The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published the results of its fourth stress test exercise of Central Counterparties (CCPs). The results confirm the overall resilience of European Union (EU) CCPs, as well as third-country Tier 2 CCPs, to credit, concentration and operational risks under the tested scenarios and implemented framework. However, the stress test also identified areas where some CCPs may need to strengthen their risk management frameworks, or where further supervisory work should be prioritised, including on concentration and operational risks.
The report’s key findings are:

CCPs have sufficient buffers to withstand adverse market developments in combination with the default of the two clearing members with the largest exposures;
Gaps are identified between the necessary and available buffers for concentration risks for some CCPs, particularly in commodity derivatives markets;
CCPs remained overall resilient despite increased market volatility in the wake of Russia’s invasion of Ukraine;
For operational risk, differences in terms of risk sources, exposures and mitigation tools across CCPs are observed and need to be further assessed on an individual basis before issuing potential recommendations; and
Most of the analysed operational events stem from third-party services, whereas a number of critical third-party service providers have the potential to affect the critical functions of multiple CCPs in a correlated manner.

Klaus Löber, Chair of the CCP Supervisory Committee, said:
“ESMA’s fourth stress test found that the European clearing market is resilient and capable of withstanding severe stress scenarios, although certain areas need further strengthening. CCPs’ resilience was confirmed during the real-life market stress following Russia’s invasion of Ukraine.
“CCPs are of critical importance to the stability of the financial system and the failure of one CCP has the potential to cause serious systemic risk across the EU. Therefore, stress testing CCPs is a key supervisory tool to understand the clearing industry, identify issues relevant for financial stability and eventually mitigate systemic risk, contributing to ESMA’s mission.”
CCP stress test scenarios and outcomes
A total of 15 CCPs were covered by the exercise, including two UK CCPs qualifying as Tier 2 CCPs. The exercise assessed credit and concentration risk and included a new operational risk component that aimed to assess the resilience of CCPs to operational events and failures of third-party service providers.
Operational risk analysis
ESMA identified varying degrees of operational reliability for the CCPs included in the exercise and identified specific CCPs where further work should be conducted to understand the drivers of these differences, the root causes of the events, and the remediation actions taken.
ESMA also evaluated the exposure of CCPs to critical third-party service providers and the ability of CCPs to reduce risk through operational risk management tools. Through this process, ESMA identified differences across CCPs in their relative level of third-party risk as well as the critical third-party service providers with the highest systemic importance for the CCP sector. Further work is needed to analyse exposures to third-party service providers both at an individual CCP level, as well as system wide, to further strengthen operational resilience.
Credit Stress Test
Two default scenarios, combined with the common ESRB market stress scenario, were run on two different reference dates, 19 March (end of day) and 21 April 2021 (intraday snapshot).
For 19 March 2021, the impact due to concentration and specific wrong-way risk stemming from cleared positions was also included in the baseline scenario calculations. The first scenario concerned a Cover-2 default per CCP, where the default of two clearing member groups under common price shocks is assumed separately for each CCP. The second scenario was an All-CCPs Cover-2 default, involving a default of the same two groups for all CCPs in the system, designed to assess the resilience of CCPs collectively to the market stress scenario. ESMA did not detect any major systemic risk concerns under the tested credit scenarios.
Concentration Stress Test
The European-wide concentration analysis performed on 19 March 2021 shows that concentrated positions represent a significant risk for CCPs. For most asset classes, concentrated position risk is clustered in one or two CCPs. The analysis found that concentration risk is factored in explicitly in a majority of CCPs, through dedicated margin add-ons.
Concentration modelled for commodity derivatives and the equity segment (securities and derivatives) is significant, with around 7bn EUR of concentration risk calculated for each asset class. There is a large coverage gap between the system-wide estimated market impact and margin add-ons for commodity derivatives and to a lesser extent for equity products. The concentration risk for emission allowances stands at 2.5bn EUR and is not adequately covered per the ESMA methodology.
Russia’s invasion of Ukraine
During the time of finalisation of the exercise, Russia’s invasion of Ukraine led to extreme market movements for instruments across the commodities and energy markets. ESMA concludes that the ESRB scenario is overall of greater or comparable severity for most asset classes, but of a lesser severity for some products, especially for power and gas derivatives. ESMA, in coordination with national competent authorities, also closely monitored the financial impacts that the invasion has had on CCPs. Overall, ESMA notes that CCPs remained resilient during the crisis, despite the extreme prices and increased market volatility.
Next steps
As with previous exercises, the ESMA stress test exercise for CCPs was not aimed at assessing the compliance of the CCPs with regulatory requirements, nor at identifying any potential deficiency of the stress testing methodology of individual CCPs. However, in line with the EMIR mandate, where the assessments expose shortcomings in the resilience of one or more CCPs, ESMA will issue the necessary recommendations.
Compliments of the European Securities and Markets Authority.
The post ESMA stress test of Central Counterparties finds clearing system resilient first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Today marks a historic moment in digital regulation with the landslide vote by the European Parliament adopting the Digital Services Act (DSA) and Digital Markets Act (DMA) which I have been working on together with my teams from the very first day of my mandate.
These two Acts, agreed upon in record time, have resonated around the world as landmarks – with front-page media coverage in many countries and even high-level political acknowledgements including by a former US President.
The EU is the first jurisdiction in the world to set a comprehensive standard for regulating the digital space. 
We have created a common framework for digital services, which must be respected in the same way everywhere in a single market of 450 million consumers.
Europe is the first single digital market in the “free world”, with clear and predictable rules
Europe is the first single digital market in the so-called “free world”.
And in our European single market — which is also one of the largest democracies in the world, if not the largest — the DSA and the DMA will strengthen the rule of law and provide better protection for our citizens and provide new opportunities for our businesses in the digital space.
This means in concrete terms:

New strong obligations to tackle all forms of illegal content: counterfeit or dangerous products, incitement to violence, hate speech; as an intermediary, you might not be liable, but certainly you need to be responsible;
An innovative framework for the protection of fundamental rights and the fight against harmful content and disinformation;

More trust and protection for consumers in online marketplaces;
 More protection for social network users, especially children;
More opportunities for innovative businesses and a wider choice of innovative products and services;
A new framework for online advertising to limit the use of data and protect the most vulnerable users, especially children;
And finally, one point that I think is essential: opening up the “black box” of algorithms that are at the heart of platforms’ systems.

The DSA and DMA will allow us to have more transparency, more information and if that is not enough, to go directly to inspect the these “black boxes”  to find the information that the regulator needs to ensure the implementation and monitoring of platform obligations. Also vetted researchers will gain access to data to conduct research that will support our enforcement tasks.
Turning the page on “too big to care” platforms
Ten years ago, a page was turned on the so-called “too big to fail” banks.
Today, a new page is being turned, that of the “too big to care” platforms.
Russian disinformation, the revelations about the Capitol Hill attack, online harassment and hateful content… demonstrate the urgency of the DSA.
The difficulties experienced by SMEs, particularly against the abuses of gatekeepers, which undermines fair and free consumer and business choice, the race to conquer the Metaverse, etc., remind us of the urgency of the DMA.
In the future, very large platforms will have to perform an in-depth risk assessment and propose adequate measures to minimise these risks.
Gatekeeper platforms will have to finally adapt their technologies and business models to give more choice to consumers and stop creating obstacles to smaller innovative tech companies: no need to wait for a case by case decision, their obligations of interoperability, sideloading, no self-preferencing and more are by now clearly spelled out and will apply immediately. 
Enforcement is key
Introducing new obligations on platforms and rights for users would be pointless if they are not properly enforced.
The new harmonised rules will apply directly and uniformly anywhere in Europe. The Commission’s specialised teams will centrally supervise very large platforms and very large online search engines as well as gatekeepers, coupled with effective and dissuasive sanctions.
Each platform, big and small, will have to have a legal representative in Europe. So we will now know who to call if there is a problem. And each Member State will have a regulator with the necessary powers to enforce the rules. Orders sent by national public authorities will be more effective to tackle illegal content and get information about the wrongdoer, in particular cross-borders. We will also rely on a network of trusted flaggers, such as NGOs, hotlines or rightsholders, to ensure that platforms react to the flagged illegal content as a priority. Class actions against platforms breaking the rules will be made easier, and damaged consumers can be compensated.
New powers for the Commission to investigate and sanction platforms
For the first time, the European Commission will become the supervisor of “gatekeepers” and very large platforms and very large online search engines.
Under the DSA, the Commission will be able to apply supervisory fees on very large platforms and very large online search engines to cover the costs of these supervisory and enforcement tasks.  
Within the Commission, my teams will be responsible for designating these platforms, monitoring the application of the new rules and enforcing them – including new powers to investigate and sanction platforms.
Sanctions will be gradual and unprecedented in their scope. Fines will amount to up to 6% of the global turnover of the conglomerate for DSA violations.
And in the event of serious and repeated breaches, national courts can go as far as a ban on operating on European territory. These sanctions will be extremely clear.
Under the DMA, sanctions can go up to 10% of the global turnover and even beyond up to 20% that for repeated offenders, that may be also subject to the ultimate remedy of divestitures and structural separation when they systematically undermine their obligations.
The direct enforcement by the Commission of these internal market rules against private companies represents a historic and exciting new step for the Commission in particular.
But we are not starting from a blank sheet. I have had the pleasure to note in my everyday work with DG CONNECT (Directorate-General for Communications Networks, Content and Technology)that it has rightly earned its reputation for the quality of its policy work and its deep technical expertise, and can also build on its long-standing experience in enforcing internal market rules, for example through the so-called Article 7 procedures for electronic communications, working closely with National Regulatory Authorities.
A sneak peek at the future organisation implementing the DSA & DMA
Dedicated teams within DG CONNECT will be organised around thematic domains – including the societal aspects, the technical aspects, and the economic aspects.
To name a few examples: issues such as risk assessments and audits will be handled by the societal issues team.
The technical team will take responsibility for issues such as interoperability of messenger services or the use of non-fungible tokens for product tracing, or the development of standards supporting the new rules.
Finally, the economic team will cover DMA-related unfair trading practices, such as data access or so-called FRAND conditions; or ensuring respect to the DSA-related liability exemptions or“know-your-business customer” rules for marketplaces.
As platforms do not create challenges in only one (societal, technical, economic) level, but problems appear usually in combination, these three teams will work closely together, coordinated by a sort of “program office” that will also deal with international issues and litigation.
Building up specific expertise
It is also clear, we will need to increase our staffing levels and build up specific expertise, in particular in data science and algorithms.
We have started to gear the internal organisation to this new role, including by shifting existing resources, and we also expect to ramp up recruitment next year and in 2024 to staff the dedicated DG CONNECT team with over 100 full time staff, combining both DSA and DMA – the DMA together with DG Competition.
A share of this head count will be financed, for DSA-related tasks, through a fee, which I initiated, that the Commission will collect from very large online platforms and very large online search engines to cover the additional costs needed for their supervision.
A high-profile European Centre for Algorithmic Transparency
Some of the new tasks in the enforcement of the new rules require sophisticated competencies, too.
Most prominently, the DSA contains wide-ranging rules on algorithmic transparency and accountability for online platforms, and important data access obligations for the very large ones. In order to assist the enforcement of these new DSA rules DG CONNECT and the Joint Research Centre will establish a high-profile European Centre for Algorithmic Transparency.
This new Centre will attract world-class scientific talent in data science and algorithms that will complement and assist the enforcement teams.
The new DG CONNECT teams dedicated to the DSA/DMA implementation, together with DG Competition, the Commission Legal Service and the JRC, and in cooperation with enforcement authorities in Member States, will make a powerful new digital regulator that has technology baked into its DNA from the start.
There will be a before and an after to the DSA and DMA.
Many thought that regulation would take years, would be impossible, too complicated, the lobbying too strong…
Today’s vote shows that, when we work together, much can be done in the general interest of Europeans.
We are ready.
Compliments of the European Commission.
The post Sneak peek: how the EU Commission will enforce the DSA & DMA – Blog of Commissioner Thierry Breton first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

‘Countries have made substantial progress toward implementing capital markets regulatory reform, but important gaps remain and new challenges have raised the bar.’
Capital markets are like engines that help power the global economy: they perform best with regular tune-ups. In this spirit, the major regulatory overhaul following the global financial crisis was aimed at shoring up key segments, from over-the-counter derivatives to investment funds and market infrastructure, closing fault lines revealed by the crisis.
But now, even after historic enhancements in recent years, countries still need to keep pushing to lower risks and strengthen the tools to manage future crises, and ultimately to reduce fluctuations tied to economic cycles.
So, to better gauge progress on reforms to market regulation and what further gains are needed, our latest research surveys IMF financial sector assessment programs in several countries over the past seven years.

‘Financial-sector assessments are still uncovering shortcomings despite progress since the global financial crisis.’

These regular reviews tracked risks, vulnerabilities, and arrangements for market oversight and crisis management, with a focus on safety nets to manage any potential failures of major firms.
They also looked at the resilience of central counterparties, the entities that function as buyer to every seller and seller to every buyer to guarantee performance of open contracts, which have grown in prominence under derivatives-clearing reforms. The reviews also examined the vulnerability of asset managers like money market funds and bond funds, and whether trading venues beyond traditional exchanges are adequately regulated.
Making progress
One main reason we see a need for greater reform even after the significant progress seen in recent years is that it has been accompanied by rapid growth of financial services firms that don’t have banking licenses or take deposits, such as insurers, mutual funds, and exchanges.
Nonbank financial intermediation, as it’s known, has grown to represent almost half of the assets of the global financial system, thereby playing a much bigger role in the global economy . Regulators must better ensure that its vulnerabilities and business models don’t amplify future shocks to markets and financial stability. Applied to the asset management sector, a key priority is to broaden the range of liquidity management tools that are available to investment funds managers.
Another priority for regulators is to reinforce financial safety nets and crisis-management arrangements, while a third is to strengthen early warning capabilities, for example, through enhanced stress-testing tools and capacities.
Emerging issues
Issues like these are challenging on their own, but securities regulators can’t limit themselves to just implementing the capital markets reform agenda that followed the global financial crisis. Rather, their priorities must also evolve and broaden in-step with the financial systems they safeguard.
That’s especially true in capital markets, where cyber resilience, fintech, and climate change are key emerging issues. Trading venues are a focus for cybersecurity, as both supervisors and market participants aim to boost their technological and operational resilience to minimize potential market disruptions. And fintech’s promise also involves risks stemming from crypto assets and decentralized finance.
Regulators also must be vigilant amid the shift away from benchmarks like the London Interbank Offered Rate to new references for interest rate swaps and other key financial contracts. Finally, the impact of climate change will need to be appropriately reflected in financial statements, valuations, and issuer disclosures on which investors depend.
Appropriate perimeter
A key priority highlighted by this wide-ranging, future work program is ensuring the adequacy of the financial regulation perimeter so that it covers all the relevant actors, activities, and instruments.
Our financial-sector assessments are still uncovering important shortcomings despite all of progress that has been made since the global financial crisis began a decade and a half ago.
Some countries, for example, appear to have regulatory gaps for asset management firms. Also, policymakers need to consider more explicitly which derivatives to regulate as part of efforts to manage risks from commodity, climate, emissions, and other carbon-related instruments.
This array of challenges raises concern given the insufficient resources for supervisors even in some of the world’s largest and most sophisticated markets—a finding IMF financial sector assessments confirm. Post-crisis reforms implied a significant expansion of the regulatory perimeter and raised expectations of supervision needed to assess and mitigate risk, but securities regulators rarely saw a commensurate increase in resources.
Emerging challenges like new market technology and a broadening of the regulatory perimeter make it important for regulators to have a wider range of specialist expertise and to ensure that their supervisory techniques and technology keep pace. Strained resources in some jurisdictions are compounded by a lack of operational independence for authorities, which limits their ability to effectively supervise and respond to risks.
Therefore, we must keep prioritizing our push to make further progress on these key aspects of the institutional and regulatory framework underpinning capital markets.
Authors:

Tobias Adrian
Jay Surti

Compliments of the IMF.
The post IMF | Capital Markets Regulation Is Stronger, but Some Gaps Still Must be Closed first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The Commission has today adopted the 2022 Strategic Foresight Report – “Twinning the green and digital transitions in the new geopolitical context”. As we prepare to accelerate both transitions, the report identifies ten key areas of action with the objective of maximising synergies and consistency between our climate and digital ambitions. By doing so, the EU will strengthen its cross-sector resilience and open strategic autonomy, and be better prepared to face new global challenges between now and 2050.
Maroš Šefčovič, Vice-President for interinstitutional Relations and Foresight said: “To reach climate neutrality by 2050, we need to unleash the power of digitalisation. At the same time, sustainability must be at the heart of the digital transformation. That is why this Strategic Foresight Report takes a deeper look at how to best align our twin objectives, especially as they take on a significant security dimension due to the current geopolitical shifts. For instance, from 2040, recycling could be a major source of metals and minerals, inevitable for new technologies, if Europe fixes its shortcomings in the area of raw materials. Understanding this interplay between the twin transitions, while striving for open strategic autonomy, is the right way forward.”
The green and digital transitions are at the top of the Commission’s political agenda set out by President von der Leyen in 2019. In light of Russia’s aggression against Ukraine, Europe is accelerating its embrace of climate and digital global leadership, with eyes firmly on key challenges, from energy and food, to defence and cutting-edge technologies. From this perspective, the 2022 Strategic Foresight Report puts forward a future-oriented and holistic analysis of the interactions between the twin transitions, taking into account the role of new and emerging technologies as well as key geopolitical, social, economic and regulatory factors shaping their twinning – i.e. their capacity to reinforce each other.
Technologies essential for the twinning towards 2050
On one hand, digital technologies help the EU achieve climate neutrality, reduce pollution and restore biodiversity. On the other hand, their widespread use is increasing energy consumption, while also leading to more electronic waste and bigger environmental footprint.
Energy, transport, industry, construction, and agriculture – the five biggest greenhouse gas emitters in the EU – are key for a successful twinning of the green and digital transitions. Technologies will play a key role in reducing these sector’s carbon footprint. By 2030, most reductions in CO2 emissions will come from technologies available today. However, achieving climate neutrality and circularity by 2050 will be enabled by new technologies currently at the experimental, demonstration or prototype phase.
For example:

In the energy sector, novel sensors, satellite data and blockchain could help strengthen the EU’s energy security, by improving the forecasting of energy production and demand, by preventing weather-related disruptions or by facilitating cross-border exchanges.
In the transport sector, a new generation of batteries or digital technologies, like artificial intelligence and internet of things will enable major shifts towards sustainability and multimodal mobility across different modes of transport, even short–distance aviation.
Across industrial sectors, digital twins – a virtual counterpart of a physical object or process, using real-time data and machine learning, – could help improve design, production and maintenance.
In the construction sector, building information modelling could improve energy and water efficiency, affecting design choices and use of buildings.
Finally, in the agriculture sector, quantum computing, in combination with bioinformatics, can enhance understanding of the biological and chemical processes needed to reduce pesticides and fertilisers.

Geopolitical, social, economic and regulatory factors affecting the twinning
The current geopolitical instability confirms the need to not only accelerate the twin transitions but to also reduce our strategic dependencies. In the short-term, this will continue affecting energy and food prices, with the significant social fallout. In the medium- and long-term, for instance, sustainable access to raw materials critical for the twin transitions will remain of paramount importance, adding pressure to move to shorter and less vulnerable supply chains and to friend-shoring wherever possible.
The twinning will also require hinging the EU’s economic model on wellbeing, sustainability and circularity. The EU’s position in shaping global standards will play an important part, while social fairness and the skills agenda will be amongst the conditions for success, alongside the mobilisation of public and private investment. It is expected that almost €650 billion will be needed in additional future-proof investment annually until 2030.
Ten key areas of action
The report identifies areas where a policy response is needed to maximise opportunities and minimise potential risks stemming from the twinning:

Strengthening resilience and open strategic autonomy  in sectors critical for the twin transitions via, for instance, the work of the EU Observatory of Critical Technologies, or the Common Agricultural Policy in ensuring food security.
Stepping up green and digital diplomacy, by leveraging the EU’s regulatory and standardisation power, while promoting EU values and fostering partnerships.
Strategically managing supply of critical materials and commodities, by adopting a long-term systemic approach to avoid a new dependency trap.
Strengthening economic and social cohesion, by for instance, reinforcing social protection and the welfare state, with regional development strategies and investment also playing an important role.
Adapting education and training systems to match a rapidly transforming technological and socio-economic reality as well as supporting labour mobility across sectors.
Mobilising additional future-proof investment into new technologies and infrastructures – and particularly into R&I and synergies between human capital and tech –with cross-country projects key to pooling EU, national and private resources.
Developing monitoring frameworks for measuring wellbeing beyond GDP and assessing the enabling effects of digitalisation and its overall carbon, energy and environmental footprint.
Ensuring a future-proof regulatory framework for the Single Market, conducive to sustainable business models and consumer patterns, for instance, by constantly reducing administrative burdens, updating our state aid policy toolbox or by applying artificial intelligence to support policymaking and citizens’ engagement.
Stepping up a global approach to standard-setting and benefitting from the EU’s first mover advantage in competitive sustainability, centred around a ‘reduce, repair, reuse and recycle’ principle.
Promoting robust cybersecurity and secure data sharing framework to ensure, among other things, that critical entities can prevent, resists and recover from disruptions, and ultimately, to build trust in technologies linked to the twin transitions.

Next steps
The Commission will continue to advance its Strategic Foresight Agenda, while informing the Commission Work Programme initiatives for next year.
On 17-18 November 2022, the Commission will co-organise the annual European Strategy and Political Analysis System (ESPAS) conference to discuss the conclusions of the 2022 Strategic Foresight Report and prepare the ground for the 2023 edition.
Background
Strategic foresight supports the Commission on its forward-looking and ambitious path towards achieving President von der Leyen’s six headline ambitions. As of 2020, based on full foresight cycles, annual Strategic Foresight Reports are prepared to inform the Commission’s priorities defined in the annual State of the Union address, the Commission Work Programme and multi-annual programming.
This year’s report builds on the 2020 and 2021 Strategic Foresight Reports, which focused on resilience as a new compass for EU policymaking and on the EU’s open strategic autonomy, respectively.
The analysis presented in the 2022 Strategic Foresight Report was based on an expert-led, cross-sectoral foresight exercise conducted by the Joint Research Centre, complemented by broad consultations with Member States, and other EU institutions in the framework of the European Strategy and Policy Analysis System (ESPAS), as well as with citizens through a call for evidence published on Have Your Say. The results of the foresight exercise are presented in the Joint Research Centre’s Science for Policy report: ‘Towards a green and digital future. Key requirements for successful twin transitions in the European Union’.
Compliments of the European Commission.
The post 2022 Strategic Foresight Report: twinning the green and digital transitions in the new geopolitical context first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

We, the Leaders of the Group of Seven (G7), met in Elmau, Germany, on 26-28 June 2022, were joined by the Leaders of Argentina, India, Indonesia, Senegal and South Africa, as well as Ukraine.
At a time when the world is threatened by division and shocks, we, the G7, stand united. We underscore our resolve to, together with partners, jointly defend universal human rights and democratic values, the rules-based multilateral order, and the resilience of our democratic societies. In doing so, we will address the key challenges of our time:

We reemphasise our condemnation of Russia’s illegal and unjustifiable war of aggression against Ukraine. We will stand with Ukraine for as long as it takes, providing the needed financial, humanitarian, military, and diplomatic support in its courageous defence of its sovereignty and territorial integrity. We are ready to reach arrangements together with interested countries and institutions and Ukraine on sustained security commitments to help Ukraine defend itself and to secure its free and democratic future.
Our financial support in 2022 amounts to more than USD 2.8 billion in humanitarian aid, and we are ready to grant, or have pledged and provided USD 29.5 billion in budget aid. We are strongly committed to supporting Ukranian reconstruction through an international reconstruction conference and plan, drawn up and implemented by Ukraine in close coordination with international partners.
We will continue to impose severe and enduring costs on Russia to help bring an end to this war. Beyond its direct implications, Russia’s aggression is impeding the global recovery and dramatically worsening energy security and access to food globally. To this end, we remain steadfast in our commitment to our unprecedented coordination on sanctions for as long as necessary, acting in unison at every stage, and will reduce Russia’s revenues, including from gold.
We will help to stabilise and transform the global economy while tackling rising costs of living for our citizens. We will coordinate on our economic security, strengthen the resilience of supply chains and secure a level-playing field.
We will take immediate action to secure energy supply and reduce price surges driven by extraordinary market conditions, including by exploring additional measures such as price caps. We reaffirm our commitment to phase out our dependency on Russian energy, without compromising on our climate and environmental goals.
With our partners, we have made significant progress towards the target of USD 100 billion for the most vulnerable, building on the 2021 Special Drawing Rights allocation. To protect people from hunger and malnutrition, and in response to Russia’s weaponisation of grain, we will increase global food and nutrition security through the Global Alliance on Food Security. We will provide an additional USD 4.5 billion to this end, stand by our commitments to keep our food and agricultural markets open and step up efforts to help Ukraine produce and export.
We endorse the goals of an open and cooperative international Climate Club, and will work with partners towards establishing it by the end of 2022. To drive urgent, ambitious, and inclusive action to align ourselves with 1.5°C pathways and to accelerate implementation of the Paris Agreement, we commit to a highly decarbonised road sector by 2030, a fully or predominantly decarbonised power sector by 2035, and prioritising concrete and timely steps towards the goal of accelerating phase-out of domestic unabated coal power.
Through our Partnership for Global Infrastructure and Investment, we aim to mobilise USD 600 billion over the next five years to narrow the global investment gap. We will step up our cooperation globally, including through working towards new Just Energy Transition Partnerships with Indonesia, India, Senegal and Vietnam, building on our existing partnership with South Africa.
To overcome the current COVID-19 pandemic, we will build on our provision of over 1.175 billion vaccine doses since we last met. We will also prevent, prepare, and respond to future pandemics and health challenges including through the G7 Pact for Pandemic Readiness.
Guided by the conviction that democratic values make us stronger in tackling global challenges, we will cooperate with civil society and our partners beyond the G7 to strengthen the resilience of our societies, promote human rights online and offline, address disinformation, and achieve gender equality.

With these joint commitments and actions taken today, and by working together with partners, we will make progress towards an equitable world.
Full communiqué
Compliments of the European Council.
The post G7 Leaders’ Communiqué – Executive summary first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Millions of Americans look to Walmart as their go-to place to pick up essentials. According to a complaint filed by the FTC, among the people who have come to rely on Walmart for their day-to-day needs are fraudsters who have allegedly used the retail giant’s money transfer services to bilk consumers out of millions of dollars. The FTC lawsuit charges that Walmart’s practice of looking the other way in the face of massive fraud and illegal telemarketing transactions violates the law.
Whether it’s an IRS impersonation scam, a sweepstakes fraud, or one of those “Help, Grandma. I’ve been arrested!” rip-offs, the transfer of money is the lifeblood of con artists – and they depend on a seamless way to convert their cons into cold cash. According to the FTC, that’s where Walmart’s money transfer services come in.
In addition to its retail business, Walmart runs a thriving operation as a financial services provider. Walmart acts as an agent for multiple money transfer services, including MoneyGram, Ria and Western Union, and offers services under its Walmart2Walmart and Walmart2World brands.
There is a good reason why money transfers are a pet payment method for fraudsters. Once a transfer has been picked up, the transaction is almost impossible to reverse. The criminal is often home free while the consumer is left high and dry. The FTC has been sounding the alarm about the role that money transfer operators play in the flimflam ecosystem, resulting in law enforcement actions against MoneyGram and Western Union for their failure to protect consumers who used their services.
You’ll want to read the complaint for details about the FTC’s allegations against Walmart, but it boils down to this. According to the FTC, Walmart turned a blind eye to massive amounts of fraud perpetrated through its money transfer operations. What was in it for Walmart? First, financial services drive retail sales, but Walmart also makes millions of dollars in fees from fraudulent transactions run through its financial services.
The FTC alleges that for years it was Walmart’s policy to issue payouts even in the case of suspicious money transfers. The upshot: Scammers had to go no further than their neighborhood Walmart to pick up the proceeds of their crimes. What’s more, the complaint charges that Walmart’s failure to have a policy in place to spot fraudulent transfers – and when the company finally put a policy in place, its failure to follow its own procedures – greased the wheels for scammers. Other allegedly illegal practices the FTC cited in its complaint: Walmart’s failure to effectively train its staff, and Walmart’s failure to adequately warn its money transfer customers of the risk of fraud.
The FTC also alleges that despite an express provision in the Telemarketing Sales Rule that prohibits money transfers from being used to pay for telemarketing purchases, Walmart has failed to take steps necessary to comply with that ban.
Filed in federal court, the lawsuit seeks – among other things – money back for defrauded consumers, civil penalties, and top-to-bottom changes in how Walmart runs its money transfer operations. Even at this early stage, the message to other companies is that it’s bad business to turn a blind eye in the face of fraud.
Do you know someone who has lost money to a transfer scam? The FTC has resources to help them spot the tell-tale signs of a rip-off.
Compliments of the Federal Trade Commission.
The post FTC alleges fraudsters used Walmart’s money transfer services to bilk consumers – while Walmart looked the other way first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

A renewed focus on structural reforms would help drive stronger growth and sustain living standards in Estonia as rising inflation, exacerbated by Russia’s war of aggression against Ukraine has harmed its economic recovery and risks undermining its efforts to reduce poverty.
The latest OECD Economic Survey of Estonia sets out that double-digit inflation and labour shortages are slowing the pace of Estonia’s initially robust rebound from the COVID-19 crisis. Headline inflation stood at 20% year-on-year in May, with core inflation at 9%. Policy measures to better target social transfers to the most vulnerable, making use of Estonia’s highly advanced digital capacity, would help achieve the government’s important objective to reduce relative poverty from 21% in 2020 to 15% by 2023.
“Estonia’s economy rebounded strongly last year, after weathering the pandemic better than peer countries. Now, the economic impact of Russia’s war against Ukraine is hurting growth, fanning inflation and heightening poverty challenges. This makes structural reforms to reduce labour shortages, protecting labour market flexibility and addressing skills mismatches even more important and more pressing,” OECD Secretary-General Mathias Cormann said.
Estonia has made remarkable economic progress since independence, tripling per capita income over 30 years and steadily narrowing the income gap with advanced economies. Estonia enjoys solid institutions, strong public finances, high educational outcomes, a flexible job market, business-friendly regulations and world-class digital governance and innovation. At the same time, Estonia’s cost competitiveness was decreasing even before the pandemic and could fall further if labour market shortages cause wages to grow faster than productivity.
The Survey projects Estonia’s GDP growth at 1.3% in 2022 and 1.8% in 2023 after growth of 8.2% in 2021, as high inflation weighs on household purchasing power. Savings accumulated by consumers during the pandemic and the absorption of EU recovery funds will help support economic activity.
As well as making social transfers more effective and better targeted, the Survey recommends reducing employee social security contributions for low-wage earners, notably for young workers, to ease pressure on incomes. The survey also calls for additional action to reduce the gender pay gap, which remains significant despite impressive progress in recent years. This would help support vulnerable women such as single mothers, as well as raise work incentives for women.
Tax reforms could help Estonia to prepare for future challenges such as population ageing, which will increase health and pension spending. They would also help in addressing climate change, where carbon emission reductions and climate adaptation will require public investment. One option to increase tax revenues is to review the taxation of dividends, which is among the lowest in the OECD. Another option is to look at whether the review of land valuation under way in Estonia is an opportunity to also evaluate the stock of housing and business properties and potentially expand the property tax base beyond land.
See a Survey Overview with key findings and charts (this link can be used in media articles).
Contact:

For further information, journalists are invited to contact Catherine Bremer (catherine.bremer@oecd.org) in the OECD Media Office (news.contact@oecd.org)

Compliments of the OECD.
The post OECD | Estonia: focus on structural reforms will underpin and boost recovery first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Watch the live webcast of the press conference
Russia’s invasion of Ukraine immediately slowed the recovery from the COVID-19 pandemic and set the global economy on a course of lower growth and rising inflation.
The OECD’s latest Economic Outlook projects global growth to decelerate sharply to around 3% this year and 2.8% in 2023, well below the recovery projected in the previous Economic Outlook last December.
The economic and social impact of the war is strongest in Europe, with many of the countries hardest hit in Europe, given exposure through energy imports and refugee flows.
High inflation is eroding household incomes and spending, hitting vulnerable households particularly hard. The risk of a serious food crisis remains acute for the world’s poorest economies because of the high risk of supply shortages and elevated costs.

Further increases in food and energy prices and persisting supply-chain bottlenecks are key factors causing consumer price inflation to peak at higher levels and remaining high for longer than previously projected. In some advanced economies, inflation is now expected to reach levels not seen since the 1970s. Cost pressures should start to ease with the impact of rising interest rates beginning to be felt through 2023. However, core inflation is still projected to remain at or above central bank target ranges in many major economies.
“Countries worldwide are being hit by higher commodity prices, which add to inflationary pressures and curb real incomes and spending, dampening the recovery,” OECD Secretary-General Mathias Cormann said during the presentation of the Outlook. “This slowdown is directly attributable to Russia’s unprovoked and unjustifiable war of aggression, which is causing lower real incomes, lower growth and fewer job opportunities worldwide.”
Uncertainty around the outlook is high, marked by prominent downside risks. We don’t know how much longer Russia’s war against Ukraine will last and how much worse it may get.
Many low-income and emerging‑market economies will be challenged even more by rising food and energy prices, slower demand growth in their export markets, and the potential for capital outflows as interest rates rise in the advanced countries.
Furthermore, the pandemic is not over – more aggressive or contagious variants may emerge, and zero‑Covid policies in China may continue to disrupt supply chains.
“The Outlook is sobering, and the world is already paying the price for Russia’s aggression,” said Chief Economist Laurence Boone said. “The choices made by policymakers and citizens will be crucial to determining how high that price will be and how the burden will be shared. Famine is not a price the world should pay.”
Greater international cooperation is essential to help avoid a food crisis. Curbing export restrictions, which drive up global prices, boosting efforts to transport commodities out of Ukraine and targeted direct aid would help countries hit by the current disruptions.
Protecting low-income households from the costs of the war must be an urgent priority for governments. However, the best policy option to provide such support to cushion the impact of higher prices is through temporary, well-targeted, means-tested fiscal measures.
In most economies with healthy growth and employment, the level of inflation no longer warrants an accommodative monetary policy stance. The more widespread and entrenched inflation has become, the faster the removal should be. Further policy rate increases will likely be needed in many emerging-market economies, to help anchor inflation expectations and avoid destabilising capital outflows.
The war has again underscored the importance of energy security. Accelerating the green energy transition would both improve energy security and help lower carbon emissions. Regulatory and fiscal incentives can stimulate movement towards alternative energy sources, but large-scale renewable energy investments will require copper, rare earths and other materials that are concentrated in a few countries. Open international trade is therefore essential to achieve the transition and energy security.
Contact:

For the full report and more information, visit the Economic Outlook online. Media queries should be directed to the OECD Media Office: news.contact@oecd.org

Compliments of the OECD.
The post OECD Economic Outlook reveals heavy global price of Russia’s war against Ukraine first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The euro area is facing a complex mix of shocks which are reducing growth and pushing up inflation, says President Christine Lagarde. In this environment, it is imperative for policymakers, within their respective mandates, to address the risks to the economic outlook.
Speech by Christine Lagarde, President of the ECB, at the ECB Forum on Central Banking 2022 on “Challenges for monetary policy in a rapidly changing world” in Sintra, Portugal | Sintra, 28 June 2022 |

Inflation in the euro area is undesirably high and it is projected to stay that way for some time to come. This is a great challenge for our monetary policy.
In response to the changing inflation outlook, we have consistently followed the path of policy normalisation since December last year, sequentially adjusting our policy stance.
Net asset purchases under our various programmes will come to an end this week. In July we intend to raise our policy rates for the first time in 11 years. And we have provided some guidance for our September policy meeting and the rate path we envisage taking thereafter.
We will continue along this normalisation path – and we will go as far as necessary to ensure that inflation stabilises at our 2% target over the medium term.
As Victor Hugo is said to have remarked, perseverance is the “secret of all triumphs”.
At the same time, the euro area differs from some other major economies for two key reasons and the path of normalisation has to be managed accordingly.
First, inflation in the euro area today is being driven by a complex mix of factors that reflect, in part, our economic structures and strategic dependencies. This creates uncertainty about how quickly inflation will return to our medium-term target.
In this setting, we need to act in a determined and sustained manner, incorporating our principles of gradualism and optionality. This means moving gradually if there is uncertainty about the outlook, but with the option to act decisively on any deterioration in medium-term inflation, especially if there are signs of a de-anchoring of inflation expectations.
Second, the euro area has a unique institutional set-up, built around 19 not yet fully integrated national financial markets and 19 national fiscal policies, with limited coordination. This presents the risk of our monetary policy stance being unevenly transmitted across the union.
And this is why we have emphasised all along that flexibility is integral to the process of normalising our monetary policy. It is essential to allow us to deliver the necessary policy stance and protect price stability in an environment where inflation is too high.
Today, I would like to outline how a combination of shocks is currently hitting the euro area economy; how our monetary policy stance should react to the challenges these shocks create; and how we can preserve the transmission of this stance throughout the euro area.
The shocks hitting the euro area economy
Broadly speaking, inflation in the euro area is being driven by two different types of shock.
First, the original source of inflation is an extraordinary series of external shocks.
Global supply chain disruptions coupled with surging global demand have pushed up prices sharply for industrial goods along the pricing chain.[1] Mismatches between supply and demand in global energy markets have led to rising energy prices for the euro area. And the Russia-Ukraine war has amplified both of these factors while also driving up global food prices.
Given its energy dependence, the euro area is experiencing these shocks acutely.[2] The current levels of food and industrial goods inflation have not been seen since the mid-1980s.[3] And the increase in the relative price of energy in recent months is much higher than the individual spikes that occurred in the 1970s.
Together, energy, food and industrial goods account for around 80% of the overall inflation rate seen since the start of this year.
The second factor driving up inflation – and one which has intensified in recent months – is the recovery in internal demand as the economy has reopened after the pandemic.
Spending is rotating from goods back to services as restrictions are being lifted, while pent-up demand for tourism and leisure activities is proving unexpectedly strong. This rebound in spending has seen services inflation rise to 3.5% in May – the highest rate since the mid-1990s – with the highest price increases in contact-intensive sectors.
These shocks, in particular the surge in energy prices, are driving up short-term inflation to very high levels. They are also leading to significant upward revisions to our medium-term inflation forecasts. The June Eurosystem staff projections saw inflation above 2% for the whole projection horizon, converging back to slightly above our medium-term target in 2024.
The persistence of inflation
But the size and complexity of these shocks are also creating uncertainty about how persistent this inflation is likely to be.
We are not facing a straightforward situation of generalised excess demand or economic overheating, in which case the trajectory of medium-term inflation would have been clearer. Despite the bounceback in services, private consumption in the euro area is still more than 2% below its pre-pandemic level. And investment remains subdued.
Although there have been some signs of above-target revisions in recent months, longer-term inflation expectations currently stand at around 2% across a range of measures. This supports our baseline projection for inflation to converge back towards our medium-term inflation target.
At the same time, inflation pressures are intensifying and broadening through the domestic economy. Almost four-fifths of items in the consumption basket had annual price increases above 2% in April, and this is not only a reflection of high import prices. A new ECB indicator of domestic inflation – which removes items with a high import content – currently stands above 3%.[4]
In this environment, it is important to understand how persistent domestic price pressures are likely to become. There are several factors worth considering here.
First, inflation is starting to take root in the services sector, which is the “stickiest” component of inflation and has a higher weight than goods.[5]
Second, unemployment in the euro area is at a record low[6], labour shortages are broad-based across sectors and indicators of labour demand remain strong. This tightening of the labour market, together with the catch-up effect triggered by the high inflation environment, suggests that wage growth will pick up. Our latest forecasts see wage growth[7] above 4% in 2022 and 2023 and at 3.7% in 2024 – almost double the historical average before the pandemic.
Third, these factors combined have led us to project core inflation at 2.3% in 2024 – and, in the euro area, core inflation tends to be an indicator of headline inflation over the medium term.
We are also seeing signs that the supply shocks hitting the economy could linger for longer. While it is reasonable to assume that global supply chain disruptions will gradually be resolved, the outlook for energy and commodities remains clouded.
There is not yet an end in sight to the Russia-Ukraine war, and we still face the risk of cuts to supply that could keep energy prices high. That could contribute to inflation directly – if it leads to further rises in energy costs – or indirectly, if a higher level of energy prices makes some production uneconomic and leads to a durable loss of economic capacity.
The war is also likely to accelerate Europe’s green transition as a way to enhance our energy security. In the long term, this should lead to lower energy costs in Europe. But in the meantime, it could lead to price increases for rare minerals and metals,[8] higher costs for the investment needed in clean technologies, and an expansion of carbon-pricing schemes.[9]
Uncertainty about growth
That said, these shocks also have implications for growth and, as such, they can weigh on the medium-term inflation outlook. So what are we seeing in this regard?
The external supply shocks hitting the euro area are affecting spending. Rising import prices represent a terms of trade “tax” which reduces the total income of the economy.
Households are seeing their real income being squeezed. Real wage growth has been negative for two consecutive quarters. And consumer surveys suggest that households are expecting their real income and consumption to decline further over the next year.
Firms are trying to protect their margins by raising prices, but this uncertain environment is also leading them to delay investment decisions. And sales growth now appears to be decelerating. The latest Purchasing Managers’ Indices point to no further growth in new business, and business expectations in a year’s time have reached their lowest level since October 2020.
At the same time, spending is being supported by the boost to demand from the full reopening of the services sector. And consumption is being buffered by the large stock of household savings built up during the pandemic, fiscal support measures and the continued strength of the labour market, which is helping to sustain labour income overall.
But if supply shocks drag on and inflation continues to exceed wage growth by a wide margin, losses in real income could intensify and the excess savings buffer could be eroded. The resulting hit to demand could test the resilience of the labour market and possibly temper the expected rise in labour income.
In this setting, we have markedly revised down our forecasts for growth in the next two years. But we are still expecting positive growth rates due to the domestic buffers against the loss of growth momentum.
The path ahead for rate normalisation
Based on the overall outlook, the process of normalising our monetary policy will continue in a determined and sustained manner. But given the uncertainty we still face, the pace of interest rate normalisation cannot be defined ex ante.
As I laid out in a recent blog post[10], the appropriate monetary policy stance has to incorporate our principles of gradualism and optionality.
Gradualism allows policymakers to assess the impact of their moves on the inflation outlook as they go, which can be a prudent strategy in times of uncertainty. Optionality ensures that policy can react nimbly to the incoming data on the economy and inflation expectations and, if uncertainty decreases, re-optimise the policy path as necessary. Indeed, there are clearly conditions in which gradualism would not be appropriate. If, for example, we were to see higher inflation threatening to de-anchor inflation expectations, or signs of a more permanent loss of economic potential that limits resource availability, we would need to withdraw accommodation more promptly to stamp out the risk of a self-fulfilling spiral.
These two elements of the monetary policy stance underlie the Governing Council’s decisions at our meeting on 9 June.
Consistent with moving gradually, we announced that we will end net asset purchases under our asset purchase programme on 1 July and intend to raise our three key interest rates by 25 basis points at our next meeting on 21 July.
But we also announced that we expect to raise the key interest rates again in September, and “if the medium-term inflation outlook persists or deteriorates, a larger increment will be appropriate at the September meeting.”
This reflects the optionality principle. If the inflation outlook does not improve, we will have sufficient information to move faster. This commitment is, however, data dependent.
This conditional approach to the pace of interest rate adjustment should not be confused with delaying normalisation. As our policy stance rests on a clear reaction function, interest-rate expectations and risk-free rates can adjust in advance.
Our policy adjustment is already working its way through the euro area economy. The €STR forward rate ten years out is around 240 basis points above its pre-pandemic level, without policy rates having yet moved. One-year forward real rates, one-year ahead and five-year forward real rates, five-years ahead are around 100 and 140 basis points higher, respectively.
Beyond September, the Governing Council has agreed that a “gradual but sustained” path of further rate increases will be appropriate. The starting point at each meeting will be an assessment of the evolution of the shocks, their implications for the outlook and the degree of confidence we have in inflation converging to our medium-term target.
Transmitting the policy stance
For these changes in our monetary policy stance to be effective, we need to preserve the orderly transmission of our stance throughout the euro area.
The ECB is conducting monetary policy in an incomplete monetary union, in which its policy has to be transmitted through 19 different financial and sovereign bond markets. The yields on those sovereign bonds provide the benchmark for pricing all other private sector assets in the 19 Member States – and ultimately also for ensuring that our monetary policy impulse reaches individual firms and households.
If spreads in some countries respond in a rapid and disorderly way to an underlying change in risk-free rates, over and above what would be justified by economic fundamentals, our capacity to deliver a single monetary policy is impeded. In this situation, a change in the policy stance can be followed by an asymmetric response of financing conditions, regardless of the credit risk of individual borrowers.
In such conditions – when we have what we describe as unwarranted fragmentation – preserving policy transmission is a precondition for returning inflation to our target.
The normalisation of our monetary policy will naturally lead to rising risk-free rates and sovereign yields. And, as euro area sovereigns are starting from different fiscal positions, it can also lead to a rise in spreads.
But in order to preserve the orderly transmission of our policy stance throughout the euro area, we need to ensure that this repricing is not exacerbated and distorted by destabilising market dynamics, leading to a fragmentation of our original policy impulse. That risk of fragmentation is also affected by the pandemic, which has left lasting vulnerabilities in the euro area economy. These vulnerabilities are now contributing to the uneven transmission of the normalisation of our policy across jurisdictions.
The Governing Council is therefore acting in two ways.
First, we will use flexibility in reinvesting redemptions coming due under the pandemic emergency purchase programme (PEPP) to preserve the functioning of the monetary policy transmission mechanism. In other words, those redemptions can, as appropriate, be invested within the Eurosystem in bond markets of jurisdictions where orderly transmission is at risk. We have decided to apply this flexibility in reinvesting redemptions coming due in the PEPP portfolio as of 1 July.
Second, we have decided to mandate the relevant Eurosystem committees, together with the ECB services, to accelerate the completion of the design of a new instrument for consideration by the Governing Council. The new instrument will have to be effective, while being proportionate and containing sufficient safeguards to preserve the impetus of Member States towards a sound fiscal policy.
This decision lies squarely within the ECB’s tradition. In the past, the ECB has made use of separate instruments to target inflation and to preserve the functioning of the monetary policy transmission mechanism. Measures to preserve transmission could be used at any level of interest rates – so long as they were designed not to interfere with the monetary policy stance.
At times when inflation fell too low, it made sense to shift from “separation” to “combination” so that all tools reinforced the required policy easing. That is why, for example, we linked asset purchases tightly to forward guidance on rates. But with high inflation now being the main challenge, there are merits in separating policy tools again.
Preserving policy transmission throughout the euro area will allow rates to rise as far as necessary. In this sense, there is no trade-off between launching this new tool and adopting the necessary policy stance to stabilise inflation at our target. In fact, one enables the other.
Conclusion
Let me conclude.
The euro area is facing a complex mix of shocks which are reducing growth and pushing up inflation. In this environment, it is imperative for policymakers, within their respective mandates, to address the risks to the economic outlook.
Fiscal policymakers have to play their part in reducing these risks by providing targeted and temporary support while, over the medium term, following a rules-based framework that underpins both debt sustainability and macroeconomic stabilisation.
We are unwavering in our commitment to ensure that inflation returns to 2% over the medium term. We have designed a strategy to normalise our policy that allows us to respond nimbly to the high inflation environment.
And we will ensure that the orderly transmission of our policy stance throughout the euro area is preserved. As Leonardo da Vinci said, “every obstacle yields to stern resolve”. We will address every obstacle that may pose a threat to our price stability mandate.
Compliments of the European Central Bank.

Kalemli-Özcan, S., di Giovanni, J., Silva, A., Yıldırım, M. (2022), “Global supply chain pressures, international trade and inflation”, paper presented at the ECB Forum on Central Banking, Sintra, 27-29 June 2022.

Bjørnland, H. (2022), “The effect of rising energy prices amid geopolitical developments and supply disruptions”, paper presented at the ECB Forum on Central Banking, Sintra, 27-29 June 2022.

Based on historical Consumer Price Index data series for euro area countries.

Fröhling, A., O’Brien, D. and Schaefer, S. (2022), “A new indicator of domestic inflation for the euro area”, Economic Bulletin, Issue 4, ECB.

For the increasing importance of services in the Harmonised Index of Consumer Prices, see Baldwin, R. (2022), “Globotics and macroeconomics: Globalisation and automation of the service sector”, paper presented at the ECB Forum on Central Banking, Sintra, 27-29 June 2022.

However, 1.1% of workers are still enrolled in job retention schemes.

Compensation per employee.

International Energy Agency (2022), “The Role of Critical Minerals in Clean Energy Transitions”, revised versin, March.

Kuik, F., Morris, R. and Sun, Y. (2022), “The impact of climate change on activity and prices – insights from a survey of leading firms”, Economic Bulletin, Issue 4, ECB; Bua, G., Kapp, D., Kuik, F. and Lis, E. (2021), “EU emissions allowance prices in the context of the ECB’s climate change action plan”, Economic Bulletin, Issue 6, ECB.

Lagarde, C. (2022), “Monetary policy normalisation in the euro area”, The ECB Blog, 23 May.

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On 23-24 June 2022, the European Council adopted conclusions on Wider Europe, Ukraine, the membership applications from Ukraine, the Republic of Moldova and Georgia, Western Balkans, economic issues, Conference on the Future of Europe and external relations.

European Council conclusions, 23-24 June 2022
Remarks by President Charles Michel following the second session of the European Council, 24 June 2022

Ahead of the European Council meeting, EU and Western Balkan leaders met in the morning of 23 June 2022 in Brussels.

EU-Western Balkans leaders’ meeting, 23 June 2022

Main results
Wider Europe
The European Council held a strategic discussion on ‘Wider Europe’, concerning the EU’s relations with its partners in Europe. In this context, EU leaders also discussed a proposal to launch a European political community.
The discussion was guided by the questions ‘what, who and how?’. The aim of ‘Wider Europe’ is to offer a platform for political coordination to countries in Europe with which the EU has close relations. This will help foster cooperation and address issues of common interest to strengthen security, stability and prosperity in Europe.
Such a framework would not replace existing EU policies and instruments, including EU enlargement, and will fully respect the EU’s decision-making autonomy.
EU leaders will return to this issue.
Russia’s aggression against Ukraine
The European Council reiterated that it stands firmly with Ukraine and that the EU will continue to provide strong support for Ukraine’s overall economic, military, social and financial resilience, including humanitarian aid.
Safety of civilians and war crimes
EU leaders resolutely condemned Russia’s indiscriminate attacks against civilians and civilian infrastructure, and reiterated that international humanitarian law must be respected.
Leaders stressed that Ukrainians, notably children, who have been forcibly removed to Russia, must immediately be allowed to return safely.
They underlined that Russia, Belarus and all those responsible for war crimes and the other most serious crimes will be held to account for their actions in accordance with international law.

EU response to Russia’s invasion of Ukraine (background information)

Sanctions against Russia
The European Council said that the work on sanctions will continue, including efforts to strengthen implementation and prevent circumvention.
EU heads of state or government called on all countries to align with EU sanctions, in particular countries that are candidates for EU membership. They also stressed that work on the Council decision adding the violation of restrictive measures to the list of EU crimes should be swiftly finalised.

EU restrictive measures against Russia over Ukraine (background information)

Solidarity with Ukraine
EU leaders highlighted that the EU remains strongly committed to providing further military support to help Ukraine exercise its inherent right of self-defence against Russian aggression and defend its territorial integrity and sovereignty.
To this end, they called on the Council to swiftly work on a further increase of military support.
The European Council noted that the European Commission would soon present a proposal to grant Ukraine new exceptional macro-financial assistance of up to €9 billion in 2022.
EU heads of state and government called on the Commission to swiftly present its proposals on EU support for the reconstruction of Ukraine, in consultation with international partners, organisations and experts.

EU solidarity with Ukraine (background information)

Food security
The European Council addressed the global food crisis. EU leaders urged Russia to immediately stop targeting agricultural facilities and to unblock the Black Sea ports to permit the export of Ukrainian grain and enable commercial shipping operations to resume. Leaders supported the efforts of the United Nations Secretary-General to this end.

Russia, by weaponising food in its war against Ukraine, is solely responsible for the global food security crisis it has provoked.
European Council conclusions, 23 June 2022

EU leaders underlined that EU sanctions against Russia allow the free flow of agricultural and food products and the delivery of humanitarian assistance.
Leaders expressed strong support for the ongoing work on the solidarity lanes, which are facilitating food exports from Ukraine via land routes and EU ports.
Building on the FARM initiative as well as UN and G7 initiatives, they called on the Commission and EU member states to step up efforts to:

help developing countries reorient their supply chains, where necessary
accelerate work on the Team Europe initiatives aiming to support Africa’s sustainable agri-food production capacities

support the development of input manufacturing capacity in developing countries, in particular sustainable fertilisers

Impact of Russia’s invasion of Ukraine on the markets: EU response (background information)
Food security and affordability (background information)

EU membership applications
The European Council recognised the European perspective of Ukraine, Moldova and Georgia and reiterated that the future of these countries and their citizens lies with the EU.
EU leaders granted candidate status to Ukraine and Moldova. In this context, the leaders invited the European Commission to report to the Council on the fulfilment of the conditions specified in the Commission’s opinions on the respective membership applications. The Council will decide on further steps once all of these conditions are fully met.

The European Council has just decided EU candidate status to Ukraine and Moldova. This is a historic moment. Today marks a crucial step on your path towards the EU. Our future is together.
European Council President Charles Michel, 23 June 2022.

EU enlargement: Ukraine (background information)
EU enlargement: Moldova (background information)

The European Council is ready to grant candidate status to Georgia once the priorities specified in the Commission’s opinion on Georgia’s membership application have been addressed.

EU enlargement: Georgia (background information)

Each country’s progress will depend on its own merits in meeting the Copenhagen criteria, and also on the EU’s capacity to accept new members.

EU enlargement (background information)

Western Balkans
Ahead of the European Council, EU leaders met Western Balkan leaders in the morning of 23 June 2022. During the meeting the leaders discussed:

progress on EU integration
how to advance the EU enlargement process
the consequences of Russia’s war of aggression against Ukraine in the region
geostrategic issues

The leaders also took stock of progress on key investments under the Economic and Investment Plan for the Western Balkans.

EU-Western Balkans leaders’ meeting, 23 June 2022
The EU: main trading partner and investor for the Western Balkans (infographic)

Accelerated enlargement process

The European Union expresses its full and unequivocal commitment to the EU membership perspective of the Western Balkans and calls for the acceleration of the accession process.
European Council conclusions, 23 June 2022

Building on the revised enlargement methodology, the European Council invited the European Commission, the High Representative and the Council to further advance the gradual integration between the EU and the Western Balkans during the enlargement process in a reversible and merit-based manner.
In this regard, the European Council recalled the importance of reform in the following areas:

rule of law
independence and functioning of judiciary
the fight against corruption

The European Council also called on the partners to guarantee the rights and equal treatment of minorities.

EU enlargement (background information)

Political dialogues and agreements
The European Council was informed of the latest developments on the discussions between Bulgaria and North Macedonia and called for a swift resolution of the last remaining issues so that accession negotiations can be opened without delay.

EU enlargement: The Republic of North Macedonia (background information)

The European Council reaffirmed the urgency of making tangible progress in resolving outstanding bilateral and regional disputes, particularly the Belgrade-Pristina Dialogue on the normalisation of relations between Serbia and Kosovo*.
The European Council welcomed the political agreement reached on 12 June 2022 by the leaders of Bosnia and Herzegovina, which is vital for the stability and full functioning of the country. It called on all political leaders of Bosnia and Herzegovina to swiftly implement the commitments set out in the agreement and finalise the constitutional and electoral reform in order to allow the country to advance on its EU path in line with the priorities outlined in the Commission’s opinion.
The European Council is ready to grant candidate status to Bosnia and Herzegovina. To that end, EU leaders invited the European Commission to report without delay to the Council on the implementation of 14 key priorities set out in its opinion in order for the European Council to revert to decide on the matter.

Political agreement on principles for ensuring a functional Bosnia and Herzegovina that advances on the European path (press release, 12 June 2022)
EU enlargement: Bosnia and Herzegovina (background information)

*This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence. 
Economic issues
European Semester 2022: country-specific recommendations endorsed
The European Council endorsed the country-specific recommendations, thus allowing the 2022 European Semester to be concluded.

European Semester 2022: country-specific recommendations agreed upon (press release, 17 June 2022)
Timeline: European Semester in 2022 (background information)
European Semester (background information)

Enlargement of the euro area: Croatia
The European Council welcomed the fulfilment by Croatia of all of the convergence criteria as set out in the Treaty. It endorsed the Commission’s proposal that Croatia adopt the euro on 1 January 2023 and invited the Council to adopt the relevant Commission proposals without delay.

The euro is the monetary expression of our shared destiny and has been part of our European dream. Now the dream comes true for Croatia.
European Council President, 24 June 2022

Energy prices
Referring to the Versailles Declaration and recent European Council conclusions, EU leaders reiterated the invitation to the Commission to explore with international partners ways in which to curb rising energy prices, including the feasibility of introducing temporary price caps where appropriate.

The Versailles Declaration, 10-11 March 2022
European Council conclusions, 21-22 October 2021
European Council conclusions, 24-25 March 2022
European Council conclusions, 30-31 May 2022

In the face of the weaponisation of gas by Russia, the European Council invited the Commission to urgently pursue efforts to secure energy supply at affordable prices.
The European Council also invited the Council, together with the Commission, to take any appropriate measures to ensure closer energy coordination between EU member states.

Energy prices and security of supply (background information)
Impact of Russia’s invasion of Ukraine on the markets: EU response (background information)

Conference on the Future of Europe
EU leaders took note of the proposals outlined in the final report of the Conference on the Future of Europe, which was presented to the three co-Presidents during the closing ceremony on 9 May 2022.
The Conference has been a unique opportunity to engage with European citizens, and the EU institutions should ensure that there is an effective follow-up to the final report, each within the institutions’ own spheres of competence and in accordance with the Treaties.
The European Council took note of the work already undertaken and recalled the importance of ensuring that citizens are informed on the follow-up to the report.

Conference on the Future of Europe (background information)

External relations
Eastern Mediterranean
The European Council expressed deep concern about recent repeated actions and statements by Turkey. Turkey must respect the sovereignty and territorial integrity of all EU member states. Recalling its previous conclusions and the statement of 25 March 2021, the European Council expects Turkey to fully respect international law, to de-escalate tensions in the interest of regional stability in the Eastern Mediterranean, and to promote good neighbourly relations in a sustainable way.

EU enlargement: Turkey (background information)
Statement of the members of the European Council, 25 March 2021

Belarus
Leaders reiterated that the Belarusian people have a democratic right to new, free and fair elections.
In this regard, EU leaders stressed the importance of:

upholding human rights
democracy
rule of law

The European Council reiterated its call to end repression and release political prisoners.

EU relations with Belarus (background information)
Restrictive measures against Belarus (background information)

Euro Summit
On 24 June 2022, EU leaders met in Brussels for a Euro Summit in inclusive format. They discussed the current economic situation and efforts for further strengthening the banking union and the capital markets union.

Euro Summit, 24 June 2022

Compliments of the European Council.
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