New category of company that falls between SMEs and large enterprises

EP proposes thresholds of 1,000 employees, €200M in turnover or €172M in total assets to define small mid-caps

New laws seek to boost the competitiveness of EU so-called small “mid-cap” (SMC) enterprises as they grown beyond SME status with targeted measures.

On Wednesday, three EP committees voted to endorse proposals introducing the concept of small mid-cap enterprises (SMCs) and extending to them various exemptions that so far have been available to small and medium enterprises (SMEs). The aim is to avoid cliff-edge situations where a company’s obligations drastically increase when they grow beyond the SME threshold.
MEPs want to see SMCs defined as companies with fewer than 1,000 employees; and either up to €200 million in turnover or up to €172 million in total assets (the Commission proposed 750 employees, €150 million in turnover and €129 million in total assets). At the same time, Parliament wants to ensure that support for SMEs is not diluted, that EU support follows a “think small first” principle, and that the thresholds are reviewed every five years.
Lighter record-keeping obligations for data protection purposes
Under the new law, current SME exemptions from record-keeping obligations under the General Data Protection Regulation (GDPR) would be extended to SMCs when processing data that is not considered high-risk for the subject’s rights. The exemption will not apply to processing sensitive data including biometrics and data on ethnic origin, political opinions, religion, health, or criminal convictions.
Better access to capital markets
The new definition of SMCs in the Markets in Financial Instruments Directive (MiFID) would reduce administrative burdens. It would allow these companies (SMCs) to access SME growth markets and benefit from simpler prospectus disclosure rules, in line with the updated Prospectus Regulation. This would make it easier for SCMs to raise money on capital markets.
An SME Growth Market is a special type of multilateral trading facility created to help small and medium-sized enterprises (SMEs) access public funding, with rules that are adapted to smaller companies.
Simplification measures for batteries and F-gases
Under the Batteries Regulation, SMEs are exempt from certain obligations on battery due diligence policies. To reduce the administrative burden, MEPs want the requirement for economic operators to review, update and make publicly available their due diligence policy to be extended to SMCs and apply every five years or more often if a significant change occurs (instead of every three years as in the Commission’s original proposal).
All importers and exporters of products and equipment containing F-gases are required to register in the F-gas Portal under the EU’s F-gases Regulation, making this burden disproportionate in particular for SMEs and SMCs. MEPs want this registration requirement to be limited to imports for which reporting requirements apply (10 tonnes of CO2 equivalent or more of hydrofluorocarbons or 100 tonnes of CO2 equivalent or more of other fluorinated greenhouse gases) and to exports for which an export limitation exists.
Support for critical infrastructure entities
The package also applies to legislation on the resilience of critical entities, where member states need to support SMC critical entities as they implement the obligations, and to trade defence instruments, access to which should be made easier for SMCs alongside SMEs.
You can read statements by the co-rapporteurs here.
Background
Introducing tailored measures to support SMCs was one of the recommendations of the Draghi report on EU competitiveness, and of the Letta report on the future of the single market.
The two acts voted today form part of the fourth Omnibus package on simplification proposed by the European Commission in May 2025.
Next steps
The economics and civil liberties committees adopted changes to MiFID and the resilience of critical entities directive with 98 in favour, 6 against, and 5 abstentions. Inter-institutional negotiations were authorised with 102 in favour, 6 against, and 1 abstention.
The same committees plus the environment committee adopted changes impacting the GDPR and rules on prospectuses, fluorinated gases, batteries and trade defence instruments with 158 in favour, 9 against, and 10 abstentions. Inter-institutional negotiations were authorised with 166 in favour, 9 against, and no abstentions.
Once the mandates have been endorsed by the EP plenary (planned for March), negotiations with the Council can begin.

 
 
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With a view to boosting EU competitiveness, the Council gave today its final green light to a simplification of the sustainability reporting and due diligence requirements for companies. This legislation simplifies the directives on corporate sustainability reporting (CSRD) and corporate sustainability due diligence (CS3D) by reducing the reporting burden and limiting the trickle-down effect of obligations on smaller companies.
The Omnibus I simplification package reduces complexity and unnecessary barriers, cuts red tape, enhances efficiency and introduces more flexibility for companies that remain subject to its scope with the aim to boost EU competitiveness, especially in a constantly changing geopolitical framework.
“Simplification constitutes a top priority for the Cyprus presidency. With today’s decision, we are delivering on our commitment for a European Union which is more competitive.  Through the package adopted, we are reducing unnecessary and disproportionate burdens on our businesses, with simpler, more targeted and more proportionate rules, both for our companies and our citizens. For a more autonomous Union, which also means a more competitive Union.” – Marilena Raouna, Deputy minister for European affairs of the Republic of Cyprus
Corporate sustainability reporting directive
The CSRD’s scope is narrowed by raising its thresholds to companies with more than 1,000 employees and above €450 million net annual turnover. Regarding third-country undertakings, the updated requirements will apply only to companies with a net turnover above €450 million for the parent undertaking within the EU and above €200 million generated turnover for the subsidiary or branch.
The amending directive also provides for a transition exemption for companies that had to start reporting from financial year 2024 (the so-called ‘wave one’ companies) falling out of scope for 2025 and 2026. It also includes an exemption for certain EU and non-EU financial holding companies from consolidated reporting.
Corporate sustainability due diligence directive
The CS3D’s scope is narrowed by raising its thresholds to companies with more than 5,000 employees and above €1.5 billion net turnover, considering that such large companies have the biggest influence on their value chain and are best equipped to make a positive impact and absorb the costs and burdens of due diligence processes.
On the identification and assessment of adverse impacts, companies can focus on the areas of their chains of activities where actual and potential adverse impacts are most likely to occur. To provide companies withflexibility, when a company has identified adverse impacts equally likely or equally severe in several areas, this company is given the ability to prioritise assessing adverse impacts which involve direct business partners. Companies are also supposed to base their efforts on reasonably available information, which will reduce the trickle-down effect of information requests on smaller business partners.
To provide for a significant burden relief, the obligation for companies to adopt a transition plan for climate change mitigation under the CS3D has been removed.
The updated rules also remove the EU harmonised liability regime and the requirement for member states to ensure that the liability rules are of overriding mandatory application in cases where the applicable law is not the national law of the member state.
When it comes to penalties, businesses will be liable at a national level for failure to apply the rules correctly. The new directive provides for a maximum cap of 3% of the company’s net worldwide turnover, with the Commission issuing the necessary guidelines in this regard.
Finally, the amending directive postpones the CS3D’s transposition deadline by member states into national law by another year, to 26 July 2028. Companies will have to comply with the new measures by July 2029.
Next steps
The text of the legislative act will be published in the EU’s official journal in the coming days and will come into force on the twentieth day after this publication.
Member states will have one year after the entry into force of the directive to transpose its provisions into national legislation except for article 4 on the level of harmonisation, with which they must comply by 26 July 2028 at the latest.
Background
In October 2024, the European Council called on all EU institutions, member states and stakeholders, as a matter of priority, to take work forward, notably in response to the challenges identified in the reports by Enrico Letta (‘Much more than a market’) and Mario Draghi (‘The future of European competitiveness’). The Budapest declaration of 8 November 2024 subsequently called for ‘launching a simplification revolution’, by ensuring a clear, simple and smart regulatory framework for businesses and drastically reducing administrative, regulatory and reporting burdens, in particular for SMEs. On 26 February 2025, as a follow-up to EU leaders’ call, the Commission put forward the so-called ‘Omnibus I’ package, aiming to simplify existing legislation in the field of sustainability.
 
 
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PROTECTING THE U.S. ECONOMY AND NATIONAL INTERESTS: Today, President Donald J. Trump signed a Proclamation imposing a temporary import duty to address fundamental international payments problems and continue the Administration’s work to rebalance our trade relationships to benefit American workers, farmers, and manufacturers.

President Trump is invoking his authority under section 122 of the Trade Act of 1974, which empowers the President to address certain fundamental international payment problems through surcharges and other special import restrictions.

By taking this action, the United States can stem the outflow of its dollars to foreign producers and incentivize the return of domestic production. By increasing its domestic production, the United States can correct its balance-of-payments deficit, while also creating good paying jobs, and lowering costs for consumers.

The Proclamation imposes, for a period of 150 days, a 10% ad valorem import duty on articles imported into the United States.

The temporary import duty will take effect February 24 at 12:01 a.m. eastern standard time.

Some goods will not be subject to the temporary import duty because of the needs of the U.S. economy or in order to ensure the duty more effectively addresses the fundamental international payments problems facing the United States, including:

certain critical minerals, metals used in currency and bullion, energy, and energy products;

natural resources and fertilizers that cannot be grown, mined, or otherwise produced in the United States or grown, mined, or otherwise produced in sufficient quantities to meet domestic demand;

certain agricultural products, including beef, tomatoes, and oranges;

pharmaceuticals and pharmaceutical ingredients;

certain electronics;

passenger vehicles, certain light trucks, certain medium and heavy-duty vehicles, buses, and certain parts of passenger vehicles, light trucks, heavy-duty vehicles, and buses;

certain aerospace products; and

informational materials (e.g., books), donations, and accompanied baggage.

In addition, the following goods will not be subject to the temporary import duty:

all articles and parts of articles that currently are or later become subject to section 232 actions;

USMCA compliant goods of Canada and Mexico; and

textiles and apparel articles that enter duty-free as a good of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, or Nicaragua under the Dominican Republic-Central America Free Trade Agreement.

In a separate Executive Order, President Trump also reaffirmed and continued the suspension of duty-free de minimis treatment for low-value shipments, including goods shipped through the international postal system, which will also be subject to the temporary import duty imposed under section 122.
In addition to today’s actions, the President has directed the Office of the United States Trade Representative to use its section 301 authority to investigate certain unreasonable and discriminatory acts, policies, and practices that burden or restrict U.S. commerce.

ADDRESSING FUNDAMENTAL INTERNATIONAL PAYMENT PROBLEMS: The United States faces fundamental international payment problems, in particular a large and serious balance-of-payments deficit.

As a result of its loss of domestic production, the United States must import much of what it consumes, sending U.S. dollars out of our own economy and overseas.
A measurement for the U.S. balance-of-payments is the current account, which tracks the three ways a country can make money: (1) selling goods and services overseas, or the “trade balance of goods and services”; (2) return on investment or labor, or the “balance on primary income”; and (3) voluntary transfers, like remittances, or the “balance on secondary income.”
The United States not only runs an overall current account deficit, but also a deficit in each component of the current account.

The annual U.S. goods trade deficit exploded by over 40% during the Biden Administration, reaching $1.2 trillion in 2024.

In 2024, for the first time in more than 60 years, the United States made less on the capital and labor it deployed abroad than foreigners made on the capital and labor they deployed in the United States.

At present, more money is transferred out of the United States through remittances than money is transferred in.

The situation is getting worse.

In 2024, the United States maintained a current account deficit of -4.0% of gross domestic product (GDP), almost double the current account deficit of approximately -2.0% that prevailed between 2013 and 2019, and larger than 2019 to 2024.

As a share of GDP, the 2024 current account deficit represented the biggest annual current account deficit since 2008.

Compounding these challenges is the decline in the U.S. net international investment position.

At the end of 2024, the U.S. net international investment position was $26 trillion, which was 89% of U.S. GDP. This means that if all of the obligations to foreigners that the United States has incurred were to come due today, and even if all of the foreign assets that the U.S. owns could be instantly deployed as payment, the United States would still end up needing to make payments equal to 89% of its annual economic output in order to meet its obligations. This represents the most negative net international investment position of any country on Earth.

If left unaddressed, these fundamental international payment problems can, among other things, endanger the ability of the United States to finance its spending, erode investor confidence in the economy, distress the financial markets, and endanger U.S. economic and national security.

CONTINUING TO UTILIZE TARIFFS TO PROTECT U.S. INTERESTS: Tariffs will continue to be a critical tool in President Trump’s toolbox for protecting American businesses and workers, reshoring domestic production, lowering costs, and raising wages.

The Supreme Court’s disappointing decision today will not deter the President’s effort to reshape the long-distorted global trading system that has undermined the economic and national security of our country, and contributed to fundamental international payment problems.
Since Day One, President Trump has challenged the assumption that the United States must tolerate the distorted and imbalanced global trading system.
The President’s trade policy brought the world to the negotiating table on our terms.

As a result of the President’s tariffs, major U.S. trading partners covering more than half of global GDP have agreed to historic trade and investment deals to open new markets for U.S. exports, promote manufacturing reshoring, and bring reciprocity and balance to our trade relations.

These deals are creating high-paying American jobs, boosting U.S. manufacturing and technological leadership, and will deliver massive returns for American workers and families for decades to come.

In particular, the United States will continue to honor its legally binding Agreements on Reciprocal Trade. The United States expects the same commitment from its trading partners. While the domestic legal authorities to impose future tariffs will change, the overall direction of travel for the United States—reshoring domestic production and expanding market access abroad through a combination of tariffs and deals—will not.

Today’s action will continue to protect the national interests of the United States by addressing the balance-of-payments deficit to further usher in America’s Golden Age.

 
 
 
 
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Bernd Lange, chair of Parliament’s International Trade Committee and standing rapporteur for the US, issued the following statement.

Following a meeting of the committee’s shadow rapporteurs (i.e. political group representatives), Bernd Lange (S&D, DE) said:
“The ruling by the Supreme Court of the United States of 20 February 2026 on the use of the International Emergency Economic Powers Act (IEEPA) is clear and unequivocal. Its implications cannot be ignored, and business as usual is not an option.
A key instrument used on the US side to negotiate and implement the Turnberry Deal is no longer available.
The situation is now more uncertain than ever. This runs counter to the stability and predictability we sought to achieve with the Turnberry Deal.
The proposed replacement for IEEPA, Section 122, applies indiscriminately to all countries exporting to the United States and is imposed on top of the Most Favoured Nation (MFN) rate. As a result, imports from the EU into the US would be subject to an applied rate exceeding the 15% threshold. This, in itself, constitutes a clear departure from the terms of the Turnberry Deal.
Shadow rapporteurs, representing a majority of Members, have agreed that under the current circumstances work on the two Turnberry files should be put on hold until clarity, stability and legal certainty in EU–US trade relations are re-established.
Consequently, the scheduled votes in committee tomorrow will not take place as planned and the shadow rapporteurs will reassess the situation next week.”

 
 
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The European Commission requests full clarity on the steps the United States intends to take following the recent Supreme Court ruling on the International Emergency Economic Powers Act (IEEPA).
The current situation is not conducive to delivering “fair, balanced, and mutually beneficial” transatlantic trade and investment, as agreed to by both sides and spelled out in the EU-U.S. Joint Statement of August 2025.
The Commission will always ensure that the interests of the European Union are fully protected. EU companies and exporters must have fair treatment, predictability, and legal certainty.
A deal is a deal. As the United States’ largest trading partner, the EU expects the U.S. to honour its commitments set out in the Joint Statement – just as the EU stands by its commitments.
In particular, EU products must continue to benefit from the most competitive treatment, with no increases in tariffs beyond the clear and all-inclusive ceiling previously agreed.
Tariffs are taxes, driving up costs for both consumers and businesses, as recent studies clearly confirm.
When applied unpredictably, tariffs are inherently disruptive, undermining confidence and stability across global markets and creating further uncertainty across international supply chains.
The Commission is in close and continuous contact with the U.S. Administration. On Saturday, 21 February, EU Trade Commissioner Maroš Šefčovič spoke with U.S. Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick.
We will continue to work towards lowering tariffs, as provided for in the Joint Statement. The EU’s priority is to preserve a stable, predictable transatlantic trading environment, while also acting as a global anchor for rules-based trade.
The EU continues to expand our network of comprehensive and ambitious “zero tariff” trade agreements worldwide, and efforts to strengthen the open, rules-based trading system.
 
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FEBRUARY 19, 2026

CB 26-31, BEA 26-09

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $70.3 billion in December, up $17.3 billion from $53.0 billion in November, revised.
December exports were $287.3 billion, $5.0 billion less than November exports. December imports were $357.6 billion, $12.3 billion more than November imports.
The December increase in the goods and services deficit reflected an increase in the goods deficit of $15.7 billion to $99.3 billion and a decrease in the services surplus of $1.6 billion to $29.0 billion.
For 2025, the goods and services deficit decreased $2.1 billion, or 0.2 percent, from 2024. Exports increased $199.8 billion or 6.2 percent. Imports increased $197.8 billion or 4.8 percent.
 
 
 
Compliments of the United States Census Bureau

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Global trade flows were reshaped in 2025 following the introduction of new US tariffs. US import growth weakened sharply, reflecting a strong decline in imports from China. Meanwhile, Chinese exports have surprised to the upside overall, with broad-based growth across destinations outside the United States. A key question is whether this resilience reflects trade diversion in response to the US tariffs, i.e. the reallocation of exports originally destined for one market towards alternative markets, or other adjustment mechanisms, such as rerouting through intermediary countries. However, it may still be too early to assess the full extent of tariff-induced trade redirection, as anticipatory behaviour, implementation lags at customs, shipping delays and other factors can all affect how long it takes for tariff changes to be reflected in observed trade flows. This box reviews developments in Chinese exports in 2025 and provides initial empirical evidence on whether US tariffs have triggered trade diversion.
Chinese export performance remained strong in 2025, although with marked divergence across destination markets. The value of Chinese exports grew by 5.5% in 2025, compared with 4.6% in 2024. While exports to the United States declined by 20%, export growth to all other regions remained robust, increasing by 8% for the euro area, 13% for countries in the Association of Southeast Asian Nations (ASEAN), 7% for Latin America, and 26% for Africa (Chart A, panel a). In value terms, China’s exports to the United States in 2025 were USD 104 billion lower than in 2024 (Chart A, panel b). This decline was broadly comparable with the increase in exports to ASEAN countries. Exports to the euro area rose more moderately, by about USD 32 billion, while exports to Africa expanded by USD 46 billion, a sizeable increase relative to the region’s GDP.

Chart A
China’s nominal exports

a) Annual growth rate
(annual percentage changes; percentage point contributions)

b) 2025 vis-à-vis 2024
(year-on-year changes in USD billions)

Sources: General Administration of Customs of the People’s Republic of China and ECB staff calculations.
Notes: The charts are based on nominal trade data measured in US dollars. The latest observation is for December 2025.

We assess whether US tariffs have led to trade diversion of Chinese exports by capturing variations in tariff exposure across products in a product-level panel model with fixed effects. We carry out a panel regression relating the year-on-year growth rate of Chinese exports at the product level to product-level tariff variation, while controlling for an extensive set of fixed effects that capture product-specific and destination-specific trends.[1] The model is estimated using data on global imports of Chinese products over the period January-September 2025.[2]
Although the US tariffs imposed on Chinese goods had a strong negative direct effect on China’s exports to the United States, evidence of broad-based trade diversion remains limited. Empirical analyses of the 2025 tariff episode are still scarce, and existing assessments rely on early evidence. Our model estimates suggest that the tariffs reduced US imports from China by around 9% (Chart B, panel a), while the observed year-on-year decline in the trade data reached approximately 17% over the first nine months of 2025.[3] This gap suggests that factors other than tariffs, such as heightened policy uncertainty, frontloading of imports ahead of tariff increases, weaker US demand or the slight appreciation of the renminbi against the US dollar, also contributed to the contraction in Chinese exports to the United States. At the same time, evidence of trade diversion effects to other markets is limited. A statistically significant positive effect is identified only for African and ASEAN countries, while the estimated impact on the euro area is modest and statistically insignificant. Disaggregating by product category, the negative effects of US tariffs are most pronounced for capital goods, followed by consumer goods and intermediate goods (Chart B, panel b). At this more granular level, some evidence of trade diversion emerges, particularly for consumer goods, where higher US tariffs on Chinese products are associated with increased exports to other markets.

Chart B
Impact of the 2025 US tariffs on Chinese exports

a) By destination
(percentage deviation between December 2024 and September 2025)

b) By category
(percentage deviation between December 2024 and September 2025)

Sources: Trade Data Monitor and ECB staff calculations.
Notes: The charts show the percentage changes of Chinese exports as a result of the 2025 US tariffs. The impact is calculated by applying the average tariff rate increase observed between the end of 2024 and September 2025, expressed in percentage point differences, to the estimated elasticity of exports with respect to tariffs. On average, US tariffs on Chinese exports rose by 37 percentage points over this period. The grey bars represent 95% confidence intervals around the estimated coefficients, while (*), (**) and (***) denote 10%, 5% and 1% significance levels respectively. The sample of estimation includes data on global imports of Chinese goods between January and September 2025. The latest observation is for September 2025.

The limited but significant Chinese trade diversion toward ASEAN countries following tariffs may reflect broader trade rerouting patterns. Trade rerouting occurs when exports are redirected through intermediary countries but ultimately reach the original destination market. Notably, Chinese exports to ASEAN countries have surged, particularly in intermediate goods used for further processing or assembly (Chart C, panel a). This trend aligns with the increase in US imports from ASEAN countries, which is the only region that contributed positively to US import growth in 2025 overall. Sectoral data also indicate a sharp rise in Chinese export volumes to ASEAN countries, accompanied by declining unit values for most sectors – a pattern consistent with a greater integration of lower-value intermediate inputs into regional production chains (Chart C, panel b). Taken together, these developments suggest that ASEAN-centred supply chains played a role in the adjustment, although the evidence remains preliminary.

Chart C
Chinese export developments, January-November 2024 to January-November 2025

a) By category
(changes in USD billions)

b) By trading partner and sector
(percentage changes)

Sources: Trade Data Monitor and ECB staff calculations.
Notes: Panel a) reflects the changes in total Chinese exports during the first 11 months of 2025 compared with the same period in 2024. Panel b) shows the changes in Chinese export volumes and export unit values (in US dollars) during the first 11 months of 2025 for each trading partner and each sector. The size of the bubbles is proportional to the average corresponding trade value during the same months from 2022 to 2024. The high-tech goods list is based on the European Commission’s definition. The latest observation is for November 2025.

Overall, trade diversion accounts for only a limited role in recent Chinese export dynamics, with other factors playing a more prominent role. While part of the decline in Chinese exports to the United States can be attributed to the new tariffs, thus far there is little evidence that these measures have led to substantial trade diversion towards other markets. Any tariff-related diversion appears modest and confined to a narrow set of products, indicating limited spillovers from US tariffs to third destinations. Instead, the recent strength of Chinese exports to other markets seems to have been driven by trends that predate the latest tariff measures, as evidenced by broad-based export growth across major regions. Several factors underpin these trends. Weak domestic demand has pushed Chinese firms to channel excess capacity abroad, supported by falling export prices, competitiveness gains reinforced by a weak currency, and state-led expansion of manufacturing capacity.[4] Deeper supply chain integration within Asia has also supported exports to regional partners.
References
Al-Haschimi, A., Dvořáková, N., Le Roux, J. and Spital, T. (2025), “China’s growing trade surplus: why exports are surging as imports stall”, Economic Bulletin, Issue 7, ECB.
Amiti, M., Redding, S. J. and Weinstein, D. E. (2019), “The Impact of the 2018 Tariffs on Prices and Welfare”, Journal of Economic Perspectives, Vol. 33, No 4, pp. 187-210.
Cigna, S., Meinen, P., Schulte, P. and Steinhoff, N. (2022), “The impact of US tariffs against China on US imports: Evidence for trade diversion?”, Economic Inquiry, Vol. 60, No 1, pp. 162-173.

We use product data based on the six-digit level of Harmonized System (HS) codes, and combine it with tariff assumptions at the same level of disaggregation. Products exempted from tariffs are retained in the sample.

We replicate the approach by taken Cigna et al. (2022), which builds on that of Amiti et al. (2019). Click here to see the equation that was used.

Trade tensions between the United States and China escalated sharply in early 2025. The United States imposed 10% tariff increases on all Chinese goods in February and March, followed by further hikes that culminated in a peak rate of 125% in April. Following bilateral agreements, tariffs were partially rolled back in May and October. The current effective tariff rate on US imports of Chinese goods stands at 34%.
For details on recent Chinese export developments, see Al-Haschimi et al. (2025).

 
Authors:
• Tajda Spital, Economist, ECB
• Julien Le Roux
 
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Stefano Scarpetta has been appointed as the next Chief Economist of the OECD. He will take up his duties on 1 April 2026.
Mr Scarpetta brings an outstanding international reputation as a leading economist, built over more than three decades of distinguished service. Since 2013, he has led the OECD Directorate for Employment, Labour and Social Affairs, where he oversaw landmark initiatives including the OECD Jobs Strategy and strengthened the Organisation’s capacity to assess the impact of major structural transformations — including demographic change, digitalisation and artificial intelligence — on labour markets and public services. He also served as sous-sherpa to the G7 and G20 on employment and social policy issues.
As Chief Economist, Mr Scarpetta will lead the OECD Economics Department in delivering rigorous, evidence-based analysis, international benchmarking and country-specific policy advice. The Department’s work supports policymakers in fostering sustainable economic growth, expanding employment opportunities and improving living standards across more than 100 countries worldwide.
“Over three decades at the OECD, Stefano has consistently demonstrated exceptional leadership, deep expertise in economic analysis and policy with a commitment to advancing the OECD’s mission and the collective interests of its members and partners,” OECD Secretary-General Mathias Cormann said.
Mr Scarpetta began his career at the OECD in 1991 and became a Senior Economist in the Economics Department in 1995. From 2002 to 2006, he served at the World Bank as labour market advisor and lead economist before returning to the OECD’s Economics Department in 2006. There, he led a division of the Department’s country studies branch before taking up successively senior positions in the Directorate he now leads.
An Italian national, Stefano holds a PhD in Economics from the École des Hautes Études en Sciences Sociales (EHESS), a Master of Science in Economics from the London School of Economics and Political Science and a Laurea Summa cum Laude from the University of Rome.

Working with over 100 countries, the OECD is a global policy forum that promotes policies to preserve individual liberty and improve the economic and social well-being of people around the world.

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Munich, 14 February 2026
It is a mark of how much our world has changed that a central banker speaks at the Munich Security Conference on supply chains.
A decade ago, this would have seemed like a category error. Today, everyone in this room recognises that trade is as much a security issue as an economic one.
Economic interdependence has deepened substantially in recent decades, creating intricate webs of cross-border trade flows. Where this was once seen as a source of stability, it is now a source of vulnerability: to global disruptions like the pandemic and to deliberate weaponisation of dependencies.
Eurosystem staff have mapped products that are hard to diversify and difficult to substitute – and we can stress test the implications of suddenly cutting off supply.
Our analysis suggests that a sudden 50% drop in supply from geopolitically distant suppliers would reduce manufacturing value added by 2-3% – with the impact concentrated in electrical equipment, chemicals and electronics.[1]
This shift matters profoundly for Europe. We are the most open of the major economies. Now we must make the transition to strategic autonomy.
But what does that actually mean?
We hear many terms – reshoring, friendshoring, coalitions of the willing – but they distill into three distinct strategies:

Independence: rebuilding supply chains at home in critical technologies and inputs to reduce dependence.
Indispensability: building strengths in critical “indispensable” areas of those supply chains.
Diversification: spreading supply chains across partners so that no single disruption can paralyse our economy.

Each strategy is legitimate. But they are not the same – and without clarity, they can work at cross purposes.
If we pursue independence in sectors where we are lagging far behind, we risk imposing costs that erode competitiveness downstream.
For example, pursuing full autonomy in chip making could produce what one study calls “hollow champions” – firms unable to compete globally, supplying substandard technology to industries that are themselves strategic.[2]
Yet relying solely on trade – even within alliances – also carries risks. Trusted partners do not always remain so.
In some critical sectors, we need to build domestic capacity, even when it is temporarily more expensive. In 2023, the US conducted 114 orbital launches. Europe conducted three.[3]
Broad-brush strategies will not work. They may create unnecessary costs or miss real chokepoints. We need a targeted approach: understanding our strengths and weaknesses at a granular level, and evaluating costs and benefits.[4]
What does this mean from the ECB’s perspective? Let me focus on one key initiative.
The ECB needs to be prepared for a more volatile environment. As industrial policy becomes more assertive, geopolitical tensions rise and supply chains are disrupted, financial market stress is likely to become more frequent.
We must avoid a situation where that stress triggers fire sales of euro-denominated securities in global funding markets, which could hamper the transmission of our monetary policy. And this means we have to give partners who want to transact in euros the confidence that euro liquidity will be available if they need it.
That is why, last week, the Governing Council decided to expand our EUREP facility – our standing facility that offers euro liquidity against high-quality collateral.
This expanded facility provides permanence: central banks outside the euro area can now rely on continuous access to liquidity in euros, not just temporary lines.
It extends scope: we move from a regional to a global perimeter. Any central bank that meets basic criteria can request access, with flexibility on usage.
And it ensures agility: access is granted by default unless there is a reason to restrict it, speeding up the provision of liquidity.
This facility also reinforces the role of the euro. The availability of a lender of last resort for central banks worldwide boosts confidence to invest, borrow and trade in euros, knowing that access will be there during market disruptions.
In a world where supply chain dependencies have become security vulnerabilities, Europe must be a source of stability – for ourselves and for our partners.
That, too, is part of European security. And that is how the ECB plays its part.

Attinasi, M.G. et al. (2024), “Navigating a fragmenting global trading system: insights for central banks”, Occasional Paper Series, No 365, ECB.
Institut Montaigne (2025), “Autonomy or Indispensability? Identifying the EU’s Semiconductor Lodestar“, Policy Paper, December.
European Space Agency (2024), Report on the Space Economy, December.
Attinasi et al. (2024), op. cit.

 
 
Compliments of the European Central Bank The post ECB | Opening remarks by Christine Lagarde, President of the ECB, at a roundtable discussion on “Chain Reaction: Navigating Geoeconomic Shifts and Dependencies” at the Munich Security Conference, Germany first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.