|
on European Economics |
|
Issue of 2025–08–11
27 papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | International Monetary Fund |
| Abstract: | Banking supervision has significantly strengthened since the last Financial Stability Assessment Program (FSAP). The European Central Bank (ECB), in cooperation with the national competent authorities (NCAs), is exclusively responsible for the prudential supervision of credit institutions (banks) established in the participating EU member states. Together the ECB and the NCAs form the Single Supervisory Mechanism (SSM) which became operational in 2014. The SSM has made significant progress in raising the quality of supervision of Significant Institutions (SIs) since 2014 and implementing the recommendations of the 2018 assessment of the compliance with the Basel Core Principles (BCP). Banking supervision is underpinned by a clear mandate and independence from government or industry interference in individual supervisory decisions. The SSM is a highly capable supervisor supported by excellent risk analysis and a robust skill set in all aspects of supervision. It conducts an intrusive approach to supervision, uses a broad range of tools and relies on a fully articulated supervisory framework. In areas that the SSM chooses to make a priority (e.g., credit risk, liquidity risk, banks’ internal models, operational risk and resilience, and climate-related financial risk), it delivers a thorough assessment and has been effective in improving bank risk management. Banking systems, both globally and in the euro area, have been exposed to a series of severe shocks and the SSM has been agile in responding to these events. On average, banks in the euro area maintain solid capital and liquidity positions, well above regulatory requirements. The SSM is also extremely transparent in its approach to supervising banks. |
| Date: | 2025–07–25 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfscr:2025/215 |
| By: | Böninghausen, Benjamin; Evrard, Johanne; Gati, Zakaria; Gori, Sofia; Lambert, Claudia; Legran, Daniel; Schuster, Wagner Eduardo; van Overbeek, Fons |
| Abstract: | The European Union (EU) economy depends heavily on bank funding. For this reason, strengthening EU equity markets as an alternative funding source has been a policy priority under the Capital Markets Union (CMU) agenda, and more recently a key feature of the Savings and Investment Union (SIU). EU listed equity markets are smaller and structurally different from those in the United States (US), with differing market capitalisations of listed firms and differences in the number of companies listed, stemming from lower initial public offering (IPO) activity in Europe. This paper aims to understand the drivers behind the EU-US listing gap, focusing on two aspects: (1) the general firm-level benefits of listing, and (2) whether pre-listing financing opportunities in the EU are underdeveloped, hindering firm growth and ultimately market depth. This paper first puts forward an empirical analysis to assess how a firm’s decision to list impacts various key performance indicators, with a view to assessing the implications of listing for the economy at large. Second, it zooms in on innovative firms to shed light on the primary challenges faced by EU startups in their funding pipelines, with a focus on late-stage equity financing and venture capital (VC) markets. Focusing on the euro area (EA) as a proxy to derive broader benefits of listing in the EU, we find that EA companies’ key profitability measures, employment, innovation capacity and productivity all increase after listing – and are thus indicative of wider economic benefits. This is, however, associated with challenges for the long-term investment strategies of listed companies, such as potential short-termism – a topic widely studied in the literature. Moreover, a comparison with the US suggests that, while the benefits and risks of listing are qualitatively similar on the other side of the Atlantic, EA companies seem to benefit somewhat less from listing than their US peers. […] JEL Classification: G10, G30, L10, L50, G24, G32, L21, L25 |
| Keywords: | capital markets union, equity markets, financial structure, listing, savings and investments union, venture capital |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2025373 |
| By: | Albanesi, Stefania; Dias Da Silva, António; Jimeno, Juan F.; Lamo, Ana; Wabitsch, Alena |
| Abstract: | We examine the link between the diffusion of artificial intelligence (AI) enabled technologies and changes in the female employment share in 16 European countries over the period 2011-2019. Using data for occupations at the 3-digit level, we find that on average female employment shares increased in occupations more exposed to AI. Countries with high initial female labor force participation and higher initial female relative education show a stronger positive association. While there exists heterogeneity across countries, almost all show a positive relation between changes in female employment shares within occupations and exposure to AI-enabled automation. JEL Classification: J23, O33 |
| Keywords: | artificial intelligence, employment, gender, occupations, skills |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253077 |
| By: | Philipp Heil; Emilie Höslinger; Niklas Potrafke; Tuuli Tähtinnen; Emilie Antonia Höslinger; Tuuli Tähtinen |
| Abstract: | Key Messages• On average, experts from the EU expect tariffs on US imports to be around 5 percentage points higher than they would recommend.• Tariff expectations are higher and more varied across European countries for US goods than for all imports.• Expert recommendations for tariffs diverge widely across European countries.• US experts recommend low tariffs on EU imports, despite expecting higher rates.• Gaps between expected and recommended tariffs highlight policy challenges. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpb:_76 |
| By: | António Afonso; José Alves; Alessio Ferraro; Sofia Monteiro |
| Abstract: | This paper estimates the fiscal multipliers of green public spending using a linear Bayesian Panel VAR and a Smooth Transition VAR framework, with quarterly data for the period 1995Q1–2022Q4 for EU member states. We group EU member states based on similarities in debt trajectories and green spending intensity, forming three regional aggregates: Southern Europe, Eastern Europe, and Northern Europe. Our results show that green spending multipliers on GDP are generally below one, but the response of private investment is significantly stronger — particularly in Southern and Eastern Europe. Multipliers tend to be larger in periods of high public debt, suggesting that green fiscal expansions may be more effective during downturns. Another key finding is that in response to green spending shocks, both long-term interest rates and public debt tend to decline—especially in high-debt regimes—indicating improved market expectations about fiscal sustainability. In contrast, when we estimate the effects of a shock to total public spending net of green spending, we find that both interest rates and debt increase. This suggests that economic agents perceive green spending more favorably than undifferentiated fiscal expansions, likely due to its role in mitigating climate risks, lowering long-term energy costs, and signaling credible long-term policy commitments. |
| Keywords: | green fiscal multipliers; debt trajectories; interest rates; Bayesian Panel Vector Autoregression (BVAR). |
| JEL: | C23 E44 E62 G15 H62 H63 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03892025 |
| By: | Sangyup Choi (Yonsei University); Kimoon Jeong (University of Virginia); Jiseob Kim (Yonsei University) |
| Abstract: | Despite extensive research, there is little consensus on whether common monetary policy generates systematically asymmetric effects within the euro area. We argue that this ambiguity arises from failing to account for heterogeneity in local cyclical conditions at the time of policy changes, which leads state-dependent responses to obscure underlying cross-country differences. To address this, we construct a measure of country-specific monetary policy that internalizes local cyclical conditions. This adjustment reveals systematic asymmetries in policy transmission between core and periphery euro area countries that conventional methods overlook. We find that macroeconomic and financial variables respond more strongly in periphery countries. In contrast, credit and housing booms are largely absent in core countries. This differential response is consistent with the bank lending channel of monetary policy: banks in periphery countries ease mortgage lending standards following an expansionary shock, while those in core countries tighten them. Cross-border banking flow patterns further corroborate the importance of credit supply in explaining regional heterogeneity. |
| Keywords: | Monetary Union; Country-specific monetary policy gap; Mortgage credit; Bank lending survey; Cross-border banking flows. |
| JEL: | E21 E32 E44 F52 G21 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2025rwp-256 |
| By: | Anyfantaki, Sofia; Benkovskis, Konstantins; Kunzmann, Vanessa; Lalinsky, Tibor; Petroulakis, Filippos; Zutis, Klavs; Vilerts, Kārlis; Bredl, Sebastian; Giovannini, Massimo; Horky, Florian Matthias; Lampousis, Athanasios; Lukmanova, Elizaveta |
| Abstract: | Does the maturity of the relevant risk-free rate influence the strength of monetary policy pass-through to interest rates on new loans? To address this question, we present novel empirical evidence on lending practices across all euro area countries, using AnaCredit data covering nearly seven million new loans issued to non-financial corporations in 2022–2023. We document substantial variation in (a) the prevalence of fixed- vs floating-rate loans, (b) rate fixation periods, and (c) reference rates. This variation results in lending rates being exposed to different segments of the risk-free rate yield curve which, in turn, influence their sensitivity to monetary policy changes. We show that loans linked to shorter-maturity risk-free rates experience more pronounced monetary pass-through. Importantly, this effect is not purely mechanical, as part of the effect is offset by adjustments in the premium, revealing previously less-explored heterogeneity in the pass-through to lending rates. JEL Classification: E52, E43, G21, E58 |
| Keywords: | fixed-rate loans, floating-rate loans, interest rate pass-through, lending rates |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253078 |
| By: | Gschossmann, Isabella; Kok, Christoffer; De Cicco, Valentina |
| Abstract: | Do climate stress tests affect bank credit supply to brown firms? Using a difference-in-differences approach and detailed data on individual bank loans in the euro area, this paper provides novel evidence on the effects of the ECB’s 2022 climate risk stress test. Despite no capital implications or public disclosures, participating banks significantly reduced credit to greenhouse gas-intensive industries relative to nonparticipants. Among affected firms, smaller borrowers were more negatively impacted. Notably, only the best-performing banks in the climate stress test significantly reduce their brown credit after participation. This is evidence that banks which are more advanced in climate risk management more proactively consider transition risks in their lending. In contrast, banks less advanced in managing climate risk do not to the same extent discriminate against polluting firms. JEL Classification: E51, G21, G28 |
| Keywords: | banking supervision, climate risk, climate stress test |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253088 |
| By: | International Monetary Fund |
| Abstract: | The European Union (EU) recently sought to give fresh impetus to longstanding efforts to grow and deepen its capital markets—the Capital Markets Union (CMU). Building on the earlier Financial Services Action Plan and work to remove barriers to consolidation and efficiency in post-trade arrangements, the European Commission has set out various legislative and non-legislative initiatives to enable easier access to capital, enhance the efficiency and scalability of EU capital markets, and by doing so reduce the extent of the dependence on bank financing. Fragmentation of capital markets in the euro area (EA) is driven by many factors including national differences in securities, corporate, tax and pensions laws, policies. These can create significant uncertainty, e.g., determining which law is applicable and how cross-border financial investments will be treated in insolvency, and barriers to cross-border provision of investments products. For the CMU to be successful these barriers will need to be reduced over time. However, the focus of this note is on proposals pertaining to the institutional arrangements and supervisory framework, including how to enable a safe transition towards centralizing supervision of at least some types of entity at the EA level. |
| Date: | 2025–07–25 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfscr:2025/214 |
| By: | António Afonso; José Alves; Najat Bazah; A. J. SánchezFuentes |
| Abstract: | We evaluate the efficiency of public expenditure in the 27 European countries in achieving the Sustainable Development Goals (SDGs) of the 2030 Agenda. Using Data Envelopment Analysis (DEA), we map performance over the period 1995-2023, incorporating Musgravian functional spending – redistribution, allocation, public services, and private activities – as input variables, and constructing synthetic indices for the five pillars of the 2030 Agenda people, planet, prosperity, peace, and partnership – as outputs. Results indicate that input efficiency scores range from 0.77 to 0.95, while output scores range from 0.88 to 0.93, suggesting a potential 5%-23.5% increase in inputs or a 7%-11.7% improvement in outputs. Denmark, Ireland, and Finland are efficient throughout the entire period, with strategic reductions in public spending correlating with high SDG performance. Sweden also has high efficiency and leads in multiple pillars by 2023. Conversely, the peace pillar remains the least achieved, while the people pillar shows the greatest progress. |
| Keywords: | public spending; Sustainable Development Goals (SDGs); Data Envelopment Analysis (DEA); government spending efficiency. |
| JEL: | C61 H11 H72 O57 Q56 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03882025 |
| By: | Smolenska, Agnieszka |
| Abstract: | The EU’s sustainable finance agenda aims to accelerate the sustainability transition through the ‘greening’ of finance. How such greening may trigger institutional transformation in Member States is not well understood. However, the political economy literature has elevated the importance of non-market coordination and institutional complementarity in sustainability transitions. The article investigates sustainable finance uptake in four distinct Member States (the Netherlands, Poland, Spain and Sweden). Green bond legal documentation is analysed for three dimensions of firm-finance coordination: exchange of information, monitoring and sanctioning. The micro-level analysis identifies local adaptations that relate to how actors incorporate sustainability commitments and the EU sustainable finance rules into financial transactions and whether they conceive these as a source of risk (the Netherlands and Sweden) or a guarantee of profit (Poland and Spain). One jurisdiction (Poland) is further differentiated by a strong legal sanctioning mechanism resulting from legal factors and the presence of international financial institutions. Notwithstanding local adaptations, several micro – and meso-level transformations are identified, such as the consistent emergence of new forums for both market and non-market coordination. The political economy impacts and micro-level tensions identified in the article highlight how comparative legal analysis can anticipate the sites of broader political struggles. |
| Keywords: | EU Green Deal; green bonds; comparative political economy; institutional complementarity; sustainable finance |
| JEL: | Q58 G23 P51 |
| Date: | 2025–07–17 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128943 |
| By: | Javier Olivera (National Bank of Belgium; and Luxembourg Institute of Socio-Economic Research); Jan De Mulder (National Bank of Belgium) |
| Abstract: | The present study analyses the impact of ageing on wealth inequality in fifteen European countries by exploiting the Household Finance and Consumption Survey (HFCS) for the years 2010 and 2021. For this aim, we use recentered influence regressions to estimate influence of ageing and other key covariates on the Gini index of net wealth and wealth components. When analysing the overall wealth of the countries, no clear impact of ageing on net wealth inequality is found. However, ageing appears to contribute to rising inequality when its main componentsâ۠real assets, financial assets, and debtâ۠are examined. The evidence suggests that the magnitude of the effect has increased over time. When considering individual countries separately, ageing appears to have an increasing impact on net wealth inequality, as well as on the inequality of its main components in countries experiencing more advanced population ageing, such as Portugal, Spain, and Italy. |
| Keywords: | Ageing, Wealth, Inequality, Europe, RIF regressions |
| JEL: | D31 E24 J11 J14 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2025-685 |
| By: | Brandtjen, Roland |
| Abstract: | This paper investigates the theoretical feasibility and implications of Canadian accession to the European Union (EU), a scenario that challenges conventional geographic and political boundaries of EU enlargement. Prompted by recent shifts in global geopolitics and Canadian public opinion, the study evaluates whether Canada meets the legal, political, and economic criteria for EU membership as outlined in Article 49 of the Treaty on European Union and the Copenhagen criteria. Drawing on comparative data across democracy, human rights, economic competitiveness, and institutional capacity, the analysis demonstrates that Canada aligns closely with EU standards and, in many cases, surpasses existing member states. The paper also explores the legal ambiguity of defining a "European state, " the potential institutional impact of Canadian membership, and the compatibility of Canada's existing international obligations with EU law. While full membership would entail significant legal and political adjustments, including treaty renegotiations and institutional restructuring, the study concludes that Canadian EU accession is theoretically plausible and politically contingent. Alternative integration models, such as EFTA membership or enhanced association agreements, are also considered as viable pathways for deepening EU-Canada relations. |
| Keywords: | Canada-EU Relations, European Union Enlargement, Geopolitical Integration, Copenhagen Criteria, Effects of US Policies |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iubhbm:321859 |
| By: | Elfsbacka-Schmöller, Michaela; Goldfayn-Frank, Olga; Schmidt, Tobias |
| Abstract: | This paper provides novel empirical evidence on the impact of monetary policy on innovation investment using unique firm-level data. First, we document the effect of a large, systematic monetary tightening (ECB rate increases from 0% to 4.5% during 2022-23), with average firm-level innovation cuts of 20%. These cuts persist over the medium term, indicating a sustained innovation slowdown. Second, we use the survey to identify elasticities of innovation expenditure to exogenous policy rate changes. Responses to hikes and cuts are significant and largely symmetric at the baseline rate (4.5%), though we detect potential state-dependent asymmetry due to the extensive margin. The financing channel emerges as one of the transmission channels, with more pronounced effects in firms with higher shares of bank loans and variable-rate loans. Crucially, we show that monetary policy transmits via aggregate demand, with stronger responses in firms with pessimistic demand expectations. Forward guidance provides substantial additional stimulus by reducing uncertainty about future rates, suggesting long-term, supply-side effects of announcements. These results challenge monetary long-run neutrality and are suggestive of policy endogeneity of R∗ operating through innovation-driven technology growth. JEL Classification: E52, E22, E24, D22 |
| Keywords: | endogenous growth, forward guidance, monetary policy transmission, R&D, R∗ |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253080 |
| By: | Suproń, Błażej |
| Abstract: | Aim: The aim of this study is to econometrically assess the long-term impact of Green Deal-related regulatory areas on cereal crop production in European Union countries. Methods: The study is based on an analysis of panel data for 21 European Union countries for the period 1995–2021. The FGLS, PCSE and CCEMG models, which are robust to heteroskedasticity and cross-sectional dependence, were used to determine the impact of agricultural CO2 emissions, agricultural area, food production volumes and fertilizer consumption on cereal production. In addition, a robust test of the Westerlund ECM panel test model was applied to confirm cointegration. All models were bootstrapped to strengthen the results. Results: The results show that, in the long run, a 10% increase in CO2 emissions from agriculture leads to an average decrease in cereal production of 0.5%. A 1% increase in cultivated area leads to a 1.1% positive change in the value of cereal production, and a 1% increase in fertilizer use per hectare leads to a 0.38% increase in cereal production. The value of the food production index also shows a positive effect on cereal production. If the index increases by 1 p.p., cereal production increases by 1.13% in the long term. The study also found a positive relationship between an increase in the share of renewable energy and the volume of cereal production. If the share of renewable energy increases by 1%, the volume of cereal production in the EU countries increases by 0.11%. Conclusions: Overall, it can be concluded that the green transformation brings both negative and positive aspects of change to agriculture. The decrease in cultivated land and reduced use of artificial fertilizers may negatively impact farm productivity in crop production areas. On the other hand, the improvement of climatic conditions and the development of renewable energies could be beneficial for agriculture in the long term. The study is original in the sense that it fills an empirical and theoretical gap related to the verification of the impact of the Green Deal on the cereal production sector and thus on agriculture in the European Union. |
| Keywords: | Cereal production; Agriculture; FGLS; Green transformation; European Union |
| JEL: | C23 O13 O47 Q15 Q54 |
| Date: | 2024–03–04 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122723 |
| By: | Jianu, Ionut; Tudorache, Maria-Daniela; Simion, Constantin-Stefan |
| Abstract: | This paper examines the impact of institutions on income inequality in 27 European Union member states over the period 2011-2022, using the method Panel Estimated Generalized Least Squares. To catch the quality of institutions we used World Governance Indicators published by World Bank, especially those related to rule of law and political stability and absence of violence/terrorism. The results confirmed a negative relationship between institutional quality (rule of law, political stability and absence of violence/terrorism) and income inequality, indicating that the quality of the rules driving human action really matter and influences the dynamic of social development. In addition, we used additional variables to improve the quality of the model, by using variables related to labour market, education and household sectors. In this respect, we found a positive association between income inequality and other explanatory factors, such as school dropout, unemployment rate and the housing cost overburden rate. Even if the model is limited to five income inequality drivers, we have demonstrated that the calculated coefficients are not affected by multicollinearity or other model issues. In this respect, the estimation provides high confidence results, which can be fully taken into consideration by governments, when drafting policy measures oriented to tackle income inequality. |
| Keywords: | income inequality, rule of law, political stability, institutions, early leavers |
| JEL: | E02 D63 C33 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esconf:322260 |
| By: | Kostarakos Ilias (European Commission - JRC); Marques Santos Anabela (European Commission - JRC); Molica Francesco (European Commission - JRC) |
| Abstract: | The impacts of the green and the digital transitions on the regional economic structure of the European Union are of paramount importance and have been at the forefront of the recent policy discussions. This paper contributes to the ongoing discussion by developing a composite indicator to assess the overall risks imposed by the twin transition on the EU’s NUTS2 regions. The indicator focuses on two key aspects: the regions’ vulnerabilities and their readiness to adapt to the challenges of the transition. The risk index highlights the large degree of heterogeneity in terms of the risk imposed by the transition process, with the less-developed regions emerging as the most vulnerable. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:termod:202508 |
| By: | Jorge Braga Ferreira |
| Abstract: | This study evaluates the impact of the ECB’s Corporate Sector Purchase Programme (CSPP) on corporate bond spreads at issuance, as measured by Option-Adjusted Spreads (OAS), and on subsequent changes in firms' capital structures, as proxied by year-on-year changes in the debt ratio. Using a sample of 1, 275 Eurozone corporate bonds issued between 2015:Q1 and 2018:Q4, we estimate a two-stage empirical model to evaluate. In the first stage, we find that the initial association between CSPP eligibility and lower spreads disappears once firm- and bond-level characteristics are controlled for, suggesting that observed differences reflect issuer and instrument features rather than programme eligibility. While the CSPP’s effect does not vary systematically by firm or bond characteristics, the results indicate broader market effects, likely driven by the programme’s signaling power and perceived credibility, which extended beyond the impact of direct bond purchases. In the second stage, we assess changes in leverage following the issuance of bonds. CSPP eligibility did not seem to affect the debt ratio in the issuance year. However, longer-maturity eligible bonds are associated with delayed increases in leverage, as firms expanded their debt ratios in the year following issuance. This pattern suggests that improved financing conditions under the programme may have encouraged firms to raise additional debt at a later stage. |
| Keywords: | ECB, CSPP, unconventional monetary policy, bond yields, corporate capital structure, corporate financing. |
| JEL: | C23 E52 E58 G12 G32 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03902025 |
| By: | Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Alexandra Bykova (The Vienna Institute for International Economic Studies, wiiw); Selena Duraković (The Vienna Institute for International Economic Studies, wiiw); Meryem Gökten (The Vienna Institute for International Economic Studies, wiiw); Richard Grieveson (The Vienna Institute for International Economic Studies, wiiw); Maciej J. Grodzicki; Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Gabor Hunya (The Vienna Institute for International Economic Studies, wiiw); Branimir Jovanović (The Vienna Institute for International Economic Studies, wiiw); Niko Korpar (The Vienna Institute for International Economic Studies, wiiw); Dzmitry Kruk; Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Isilda Mara (The Vienna Institute for International Economic Studies, wiiw); Emilia Penkova-Pearson; Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Sandor Richter (The Vienna Institute for International Economic Studies, wiiw); Marko Sošić; Bernd Christoph Ströhm (The Vienna Institute for International Economic Studies, wiiw); Maryna Tverdostup (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | wiiw winter forecast update Growth mostly firming, despite major external headwinds and uncertainty Economic forecasts for Eastern Europe for 2025-27 The economic outlook for Central, Eastern, and Southeastern Europe (CESEE) in 2025 is mixed, with overall growth projected to slow to 2.7%. However, this slowdown is primarily due to weaker growth in Russia, with most other countries either maintaining 2024’s growth rate or expanding at a faster pace than last year. Consumption, investment, and EU funds are expected to drive growth, but weak external demand and inflation concerns are significant headwinds that will prevent a faster rate of expansion. The likelihood of new US tariffs, and continued geopolitical tensions, represent downside risks to growth. Executive summary by Richard Grieveson Winter 2024/2025 interim forecast update by Statistics Department 1. Global assumptions Bracing for impact by Richard Grieveson 2. CESEE outlook Growth mostly firming, despite major external headwinds and uncertainty by Richard Grieveson, Vasily Astrov, Meryem Gökten, Maciej J. Grodzicki, Branimir Jovanović and Olga Pindyuk 3. Country updates Albania Tourism momentum and economic growth continue by Isilda Mara Belarus Growth slowdown ahead by Dzmitry Kruk Bosnia and Herzegovina Historic increase in the minimum wage to boost the economy by Selena Duraković Bulgaria Schengen Area membership expected to boost the economy by Emilia Penkova-Pearson Croatia Among the euro area’s top performers by Bernd Christoph Ströhm Czechia Domestic strength offsetting external weakness by Richard Grieveson Estonia Economic recovery firming by Maryna Tverdostup Hungary Budget consolidation or a new attempt to accelerate growth? by Sándor Richter Kazakhstan Growth acceleration amid anticipated oil sector recovery by Alexandra Bykova Kosovo Resilient and steady growth by Isilda Mara Latvia Slower-than-expected recovery ahead by Sebastian Leitner Lithuania Domestic and foreign demand driving economic recovery by Sebastian Leitner Moldova Upswing held back by energy crisis by Gábor Hunya Montenegro Hints of growth amidst EU accession hopes by Marko Sošić North Macedonia Still searching for direction by Branimir Jovanović Poland Strong growth driven by domestic demand by Maciej J. Grodzicki Romania Modest recovery from near-stagnation by Gábor Hunya Russia Stubborn inflationary pressures pose a policy dilemma by Vasily Astrov Serbia Moment of truth by Branimir Jovanović Slovakia Start of fiscal consolidation by Doris Hanzl-Weiss Slovenia Despite industry worries, a year of solid growth ahead by Niko Korpar Turkey Navigating a soft landing amid global uncertainty by Meryem Gökten Ukraine Weak growth amid huge uncertainty by Richard Grieveson |
| Keywords: | CESEE, economic forecast, Central and Eastern Europe, Western Balkans, EU, euro area, CIS, war in Ukraine, energy dependence, EU accession, EU Recovery and Resilience Facility, economic growth, labour markets, inflation, monetary policy, fiscal policy, GDP, consumer prices, unemployment, current account, fiscal balance, policy rate, exchange rate, political risk, FDI, exports, imports |
| JEL: | E20 E21 E22 E23 E24 E31 E32 E5 E62 F21 F31 H60 I18 J20 J30 O47 O52 O57 P24 P27 P33 P52 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:wii:mpaper:mr:2025-01 |
| By: | Roy Cerqueti (GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement, UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome]); Giovanna Ferraro (Università degli Studi di Roma Tor Vergata [Roma, Italia] = University of Rome Tor Vergata [Rome, Italy] = Université de Rome Tor Vergata [Rome, Italie]); Raffaele Mattera (UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome]); Saverio Storani (GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement, UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome]) |
| Abstract: | This paper faces the relevant task of assessing the integration of European countries when dealing with three paradigmatic socio-environmental themes: Circular Economy (CE), Energy Transition (ET), and Social Justice (SJ). Specifically, we aim to explore whether a similar behavior in facing one of the considered aspects is mirrored by similarity in the others. We move from a dataset composed of five variables for CE, two for ET, and three for SJ, representing yearly data for the quinquennium 2016-2020 and European countries. We build a multilayer network based on the ten variables having countries as nodes. Each layer/variable has weighted links based on countries' similarity. Inter-layer links are created through a community detection exercise over the individual layers. This approach allows us to evaluate analogies, leading to the assessment of intra-and inter-layer policy integration. We find a relatively low level of integration at the European level and a high sensitivity to the number of detected communities, thus revealing the role of countries' heterogeneity in driving integration. |
| Keywords: | Circular economy, Energy transition, Social justice, European countries, Multilayer networks, Clustering procedures |
| Date: | 2025–01–22 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05109264 |
| By: | International Monetary Fund |
| Abstract: | This technical note (TN) focuses on the euro area (EA) banking sector, which has weathered a succession of shocks over the past few years with notable resilience. Strong starting capital positions, ample liquidity and a diversified deposit base allowed banks to absorb the effects of the COVID-19 pandemic as well as the surge in inflation and rapid monetary policy tightening that followed. Capital ratios and liquidity cushions have in fact edged higher, non-performing loans continued to decline and profitability rose to post-global-financial-crisis highs in 2023, buoyed by wider interest margins. Even so, the picture is uneven: large cross-border groups display thinner capital and liquidity buffers, in line with structural differences in business models, and lower returns than their mid-sized domestic peers. Also, profitability retreated in late 2024, as asset-quality indicators began to soften. These recent trends signal both the rewards of prudent balance sheet management in good times and the latent pressures that could resurface should macro-financial conditions deteriorate. |
| Date: | 2025–07–25 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfscr:2025/210 |
| By: | Federico Colozza (UNIPV - Università degli Studi di Pavia [Italia] = University of Pavia [Italy] = Université de Pavie [Italie], ROMA TRE - Università degli Studi Roma Tre = Roma Tre University); Carlo Pietrobelli (UNU-MERIT - UNU-MERIT - United Nations University - Maastricht University, ROMA TRE - Università degli Studi Roma Tre = Roma Tre University); Antonio Vezzani (ROMA TRE - Università degli Studi Roma Tre = Roma Tre University, ESC [Rennes] - ESC Rennes School of Business) |
| Abstract: | In this paper we investigate the relationship between participation in global value chains and the environment from a spatial perspective. By drawing on an original dataset on global value chain participation, emissions of nitrogen oxides and sulphur oxides, and green patents for European regions, we present novel evidence about the relationship between global value chains, green technologies and air pollution at the regional level. Our findings suggest that although participation in global value chains may lead to lower polluting emissions, this effect largely depends on the capacity of regions to exploit the green knowledge deriving from participation and on the specific form of participation. When European regions are integrated with backward linkages (i.e., importing inputs to produce exports) they record lower levels of air pollution; conversely, participation through forward linkages (i.e., exporting inputs for other places' exports) leads to an increase in air pollution. Backward participation also come out to support the development of green technologies that mediate the effects of global value chains on the environment posited by the "Pollution Haven" hypothesis. Overall, the relationship between global value chains participation and air pollution will depend on the type of participation and on the capacity of territories to profit it for the development of green technologies. |
| Keywords: | Global value chains, Green technologies, Emissions, EU regions, Pollution haven hypothesis |
| Date: | 2024–02–13 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05136372 |
| By: | Edoardo Baldoni (European Commission, Joint Research Centre); Roberto Esposti (Department of Economics and Social Sciences, Universita' Politecnica delle Marche (UNIVPM)) |
| Abstract: | This paper concerns the application of the Treatment Effect logic to the assessment of environmental policy measures. Staggered treatment entry is admitted and, unlike most literature in the field, both dynamic treatment effects (carryover effect or time interference) and spatial interference (contagion or spillovers) are admitted. This circumstance is referred to as general interference. An appropriate theoretical framework is developed to integrate general interference in adopters' decision making. The identification and estimation approach adapts the procedure recently proposed by Wang (2023). This theoretical framework and estimation approach are applied to the adoption of organic farming in Italian agriculture under the EU support during period 2014-2022. Results confirm that disregarding one of these sources of interference may induce misleading evidence resulting in inappropriate policy conclusions. |
| Keywords: | Staggered Treatments, Dynamic Treatment Effects, Spatial Interference, Environmental Policy, Organic Farming. |
| JEL: | C21 C22 C23 Q12 Q18 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:anc:wpaper:497 |
| By: | Papatheophilou, Simela; Tröster, Bernhard; Raza, Werner; Coral, Laura |
| Abstract: | After some 20 years, the negotiations on the EU Mercosur Association Agreement (EUMAA) were concluded in June 2019. Due to strong opposition by EU Member States as well as from trade unions and civil society organizations, in particular with respect to the lack of enforceable environmental provisions and the potential impacts on EU agriculture as well as workers' rights, further negotiations on the agreement in principle took place in 2023 and 2024. This report presents an updated assessment of the potential effects of the EUMAA in its final version, thereby paying particular attention to the new elements included in the agreement. Against the background of recent geopolitical changes, the report also discusses the agreement's potential to promote economic security in the EU as well as to enhance inter-regional cooperation. |
| Abstract: | Nach rund 20 Jahren wurden die Verhandlungen über das Assoziierungsabkommen zwischen der EU und dem Mercosur (EUMAA) im Juni 2019 abgeschlossen. Aufgrund des starken Widerstands von EU-Mitgliedstaaten sowie von Gewerkschaften und Organisationen der Zivilgesellschaft, insbesondere hinsichtlich fehlender durchsetzbarer Umweltbestimmungen und der potenziellen Auswirkungen auf die EU-Landwirtschaft sowie die Arbeitnehmerrechte, fanden 2023 und 2024 jedoch weitere Verhandlungen über das Abkommen statt, die im Dezember 2024 abgeschlossen wurden. Auf der Grundlage einer früheren ÖFSE Studie (Tröster/Raza 2021) enthält dieser Bericht eine aktualisierte Bewertung der potenziellen Auswirkungen des EUMAA in seiner endgültigen Fassung, wobei der Schwerpunkt auf den neuen Elementen des Abkommens liegt. Vor dem Hintergrund der jüngsten geopolitischen Veränderungen wird in dem Bericht auch das Potenzial des Abkommens zur Förderung der wirtschaftlichen Sicherheit in der EU sowie zur Verbesserung der inter-regionalen Zusammenarbeit erörtert. |
| Keywords: | EU Mercosur Association Agreement (EUMAA), Trade, inter-regional cooperation, Trade Unions, Civil Society Organizations |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:oefser:323219 |
| By: | Perju, Genoveva-Elena |
| Abstract: | This paper analyses how the European Union (EU) has systematically used trade-facilitation assistance, rule-making, and market-access diplomacy to advance its economic and geopolitical interests vis-à-vis the United Nations Special Programme for the Economies of Central Asia (SPECA) and a broader set of developing economies. Drawing on primary documents (EU-SPECA progress reports 2018-2024, GSP+ monitoring reports), 87 semi-structured interviews with customs officials, private-sector representatives, and EU Delegation staff, and a new panel dataset covering 38 developing countries (2000-2023), we show that trade-facilitation measures have delivered measurable reductions in trade costs, but that their diplomatic value is mediated by four factors: (i) institutional absorptive capacity; (ii) the credibility of EU conditionality; (iii) competing offers from China and the Gulf states; and (iv) domestic political-economy coalitions. The paper concludes with a typology of “facilitation diplomacy” and a set of policy recommendations for the EU’s 2025-2030 external action agenda. |
| Keywords: | Trade facilitation, economic diplomacy, SPECA, EU external action, Aid for Trade, GSP+, Central Asia |
| JEL: | F13 F14 F15 |
| Date: | 2025–07–16 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125375 |
| By: | Judith Arnal |
| Abstract: | En junio de 2025, siete Estados miembros de la UE lanzaron Finance Europe, una etiqueta paneuropea para productos de ahorro minorista que exige invertir al menos el 70% de los recursos en activos europeos. La iniciativa responde al diagnóstico del informa Letta sobre la fuga anual de 300.000 millones de euros de ahorro europe hacia mercados extranjeros, principalmente estadounidenses, debido supuestamente a la fragmentación de los mercados financieros europeos. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:fda:fdafen:2025-26 |
| By: | International Monetary Fund |
| Abstract: | Despite recurring shocks, Europe’s economy remains resilient with record-low unemployment, declining inflation, and a stable financial system. However, policymakers face mounting challenges, including trade tensions, rising demand for defense spending, and the need to ensure energy security, all while addressing longstanding productivity challenges, rapid aging, and weak medium-term growth. |
| Keywords: | EU single market; EU budget; headline inflation; EU institution; growth potential; Inflation; Tariffs; Defense spending; Energy prices; Global; Europe |
| Date: | 2025–07–11 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfscr:2025/174 |