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Policymaking in a new risk environment

As policymakers grapple with new kinds of risks, we need to find balanced ways to move forwards in an uncertain world while delivering on our price stability mandate, says President Christine Lagarde.

Read her speech

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Civil war declaration: On April 14th and 15th, 2012 Federal Republic of Germany "_urkenstaats"s parliament, Deutscher Bundestag, received a antifiscal written civil war declaration by Federal Republic of Germany "Rechtsstaat"s electronic resistance for human rights even though the "Widerstandsfall" according to article 20 paragraph 4 of the constitution, the "Grundgesetz", had been already declared in the years 2001-03. more

THE ECB BLOG 18 June 2024

How banks react to less excess liquidity

With the reduction of the Eurosystem’s balance sheet, central bank liquidity is declining. As liquidity is unevenly distributed among banks, an effective redistribution of such liquidity and an increased use of market funding sources are essential.

Read The ECB Blog
ECONOMIC BULLETIN 17 June 2024

Sectoral dynamics and the business cycle

To properly anticipate and tackle risks to the economy, policymakers need to monitor and analyse changes across different sectors, such as manufacturing, trade and hospitality.

Read the Economic Bulletin
PODCAST 10 June 2024

Ask the ECB

Is there something you’ve always wanted to ask us? Now’s your chance! Send us your questions by Sunday, 23 June for the chance to feature on our #AskECB edition of The ECB Podcast. Find out more on our Instagram channel.

Ask us via Instagram
14 June 2024
Speech by Christine Lagarde, President of the ECB, at the 30th Dubrovnik Economic Conference
12 June 2024
Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the Finance Committee of the German Bundestag in Berlin
English
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11 June 2024
Dinner speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the 2024 Annual ECB Banking Supervision Research Conference
11 June 2024
Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the Banking & Payments Federation Ireland (BPFI) National Banking Conference
Annexes
11 June 2024
7 June 2024
Speech by Christine Lagarde, President of the ECB, at the Maurice Allais Foundation
English
OTHER LANGUAGES (1) +
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11 June 2024
Interview with Christine Lagarde, President of the ECB, conducted by Andrés Stumpf, Stefan Reccius, Isabella Bufacchi, Guillaume Benoit and Alexandre Counis in Paris on 7 June 2024
English
OTHER LANGUAGES (4) +
27 May 2024
Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Martin Arnold on 24 May 2024
24 May 2024
Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Steffen Clement on 16 May 2024
English
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23 May 2024
Interview with Luis de Guindos, Vice-President of the ECB, conducted by Dietmar Mascher and Alexander Zens
English
OTHER LANGUAGES (1) +
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17 May 2024
Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Shogo Akagawa and Takerou Minami on 13 May 2024
18 June 2024
With the reduction of the Eurosystem’s balance sheet, central bank liquidity is declining. As liquidity is unevenly distributed among banks, an effective redistribution and use of market funding are essential. This worked well so far, with limited recourse to Eurosystem’s refinancing operations.
Details
JEL Code
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
13 June 2024
Many people appreciate privacy when paying, and want their data protected. Current electronic means of payment are not optimal in this regard. We are designing the digital euro to be the most private electronic payment option. The ECB Blog explains.
Details
JEL Code
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
E49 : Macroeconomics and Monetary Economics→Money and Interest Rates→Other
E59 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Other
G29 : Financial Economics→Financial Institutions and Services→Other
12 June 2024
More reforms are needed if the euro is to maintain and strengthen its role amid geopolitical shifts. Europe needs to further develop the infrastructure for making cross-border payments in euro with key partners.
Details
JEL Code
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
F02 : International Economics→General→International Economic Order
F01 : International Economics→General→Global Outlook
F31 : International Economics→International Finance→Foreign Exchange
F33 : International Economics→International Finance→International Monetary Arrangements and Institutions
8 June 2024
The ECB has cut interest rates. President Christine Lagarde explains why and sets out what still needs to be done to bring inflation back to 2% over the medium term.
Details
JEL Code
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E60 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General
E61 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Policy Objectives, Policy Designs and Consistency, Policy Coordination
23 May 2024
Negotiated wage growth in the euro area increased in the first quarter of 2024. This post on The ECB Blog illustrates how the ECB wage tracker can help to put latest developments in negotiated wage growth into perspective.
Details
JEL Code
E20 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→General
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
18 June 2024
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 4, 2024
Details
Abstract
Since the start of 2018 automotive production and exports in the euro area have both contracted by about 20%, while they have fared better in China, Japan, Korea and the United States. The current weakness is mostly a result of declining demand for combustion engines in the context of net zero emission targets and hesitancy to purchase hybrid and electric vehicles. Other factors, such as supply chain disruptions, adverse energy supply shocks and monetary tightening have also negatively contributed to the drop in automotive production. Despite intensified foreign competition, the euro area automotive industry has defended its global positioning by focusing on profitable market segments. A recovery can be expected in the medium term as adverse factors related to supply bottlenecks and tight financing conditions fade away. However, risks to the outlook are elevated. These are associated with the digital innovation gap vis-a-vis the United States and China as well as geopolitical tensions, which can disrupt supply chains.
JEL Code
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
F1 : International Economics→Trade
L62 : Industrial Organization→Industry Studies: Manufacturing→Automobiles, Other Transportation Equipment
18 June 2024
FINANCIAL INTEGRATION AND STRUCTURE IN THE EURO AREA
18 June 2024
FINANCIAL INTEGRATION AND STRUCTURE BOX
Financial Integration and Structure in the Euro Area 2024
Details
Abstract
The European Union's FinTech industry has experienced rapid growth since the 2010’s, with a significant concentration of firms in major financial centers. This Box suggests that one of the reasons for the clustering of FinTechs close to financial centres may be easier access to equity finance. The analysis also shows that FinTechs outside financial centres compared to Fintechs that cluster in financial centers need to rely more on their performance as a signalling device to potential funding providers. Given the relevance of incubators and accelerators for early-stage development and funding of FinTech startups, the article points to the need to further investigate the role and effectiveness of institutional support schemes. It also underscores the need to advance on the EU’s capital markets union (CMU) agenda, in particular as regards policy efforts to grow European equity markets, in terms of both liquidity and depth.
JEL Code
D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
G3 : Financial Economics→Corporate Finance and Governance
O30 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→General
18 June 2024
FINANCIAL INTEGRATION AND STRUCTURE BOX
Financial Integration and Structure in the Euro Area 2024
Details
Abstract
In view of recent high-profile delistings from European stock exchanges and the widening gap in listings compared to the US, this Box sheds more light on the gap in listings between the United States and Europe. It examines the reasons behind the delisting activities of EU companies and identifies mergers and acquisitions as the key determinant over time, including in recent years. In addition, an examination of the trends of dual and US listings of European firms suggests a growing attractiveness of US markets for European firms. This suggests that policy measures may be needed to make EU listings more appealing, particularly for larger companies, by enhancing market depth and liquidity and possibly further consolidating European stock exchanges.
JEL Code
G10 : Financial Economics→General Financial Markets→General
G15 : Financial Economics→General Financial Markets→International Financial Markets
G34 : Financial Economics→Corporate Finance and Governance→Mergers, Acquisitions, Restructuring, Corporate Governance
18 June 2024
FINANCIAL INTEGRATION AND STRUCTURE BOX
Financial Integration and Structure in the Euro Area 2024
Details
Abstract
The issuance of these temporary recovery instruments has renewed the discussion on the benefits of a common safe asset and their transformative potential for EU financial integration. Given that a common safe asset may foster financial integration in the euro area by facilitating diversification and de-risking banks’ sovereign portfolios, this box assesses the extent to which these newly issued EU bonds (i) are perceived by market participants as a common safe asset, and (ii) can facilitate diversification and affect banks’ sovereign portfolio composition.
JEL Code
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
H63. : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
18 June 2024
FINANCIAL INTEGRATION AND STRUCTURE BOX
Financial Integration and Structure in the Euro Area 2024
Details
Abstract
The box highlights the importance of cross-border bank lending to non-banks in the euro area. Comparing the domicile of euro area banks and borrowers, we estimate the scale of direct cross-border lending to represent 14.1% of euro area bank lending to non-banks which increases to 23% when we include indirect cross-border lending. Direct cross-border lending represents an important driver for enhancing banking market integration. It also constitutes an instrument to improve banks’ risk diversification and the resilience of borrowers’ funding structure. Finally, the box discusses the implications of different lending approaches, and sheds light on the sectors relying more on cross-border lending.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
F02 : International Economics→General→International Economic Order
F34 : International Economics→International Finance→International Lending and Debt Problems
F36 : International Economics→International Finance→Financial Aspects of Economic Integration
O52. : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
18 June 2024
FINANCIAL INTEGRATION AND STRUCTURE BOX
Financial Integration and Structure in the Euro Area 2024
Details
Abstract
European banks often borrow in repo markets, pledging domestic government bonds as collateral. As there tends to be a positive relation between the default risk of a bank and the default risk of its home country, using domestic collateral comes at a cost. Using transaction-level data on short-term repurchase agreements (repo) and taking into account the direct effect of collateral and borrower risk, we show that borrowers pay a premium of 1.1 to 2.6 basis points when they use domestic collateral. Additionally, we show that borrowers internalize this premium when making their collateral choices.
JEL Code
G21, G12, E43 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
18 June 2024
FINANCIAL INTEGRATION AND STRUCTURE BOX
Financial Integration and Structure in the Euro Area 2024
Details
Abstract
This box reassesses the patterns of euro area financial integration, adjusting for the role of financial centres in the euro area. Their special role involves acting as one of the euro area’s major hubs for (i) the investment fund industry, and (ii) securities issuance by affiliates of foreign companies. Looking through these dual roles of euro area financial centres provides a nuanced picture of euro area financial integration and portfolio exposures. The restatements methodology reveals three main findings namely that (i) the euro area as a whole is less financially integrated with the rest of the world (ii) at the country level Luxembourg and Ireland act as a source of portfolio diversification for the other euro area countries and (iii) the evolution of equity home bias in the euro area looks very similar to that of the United States since 1995, while euro area bond home bias declined significantly.
JEL Code
F3 : International Economics→International Finance
F4 : International Economics→Macroeconomic Aspects of International Trade and Finance
G2 : Financial Economics→Financial Institutions and Services
G3 : Financial Economics→Corporate Finance and Governance
H26 : Public Economics→Taxation, Subsidies, and Revenue→Tax Evasion
18 June 2024
FINANCIAL INTEGRATION AND STRUCTURE BOX
Financial Integration and Structure in the Euro Area 2024
Details
Abstract
The United Kingdom’s decision to leave the EU impacted the EU’s financial infrastructure, in particular those financial market segments heavily reliant on UK clearing services. This box analyses how the market shares of euro area CCPs offering similar clearing services to their UK competitors have evolved since Brexit. Although the market share of euro area CCPs has increased over time, the over-reliance of domestic market participants on non-euro area clearing services persists. This could have serious implications for the financial stability of the EU, especially under stressed market conditions. Reducing the reliance of European markets on third countries for the provision of critical clearing services remains a priority for EU policymakers from a financial stability perspective, together with building well-integrated, resilient clearing markets in the EU.
JEL Code
G15 : Financial Economics→General Financial Markets→International Financial Markets
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
F36 : International Economics→International Finance→Financial Aspects of Economic Integration
18 June 2024
FINANCIAL INTEGRATION AND STRUCTURE BOX
Financial Integration and Structure in the Euro Area 2024
Details
Abstract
Substantial green and digital investments will be needed to reach the targets set for 2030 and beyond under the Green Deal and the Digital Compass. The EU faces a large gap in funding for these investment needs, raising the question of how private capital can be best mobilised to bridge the gap. This box presents an overview of estimates of green and digital investment needs and discusses some of the challenges to be met, in particular in terms of funding needs
JEL Code
Q43 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Energy→Energy and the Macroeconomy
Q50 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→General
O30 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→General
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
H54 : Public Economics→National Government Expenditures and Related Policies→Infrastructures, Other Public Investment and Capital Stock
17 June 2024
WORKING PAPER SERIES - No. 2946
Details
Abstract
We examine the extent to which environmental regulation affects innovation and which policy types provide the strongest incentives to innovate. Using a local projection framework, we estimate the regulatory impact on patenting activity over a five-year horizon. As a proxy for environmental policy exposure, we estimate firm-level greenhouse gas emissions using a machine learning algorithm. At the country-level, policy tightening is largely associated with no statistically significant change in environmental technology innovation. At the firm-level, however, environmental policy tightening leads to higher innovation activity in technologies mitigating climate change, while the effect on innovation in other technologies is muted. This suggests that environmental regulation does not lead to a crowding-out of non-clean innovations. The policy type matters, as increasing the stringency of technology support policies and non-market based policies leads to increases in clean technology patenting, while we do not find a statistically significant impact of market-based policies.
JEL Code
O44 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Environment and Growth
Q52 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Pollution Control Adoption Costs, Distributional Effects, Employment Effects
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
17 June 2024
ECONOMIC BULLETIN - ARTICLE
Economic Bulletin Issue 4, 2024
Details
Abstract
This article examines recent sectoral developments in the euro area and their near-term implications for the business cycle. After a brief review of the existing literature, it presents new evidence for the euro area. It first uses a simple aggregate measure of cross-sectoral shifts in activity to assess the short-term impact of these shifts on the business cycle. It then explores the leading-indicator properties of sectoral developments as regards aggregate activity and explains the correlation between these properties and the position of sectors within the production structure of the economy. Overall, the results of this article point to moderate momentum in economic activity in the euro area in the near term.
JEL Code
E23 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Production
E27 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Forecasting and Simulation: Models and Applications
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
14 June 2024
LEGAL WORKING PAPER SERIES - No. 22
12 June 2024
WORKING PAPER SERIES - No. 2945
Details
Abstract
We investigate the impact of expectations about future climate policy on investment decisions of fossil fuel firms. Our empirical analysis reveals that firms with greater exposure to climate change significantly increased their investment in response to the Paris Agreement, in contrast to firms with lower exposure. Importantly, investment was directed towards traditional activities in the fossil fuel industry. By contrast, there are no indications that firms invested to transition towards renewable energy sources nor in making production less carbon-intensive. Our findings contribute to the ongoing discussion about the potential adverse effects of delays in the implementation of climate regulation.
JEL Code
G31 : Financial Economics→Corporate Finance and Governance→Capital Budgeting, Fixed Investment and Inventory Studies, Capacity
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
12 June 2024
THE INTERNATIONAL ROLE OF THE EURO
Annexes
12 June 2024
THE INTERNATIONAL ROLE OF THE EURO - STATISTICAL ANNEX
Related
10 June 2024
WORKING PAPER SERIES - No. 2944
Details
Abstract
We use outages as natural experiments to study sovereign bond market functioning. When the euro area futures market goes down, trading activity on the cash market declines, liquidity evaporates, and transaction prices deviate from fundamental values. Tracing back this macrolevel market breakdown to the micro-level, we show that particularly dealers withdraw from the cash market during outages. While most of their remaining trades remain fairly priced, dealer’s capacity to intermediate trades on the cash market is reduced, forcing more clients to trade directly with each other, leading to substantial mispricing. Lastly, outages on cash trading venues barely affect the futures market, suggesting that price formation and liquidity provision is a one-way street, and outages on the US and euro area futures market barely affect each other, in stark contrast to the significant price spillovers. Our results reveal the trade-offs between a (de)centralized market structure, they support cross-asset learning models to explain the link between liquidity and arbitrage, and they demonstrate how financial intermediaries can impose important limits to arbitrage.
JEL Code
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
10 June 2024
SURVEY OF MONETARY ANALYSTS - AGGREGATE RESULTS
10 June 2024
OCCASIONAL PAPER SERIES - No. 351
Details
Abstract
The European Union is aiming to foster digital transformation in all sectors by 2030. It has pioneered cross-sectoral legislation on artificial intelligence, cloud computing services and crypto-assets for this purpose. Yet compared with the work done on ESG, the prospective banking regulation regime has still to articulate more purposefully how the industry should manage the risks from digital trends and how supervisors should assess them. This paper discusses digital innovation in the banking sector in the context of the academic literature on financial innovation and non-banks. It also considers how to foster a risk-based Pillar 2 prudential framework, as well as market discipline through harmonised Pillar 3 disclosures. The paper concludes that these latter two propositions can help reconcile the challenges stemming from the short-term horizon applied in prudential assessment and the longer-term horizon over which digital innovation will take place in the banking sector.
7 June 2024
TARGET ANNUAL REPORT
7 June 2024
EURO AREA BALANCE OF PAYMENTS AND INTERNATIONAL INVESTMENT POSITION STATISTICS - QUALITY REPORT
Annexes

Interest rates

Marginal lending facility 4.50 %
Main refinancing operations (fixed rate) 4.25 %
Deposit facility 3.75 %
12 June 2024 Past key ECB interest rates

Inflation rate

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Exchange rates

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