel c).

Uncertainty and bank credit supply
Recent empirical studies demonstrate that economic policy uncertainty does not go unnoticed by banks, but directly affects their lending behaviour.[5] Our study confirms these results: specifically, we find that when uncertainty about US economic policy rises, euro area banks tend to tighten credit conditions. The analysis is based on granular loan data from the Anacredit database. Loan-level evidence confirms that uncertainty is not just a concern for firms. It directly shapes how banks lend, which is consistent with survey evidence from both the euro area and the United States indicating worsening risk perception and lower risk tolerance by banks.[6]
Using detailed data on new bank loans to firms, we find that higher US EPU leads euro area banks to reduce credit supply, even after accounting for firm-specific demand and ongoing lending relationships. The effect is particularly strong for banks that are more exposed to the US dollar. These banks reduce their lending supply to euro area firms by more than less exposed banks. Banks that are more exposed to uncertainty about US economic policy also increase interest rates on new loans and reduce their maturity. These effects are more pronounced for firms that trade more heavily with the United States.
Other bank characteristics also matter. Credit institutions with lower liquidity, or higher shares of non-performing loans react more sharply (Chart 2, panel b). Using data since 2007 for a sample of 80 euro area banks, we find that an increase in US-driven EPU generally reduces the provision of bank-level credit to firms. That is in line with the aggregate results (Chart 2, panel a). However, a one standard deviation shock reduces loan growth by about 1 percentage point more for low-liquidity banks compared with their higher-liquidity peers. This divergence persists for up to two years. Likewise, banks with more non-performing loans experience a similarly steeper decline in their lending activity in response to an uncertainty shock. So, while banks tend to lend less in times of stress, how much less depends on specific bank balance sheet characteristics.
Implications for monetary policy
So, why does this matter for central banks? Heightened economic policy uncertainty, which stems, for example, from sudden shifts in US trade or fiscal policy, weakens the monetary policy transmission channel. During periods of heightened economic policy uncertainty, the effectiveness of monetary policy rate cuts in stimulating the economy declines significantly.[7] For investment, the impact of a 100 basis points cut in the short term rate is about 20 percent lower (Chart 2, panel c). This effect is especially pronounced among investment-intensive firms.[8] Hence, in periods of elevated uncertainty, central banks may need to respond more forcefully to achieve the same intended impact as they would under low uncertainty.
Looking ahead
As this post shows, economic policy uncertainty can significantly influence credit dynamics, business investment and the effectiveness of monetary policy in the euro area. When uncertainty rises, firms tend to delay or scale back investment. This effect is especially visible among firms operating in sectors that are more exposed to the United States. At the same time, banks – particularly those with high US exposure, limited liquidity or higher levels of non-performing loans – tighten credit conditions. And this reduces lending. As a result, policy uncertainty, even when it originates in the United States, can weaken the effectiveness of monetary policy in the euro area.
 
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.
 
Compliments of the European Central Bank
 

For details on the construction and validity of the index see Baker, S.R., Bloom, N. and Davis, S.J. (2016), “Measuring Economic Policy Uncertainty”, The Quarterly Journal of Economics, Vol. 131, No 4, pp. 1593-1636.
See Martorana, G. and Mistak, J. (2025), “Financial market volatility and economic policy uncertainty: bridging the gap”, Economic Bulletin, Issue 4, ECB.
The structural Bayesian Vector Autoregression (VAR) model is an econometric framework used to estimate a system of time series equations. Importantly, the model enables us to trace the effects of structural policy uncertainty shocks on lending conditions while accounting for the endogenous dynamics among all variables in the system. It also allows for endogenous dynamics of EPU driven by factors orthogonal to exogenous movements in EPU. The estimation accounts for the unique economic disruptions caused by the COVID-19 pandemic (see Lenza, M. and Primiceri, G.E. (2022), “How to estimate a vector autoregression after March 2020”, Journal of Applied Econometrics, Vol. 37, No 4, pp. 688-699).
Interestingly, the effects of trade policy uncertainty alone are not meaningfully different from EPU shocks, which encompass a wider range of policy-related economic uncertainties.
For recent studies on the reaction of euro area banks to uncertainty, see, for example, Altavilla, C., Carboni, G., Lenza, H. and Uhlig, H. (2025), “Interbank rate uncertainty and bank lending”, American Economic Journal: Macroeconomics (forthcoming) and Jasova, M., Mendicino, C. and Supera, D. (2021), “Policy Uncertainty, Lender of Last Resort and the Real Economy”, Journal of Monetary Economics,  Volume 118, pp. 381-398. For the impact of US EPU on euro area banks see Behn,M., Bozzelli,G., Mendicino,C., Reghezza,A., and Supera,D., “Global Uncertainty, Local Credit: The Bank Lending Channel of International Spillovers” forthcoming WP and for the impact of trade uncertainty on lending by US banks, see also Correa, R., di Giovanni, J., Goldberg, L.S. and Minou, C. (2023), “Trade Uncertainty and U.S. Bank Lending”, NBER Working Paper, No 31860.
For the euro area, see the Euro Area Bank Lending Survey. For the United States, see, for example, evidence reported in New York Fed Liberty Street Economics, 2023. Notably, shifts in credit standards have historically preceded changes in annual firm loan growth by about a year across the euro area – see, for example, Huennekes, F. and Köhler-Ulbrich, P. (2022), “What information does the euro area bank lending survey provide on future loan developments?”, Economic Bulletin, Issue 8, ECB, and Köhler-Ulbrich, P., Dimou, M., Ferrante, L. and Parle, C. (2023), “Happy Anniversary, BLS – 20 years of the euro area bank lending survey”, Economic Bulletin, Issue 7, ECB.
For evidence on the effect of uncertainty on the monetary policy transmission to inflation and unemployment, see Falconio, A, Schumacher, J, (2025), “Economic uncertainty weakens monetary policy transmission”, ECB Blog, 1 September 2025.
Firms in sectors that are more exposed to trade with the United States tend to invest more than others, making them especially sensitive to credit conditions and key to the transmission of monetary policy.
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The European Commission today announced two major initiatives to advance the Savings and Investments Union and deliver tangible benefits for all EU citizens. The comprehensive package focuses on improving financial literacy for all and at all life stages and introduces a blueprint for Savings and Investment Accounts (SIAs) – a tool aimed at making investing simpler and more accessible for everyone.

The Financial Literacy Strategy aims to help citizens make sound financial decisions, ultimately improving their well-being, financial security and independence. With the right combination of financial knowledge and skills, citizens can budget better, avoid scams and fraud, save more efficiently and feel better equipped to invest for their future. Financial literacy levels remain low in the EU – less than one fifth of EU citizens have a high level of financial literacy (Eurobarometer 2023), with significant differences across Member States. The Strategy therefore includes measures to enhance financial awareness for all citizens and support Member States’ efforts to improve financial literacy.
The Commission’s Financial Literacy Strategy is based on four mutually reinforcing pillars:

Coordination and best practices: The Commission will gather stakeholders to facilitate mutual learning of successful national and international financial literacy initiatives and encourage the adoption of best practices by Member States, including actions targeting the needs of specific groups.
Communication and awareness-raising: The Commission will launch an EU-wide financial literacy campaign that complements and amplifies national efforts to raise citizens’ financial awareness.
Funding for financial literacy initiatives, including research: The Commission will encourage Member States to use existing EU funding instruments to support financial literacy initiatives and research.
Monitoring progress and assessing impacts: The Commission will conduct regular Eurobarometer surveys and encourage Member States to develop evaluation tools to track progress of financial literacy levels.

A crucial component of securing financial independence is the possibility for citizens to manage savings better and build wealth over time, including by investing in capital markets. EU citizens have one of the highest savings rates in the world, yet they often do not get the most out of their savings. The Financial Literacy Strategy will raise citizens’ awareness about how to better plan and use their savings, and how to understand investment risks and opportunities.
Beyond knowledge, citizens also need simple and accessible investment opportunities. To address this, today’s package also includes a blueprint for Savings and Investment Accounts (SIAs), in the form of a Commission Recommendation to Member States.
SIAs are accounts provided by authorised financial services providers, even online, which enable retail investors to invest in capital markets instruments. These accounts often come with tax incentives and simplified tax procedures, making them an attractive option for citizens. SIAs will foster a stronger investment culture among EU citizens and transform how they engage with capital markets. SIAs can enable citizens to achieve higher returns on their savings, compared to keeping them in bank deposits, all while maintaining full control over which financial products or economic sectors they choose to invest in. While investing carries risks, these can be managed through diversification and a long-term investment approach.
By moving some of their savings into more productive investments, citizens can also facilitate the financing of businesses, driving economic growth and job creation across Europe, in line with the Savings and Investments Union objectives. Investing in the European economy allows them to contribute to and benefit from the EU’s competitiveness agenda.
In some EU countries, SIAs have already been put in place, although the specific features of these initiatives can vary quite significantly. Today, the Commission is recommending that Member States introduce SIAs where they do not yet exist and enhance existing frameworks by incorporating best practices from across Europe and worldwide. Drawing on these successful experiences, the Commission considers that SIA should include several key features, notably:

A wide array of providers:  A wide range of authorised financial services providers (such as banks, investment firms, neobrokers), including cross-border ones, should be able to offer SIAs, boosting competition and innovation.
Simplicity: Providers should offer a simple, reliable and easily accessible user experience for retail investors, both online and offline, that makes the buying and selling of assets within an SIA seamless.
Flexibility: Retail investors should be allowed to open multiple accounts, including with different providers, and should not be faced with excessive fees or cumbersome processes when transferring their portfolios.
Broad investment opportunities: SIAs should offer investments in various products such as shares, bonds and investment funds, allowing citizens to diversify their portfolios across asset classes, issuers, manufacturers geographies and risk profiles, while excluding highly risky or complex products. SIA providers are encouraged to provide citizens with investment options that allow them to channel their investments into the EU economy to contribute to strategic EU priorities.
Tax incentives: They are key in encouraging the SIAs and achieving broader retail investor participation. Tax incentives should be well targeted and simple for retail investors, SIA providers and tax administrations to understand and apply.
Simplified taxation process: Streamlined tax procedures, including relying on SIA providers for tax declarations, can greatly benefit retail investors.

The European Commission will work closely with Member States and stakeholders to implement the Strategy on financial literacy and monitor the take-up of its Recommendation on a Savings and Investment Account to ensure that Europe’s citizens feel confident managing their money and savings, have better access to investment opportunities and thrive financially.

 
 
Compliments of the European CommissionThe post European Commission | EU to Boost Financial Literacy and Investment Opportunities for Citizens first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Blog post by Jay Surti | Half of all financial assets worldwide are now held and intermediated by companies that are not classified and regulated as banks.
The global financial crisis of 2008 froze the financial system. Banks pulled back credit, families tightened their belts and companies laid off workers. It was a frightening time for everyone, and an extremely difficult moment for the financial services industry.
Today, the landscape of finance is quite different. Different types of investors and firms are providing businesses, consumers and governments with credit and liquidity. More than a billion more people have access to credit thanks largely to newer tech-based lenders. Families also have more options to finance purchases and to diversify retirement portfolios. Equity, fixed income, and derivatives markets have all seen strong growth.
But these developments have not been driven by banks. Instead, it is “nonbank” financial institutions that have stepped up, increasing their share of global credit and finance from 43 percent during the 2008 crisis to nearly 50 percent by 2023, our most recent data show.
This is a watershed moment: half of all financial services worldwide are now offered by companies that are not classified and regulated as banks.
Nonbank financial institutions encompass very different kinds of enterprises, and exact definitions vary. Broadly, the sector includes financial companies that provide credit, trading and investment services but don’t take deposits from the public or have accounts with the central bank. That means they aren’t covered by safety nets like deposit insurance and liquidity assistance, which banks have access to in exchange for comprehensive prudential regulations.
The megatrends
Given nonbanks’ size and importance, it’s worth looking into the megatrends driving their growth.

Governments have new lenders, enhancing liquidity and holding down rates: New nonbank buyers for bonds such as US Treasuries provide additional liquidity. This helps markets operate efficiently, which can help hold down the interest on national debt that taxpayers ultimately pay. In the United States, principal trading firms such as Citadel Securities and Jane Street Capital have developed business models around technology-driven high-frequency and algorithmic trading that have fueled this trend.
Mid-sized businesses have gained more access to funding, supporting economic activity, employment, and financial resilience: Private credit funds can provide funding for businesses that may be too large or risky for banks to lend to, but too small to issue their own bonds. Many such funds are managed by private equity firms, which in turn get financing from banks and other nonbanks. These nonbanks—typically insurers, pension funds, sovereign wealth funds, and endowments—that provide funding to private credit funds tend to have lower leverage and funding that is more stable over longer terms compared to banks. So, they don’t have to pull funds back as quickly during times of stress, increasing the financial system’s resilience.
More borrowing options for consumers and small businesses: Credit is available in a wider variety of amounts and durations, from longer-term auto loans, to “buy now, pay later” loans, and small mobile money loans in countries like Kenya. Fintech lenders have driven this trend by pioneering new sources of data for underwriting and making servicing cheaper through automation, enabling firms to make smaller loans to more people. In emerging and developing economies, they have made mobile payments available to more people, and with a broader set of financial services following behind.
Investors of all sizes have more ways to diversify portfolios. Investment funds, and particularly passive investment vehicles, have expanded access to capital markets for individual investors. As returns on the safest assets dwindled, index funds rapidly increased their share of assets under management—from 19 percent in 2010 in the United States to 48 percent by 2023. And nonbanks made new asset classes, including commercial real estate and precious metals, available to more investors. More diverse assets can help all investors manage risk, although speculative assets have risks of their own.
Beyond diversification benefits, another feature of passive investing merits mention: certain types of funds can provide a new stabilizing force for markets. One feature of these funds is that, to maintain the balance of stocks they promise to end-investors, they regularly and predictably buy more of the shares that get cheaper and sell more as their value rises. For example, when individual stocks rise enough to be added to a benchmark equity index, or are removed from it if their value falls. As they’ve attained great size, this dependable effect has helped to stabilize markets.

These trends show the benefits of nonbank innovation. But their growth also brings risks.
What could go wrong
The classic “run on a (non)bank” scenario: Like banks, open-ended and money market funds make long-term investments but promise customers the ability to withdraw at any time. So, during the early-COVID “dash for cash” in 2020, some were running out of cash (a liquidity crisis) and needed help from central banks, including the Federal Reserve. While governments did not lose money, they did take on risk for these nonbanks.
The “margin call plus contagion” scenario: Borrowing on margin to make bigger bets enhances profits but also raises risks. Some hedge funds and family offices (wealth managers focused on one or more wealthy families) borrow large amounts of money with little collateral to bet on events like stocks or bond price swings. In times of stress anywhere in the financial system, the institutions the nonbanks borrow from often go from requiring too little collateral to requiring too much, amplifying risks for everyone.
If these bets go wrong, the nonbanks may collapse, triggering losses and illiquidity for their creditors and broader market stresses. Such contagion resulted when the Archegos Capital Management family office collapsed in 2021 causing significant harm to large global banks.
Protecting the public

Get more and better data: Nonbanks borrow heavily from banks and others in the financial system, yet their disclosure and reporting requirements are quite light. Neither market participants nor financial regulators have a comprehensive view of the macro-financial stability risks arising from the sector. Taxpayers are often called in to help out in times of stress, so they deserve to know more about the risks nonbanks take. When transaction information can’t be public for competitive reasons, it should be visible to regulators—and shared across borders. The Financial Stability Board’s Nonbank Data Task Force is helping increase visibility.
Use data to improve risk analysis: Regulators can also do more with the data they already have to map connections between banks and nonbanks, and among nonbanks. Using new models and technology can help them gain a better understanding of global financial risks. Leading examples include the Bank of England’s System-Wide Exploratory Scenario, first conducted in 2023, and the IMF’s recent work on systemwide financial stability risks in the euro area.
Use risk analysis to strengthen supervision: As risks are better understood, national and international regulators can more quickly spot and intervene forcefully to make global finance less vulnerable to shocks.

Bottom line
Nonbanks are a diverse group. We need to better understand their activity and ensure that their riskiest activities are appropriately regulated to reduce potential risks to the financial system and economic activity, while allowing space for dynamism and innovation in the provision of financial services.
 
Compliments of the International Monetary FundThe post IMF | Explainer: Five Megatrends Shaping the Rise of Nonbank Finance first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Here in Finland, the idea that economics cannot be separated from geopolitics is hardly new. During the early 1990s, as the Soviet Union collapsed, Finland lost more than 10% of its GDP when trade with its eastern neighbour suddenly evaporated.[1]
Few countries know better the costs of ignoring geopolitical realities.
Today, the rest of Europe is facing a similar reckoning. We find ourselves in a new world – one where policymakers can no longer confine themselves to traditional economic and financial variables. Now, we must factor “geoeconomics” into our analyses.
The term was coined in 1990 by Edward Luttwak, who described geoeconomics as “the admixture of the logic of conflict with the methods of commerce”. It is not protectionism in the old sense of sheltering vulnerable industries. Instead, it is trade deployed as a tool of power, a strategy of influence and dominance.
This approach has been around for some time, most visibly during the US-China trade disputes that unfolded during the first Trump Administration. The unjustified war in Ukraine and the sanctions that followed have also reshaped the European landscape. But 2025 marks the first year in which Europe itself has been on the receiving end.
We currently face the highest tariffs since the days of Smoot-Hawley in the 1930s, imposed by our largest trading partner. Global trade is being reshaped as other countries respond to tariffs directed at them. And in the span of just a few months, we have seen a surge in trade uncertainty and sharp swings in exchange rates.
So now is a good time to take stock of what we have learned so far, and what this implies for monetary policy.
Trade wars: expectations versus reality
A year ago, most would have assumed that US tariffs rising from 1.5% to 13% would trigger a major adverse shock to the euro area economy. Indeed, most trade models judged the imposition of tariffs to be, on net, negative for euro area growth and likely positive for inflation, at least in the short run.
This was broadly our internal assessment in December of last year, albeit surrounded by considerable uncertainty. Three channels were usually seen as decisive in producing such an outcome.
First, retaliation. Reciprocal tariffs were expected to raise import costs and reverberate through supply chains. In most models, this retaliation channel was by far the largest driver of higher short-term inflation.[2]
Second, the exchange rate. Tariffs were expected to trigger a depreciation of the euro against the dollar – driven by expectations of higher US rates and a smaller US trade deficit – thereby amplifying imported inflation.[3]
Third, uncertainty. Elevated trade policy uncertainty was expected to weigh heavily on business investment and growth, often more than the direct effect of tariffs on exports themselves. This was expected to be the largest negative force on growth.
Yet some of these assumptions have not been borne out.
This is because the tariffs were not an isolated economic event, but a symptom of a broader geopolitical shift – one that triggered political economy dynamics beyond the reach of standard models.
Start with retaliation.
In Europe and globally, it has so far been limited. In response to the US tariffs on steel and aluminium, the EU announced counter-tariffs on around €26 billion worth of American goods, but suspended them once a deal was struck in July.
Pressure from major industrial groups to avoid a prolonged cycle of tit-for-tat measures, as well as concerns about jeopardising US support for the war in Ukraine, ultimately outweighed pure economic calculus.
As a result, we have not yet seen significant supply chain disruption. Global supply chain pressures remain contained, and in the euro area, bottleneck indicators are close to historical averages.
If anything, rather than blocked supply chains, the euro area is facing rising imports. The euro area’s trade deficit with China has risen by around 10% this year, although this was driven more by weaker Chinese demand than by diverted trade flows.
The exchange rate has also not behaved as expected.
Rather than depreciating, the euro has appreciated substantially. Since the start of this year, it has risen by 13% against the US dollar, while the nominal effective exchange rate has increased by 6.5% and the real effective exchange rate[4] by 5%.
This reflects the fact that the imposition of US tariffs coincided with a broader re-evaluation of the country’s position in the global financial system.
Investors began to question whether the US dollar would continue to warrant its status as the ultimate safe-haven currency – another political-economy factor that narrow, tariff-focused models excluded by assumption.
The international role of the euro has helped insulate us from the resulting exchange rate volatility, with 52% of our imports invoiced in our own currency. But many key imports, especially commodities, are still priced in dollars.
The euro’s appreciation has therefore contained imported inflation from supply chains, while at the same time placing an additional drag on growth.
The effects of uncertainty have been more in line with expectations. The expected cumulative impact of tariffs and uncertainty on growth is around 0.7 percentage points between 2025 and 2027, compared with our projections last December.
Still, these effects have not been as strong as we anticipated. For example, only about a quarter of the downward revision for next year, compared with December last year, is due to uncertainty.
This is partly because trade policy uncertainty fell faster than we expected once the deal with the United States was concluded. It is also because the euro area has taken internal measures to boost growth that have helped counter external weakness.
In particular, governments in Europe have committed to the largest increase in rearmament in decades, with some reversing years of underinvestment. Government investment is now expected to add 0.25 percentage points to growth[5] between 2025 and 2027, offsetting around one-third of the trade shock.[6]
The EU has also pushed ahead with new trade agreements, which will support growth. The Mercosur and Mexico deals now being adopted cover more than 3% of extra-euro area goods exports, while agreements currently under negotiation account for a further 6%.[7]
This is another example of a response that models could not capture beforehand: trade pressures have led European governments to re-evaluate their broader trade and security relationships, prompting an endogenous investment response.
All in all, with no retaliation and an appreciating exchange rate, tariffs have had little inflationary impact so far, with their adverse effects mainly limited to growth. Those effects, however, have been relatively moderate thanks to the domestic response.
Evaluating the balance of risks
In an environment of high uncertainty, understanding the nature of shocks is a precondition for getting the baseline projection right.
But capturing the balance of risks is just as crucial, so that we are prepared for a situation in which the baseline may prove obsolete and can act pre-emptively, if necessary.
This was a key conclusion of our recent strategy review: to emphasise more risks and uncertainty in our decisions, not just central projections.
Initially, we viewed the risks to growth from US tariffs as tilted to the downside.
This assessment was informed by extensive scenario analysis, including escalation scenarios and possible offsetting forces – notably the growth impact of a sustained increase in defence and infrastructure spending.
Overall, these scenarios have consistently shown that the most salient risks – those that could push growth furthest from its current path – lie on the downside rather than the upside.
For example, ECB staff find that severe escalation in trade tensions could lower growth cumulatively by about 1 percentage point over the projection horizon.[8] The potential boost from higher defence spending would not be sufficient to offset this, even if all countries were to deliver fully on their NATO commitments.
This tilt in the risk balance remains in place today. But at our last meeting, we judged risks to growth to be more balanced, because the likelihood of major tariff-related downside risks materialising had fallen owing to the new trade deal.
Meanwhile, we judged inflation risks to be two-sided, with plausible scenarios that could push inflation off track in either direction. But as new information has come in, the range of risks on both sides has also narrowed.
In particular, the absence of significant EU retaliation has reduced the risk that higher import tariffs might drive inflation above the baseline. Our scenario analysis also points to inflation risks that remain well contained.
If trade tensions were to reignite, staff project only moderately lower inflation in 2027, reflecting weaker growth. Higher spending on defence equipment, by contrast, would only modestly raise inflation, given its relatively small weight in the consumption basket.
Staff have also examined scenarios that would affect prices more directly: on the downside, Chinese export prices being lowered further as a strategic response to tariffs; and on the upside, more pronounced bottlenecks in global supply chains.
In both cases, however, the impact would be limited under reasonable assumptions, with inflation in 2027 differing by only 0.1-0.2 percentage points.[9]
Policy implications
So what does this imply for our monetary policy?
I have said that we are in a good place. This was largely a reference to the fading of the large inflation shock we faced in recent years, which is now essentially over in the euro area.
But there are also three additional reasons why it applies to the current situation.
First, because trade shocks are not creating new inflationary pressures, we are not confronted with the classic policy trade-off where the central bank faces stalling growth and rising inflation.
This has already allowed us to cut policy rates by 100 basis points since December – cushioning the impact while keeping medium-term inflation on track.
Second, insofar as we can model the future, the risks to inflation appear quite contained in both directions.
Third, with policy rates now at 2%, we are well placed to respond if the risks to inflation shift, or if new shocks emerge that threaten our target.
At the same time, we are navigating a far more difficult environment than before – beset by war, tariffs and uncertainty – which we must also factor into our policy.
If we consider the “known knowns”, the risks appear well bounded.
But there are also “known unknowns” – above all, how euro area companies will adapt to this new setting. Firms are still running down inventories and absorbing the shock in margins, so the full effects of US tariffs have yet to become clear.[10]
Finally, there are the “unknown unknowns”: in a world of geoeconomics, new trade and geopolitical shocks will remain a constant feature of our environment.
How these forces play out will have unavoidable effects on monetary policy – not only through their impact on growth, but also on potential growth.
If firms interpret the new environment as a lasting confidence shock, we could see investment shift out of the euro area.[11] Preliminary staff analysis suggests that, all else being equal, tariffs are likely to weigh negatively on potential growth.
Lower potential growth would, in turn, put downward pressure on real rates and reduce the policy space available.
But other paths are possible if governments act decisively and give firms new reasons to be confident.
One factor often overlooked in the tariff debate is that our internal market is far more important for trade than the global market. Staff analysis shows that an increase of just 2% in intra-euro area trade would be enough to offset the loss of exports to the United States caused by higher tariffs.[12]
This is a compelling reason to implement the reforms identified in recent reports from Mario Draghi and Enrico Letta, in particular simplifying burdensome regulation, completing the Single Market and building a genuine European capital market.
The same reforms would also help European companies adopt artificial intelligence more rapidly.[13] This would result in a positive shock for potential growth, helping to balance the negative forces coming from abroad.
In short, nothing about our future is fate – and there is no room for complacency by any party.
For our part, we cannot pre-commit to any future rate path, whether one of action or inaction. We must remain agile, and ready to respond to the data as they come in.
Conclusion
Let me conclude. This is an unusual time to be a monetary policymaker. We can take comfort in having overcome a large inflation shock after the pandemic, and in how the economy has coped so far with an upheaval in trade relations. And yet, we must remain alert to the possibility that not all the consequences are visible today – and that new shocks may still lie ahead.
As we look to the future, we do so mindful of Finland’s long tradition of sisu – courage and inner strength in the face of uncertainty. Sisu is not a show of fleeting bravery, but rather a fierce determination and perseverance to continue fighting even when times get tough.
We are in a good place today, but that place is not fixed. Our task is to sustain it with agility, humility and a firm grounding in the data.

 
Compliments of the European Central Bank
 
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Analysis finds that the trade shock alone can explain between 4.7 and 5.9 percentage points of the loss in GDP. See Gulan, A. (2021), “Can large trade shocks cause crises? The case of the Finnish-Soviet trade collapse”, Blogs – Bank of Finland Bulletin, Bank of Finland, 5 May.
Gnocato, N. et al (2025), “Tariffs across the supply chain”, VoxEU Column, CEPR, 30 May.
Jouvanceau, V., Darracq Pariès, M., Dieppe, A. and Kockerols, T. (2025), “Trade wars and global spillovers. A quantitative assessment with ECB-global”, Working Paper Series, No 3117, ECB, Frankfurt am Main, September.
Deflated by consumer price inflation.
This estimate also includes wages, government consumption and transfers.
Government investment as a ratio to GDP is expected to be cumulatively almost 0.6 percentage points higher over the period from 2025 to 2027 than projected in December last year.
With South Korea, India, Australia, Malaysia, Thailand, Indonesia and the Philippines.
European Central Bank (2025), “Eurosystem staff macroeconomic projections for the euro area, June 2025”, Frankfurt am Main, June.
European Central Bank (2025), “Eurosystem staff macroeconomic projections for the euro area, September 2025”, Frankfurt am Main, September.
Organisation for Economic Cooperation and Development (2025), OECD Economic Outlook Interim Report September 2025: Finding the Right Balance in Uncertain Times, OECD Publishing, Paris, September.
European Central Bank (2025), “The outlook for euro area business investment – findings from an ECB survey of large firms”, Economic Bulletin, Issue 4.
The United States accounts for 10% of total euro area exports, and the new tariffs are expected to reduce euro area exports to the United States by approximately 9%, translating to a 0.9% decline in overall euro area exports – roughly €66 billion. Making up for this shortfall in direct trade would require a 2% increase in intra-euro area trade.
European Investment Bank (2025), Investment Report 2024/2025: Innovation, integration and simplification in Europe, March.

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