Today, the Commission is proposing immediate action to prepare Europe for the increased threat of coronavirus variants. The new European bio-defence preparedness plan against COVID-19 variants called “HERA Incubator” will work with researchers, biotech companies, manufacturers and public authorities in the EU and globally to detect new variants, provide incentives to develop new and adapted vaccines, speed up the approval process for these vaccines, and ensure scaling up of manufacturing capacities.
Taking action now is important as new variants continue to emerge and challenges with scaling up vaccine production are arising. The HERA Incubator will also serve as a blueprint for the EU’s long‑term preparedness for health emergencies.
Key actions to boost preparedness, develop vaccines for the variants and increase industrial production:

Detect, analyse and assess variants

Developing specialised tests for new variants, and to support genomic sequencing in Member States with at least €75 million in EU funding;
Reaching the target of 5% of genome sequencing of positive tests to help identify variants, monitor their spread in populations, and screen their impact on transmissibility;
Stepping up research and data exchange on variants with €150 million funding;
Launching the VACCELERATE COVID-19 clinical trial network, bringing together 16 EU Member States and five associated countries including Switzerland and Israel to exchange data and progressively also include children and young adults as participants in clinical trials.

Speed up regulatory approval of adapted vaccines: based on the annual influenza vaccine model, the EU will provide accelerated approval for adapted COVID-19 vaccines by:

Adapting the regulatory framework, such as amending the regulatory procedure to enable the approval of an adapted vaccine with a smaller set of additional data submitted to EMA on a rolling basis;
Providing guidance on data requirements for developers from the European Medicines Agency so that the requirements for variants are known in advance;
Facilitating certification of new or repurposed manufacturing sites through early involvement of regulatory authorities;
Considering a new category of emergency authorisation of vaccines at EU level with shared liability among Member States.

Ramp up production of COVID-19 vaccines: the EU will:

Update or conclude new Advance Purchase Agreements to support the development of new and adapted vaccines through EU funding, with a detailed and credible plan showing capability to produce vaccines in the EU, on a reliable timescale. This should not prevent the EU from considering sources from outside the EU if needed, provided they meet the EU safety requirements;
Work closely with manufacturers to help monitoring supply chains and addressing identified production bottlenecks;
Support the manufacturing of additional vaccines addressing new variants;
Develop a voluntary dedicated licensing mechanism to facilitate technology transfer;
Support cooperation between undertakings;
Ensure the EU’s manufacturing capacity by building up the “EU FAB” project.

The actions announced today will go hand-in-hand with global cooperation via the World Health Organisation and global initiatives on vaccines. They will also prepare the ground for the European Health Emergency Preparedness and Response Authority (HERA). HERA will build on the actions launched today and provide a permanent structure for risk modelling, global surveillance, technology transfers, manufacturing capacity, supply chain risk mapping, flexible manufacturing capacity and vaccine and medicine research and development.
Members of the College said:

President of the European Commission, Ursula von der Leyen, said: “Our priority is to ensure that all Europeans have access to safe and effective COVID-19 vaccines as soon as possible. At the same time, new variants of the virus are emerging fast and we must adapt our response even faster. To stay ahead of the curve, we are launching today the HERA Incubator. It brings together science, industry and public authorities, and pulls all available resources to enable us to respond to this challenge.”
Margaritis Schinas, Vice-President of the European Commission, said: “In our fight against the virus we are anticipating problems and acting proactively to mobilise all means to address the impact of variants. With our new bio-defence preparedness plan ‘HERA Incubator’, we are tackling parallel or subsequent series of pandemics deriving from the variants. Today’s proposal is the perfect example of what the EU is best at: pooling efforts and complementing them by funding. This is the way to get out from the crisis, ready to adapt to new circumstances and united in action – ensuring solidarity across the EU and the world.”
Stella Kyriakides, Commissioner for Health and Food Safety, said: “Europe is determined to stay ahead of the threat of new coronavirus variants. The HERA Incubator is an exercise in foresight, anticipation and united response. We can meet the dual challenge of addressing new variants and increasing our vaccine production capacity. It will build bridges between research, industry and regulators to speed up the processes – starting from the detection of variants all the way to the approval and production of vaccines. We need significant investments now and for the future and the HERA Incubator is a crucial part of our response.”
Thierry Breton, Commissioner for the Internal Market, said: “The Task Force for ramping-up vaccine production is already engaging on a daily basis with industry to better address and anticipate potential bottlenecks. With this increased cooperation, we will ensure that the industrial phase of vaccine production allows manufacturers to meet their commitments while anticipating our future needs and adjusting vaccine production to future variants. Today, with HERA incubator, we are providing a strong structural response.This is not only about short term fixes: it will contribute to a higher level of autonomy in the area of health in the near future for our Continent.”
Mariya Gabriel, Commissioner for Innovation, Research, Culture, Education and Youth, said: “Research and innovation continue to be crucial in fighting the continuing challenges of this pandemic. The HERA Incubator and the reinforcement of European infrastructures and networks, supported by additional funding from Horizon 2020 and Horizon Europe programmes, will help us deal with any variants and be better prepared for future outbreaks.”
Background
The EU Vaccine Strategy has secured access to 2.6 billion vaccine doses as part of the broadest global portfolio of safe and secure COVID-19 vaccines. Less than a year since the virus appeared for the first time in Europe, vaccination has started across all Member States. This is a remarkable achievement of European and global advanced research and vaccine development, condensing what usually takes 5-10 years in just over 10 months.
At the same time, there are challenges to scale-up industrial vaccine production to keep pace. In order to boost production capacity in Europe, a much closer, more integrated and more strategic public-private cooperation with industry is needed. In this spirit, the Commission has set-up a Task Force for Industrial Scale-up of COVID-19 vaccines to detect and help respond to issues in real-time.
Europe now also needs to stay ahead of the curve as new and emerging threats continue to appear in the present or on the horizon. The most immediate of these are emerging and multiplying variants already spreading and developing in Europe and across the world. Presently, authorised vaccines are considered effective against the variants we are aware of. However, Europe must be ready and prepared for the possibility of future variants being more or fully resistant to existing vaccines.
Compliments of the European Commission.
The post Coronavirus: preparing Europe for the increased threat of variants first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Improved technology heralds a new era in EUIPO communications
From 1 March 2021, a number of important changes will affect the way the EUIPO communicates with customers. The changes are reflected in two key decisions recently adopted by the Executive Director of the EUIPO.
100% eComm

No more fax: as fax communications prove less and less reliable the EUIPO has discontinued its fax service as a means of communication in EUIPO procedures.

Fully eComm: the EUIPO’s secure e-communications platform will be the accepted means of communication for account holders in all matters relating to EU trade marks and designs via the User Area. Users, who have not chosen eComm as their preferred means of communication, will be automatically switched to eComm.

File-sharing from the User Area: the ‘Fax alternative’ button, found in the User Area under the ‘Communications’ tab, will be renamed ‘Correspondence alternative’. While the usual terms and conditions will still apply, this will serve as a back-up in the event of malfunction of specific e-operations.

File-sharing from outside the User Area: a new option will be available for users who are unable to access their account. The file-sharing platform will be independent from the EUIPO’s website and will be available during the EUIPO’s business hours after contacting us.

Hyperlinks to supporting documents: attachments in documents sent by the EUIPO will be in the form of hyperlinks rather than physical documents, where appropriate. The hyperlinks will lead to the User Area from where the user can download the documents.

For more on communication by electronic means, see Decision No EX-20-09
No more CDs and DVDs

USBs and pen drives: users must submit documents or other items of evidence for use in proceedings using small portable storage drives, such as USB flash drives, and not external hard drives, such as CD-ROMs or optical discs.

For more on the technical specifications for annexes submitted on data carriers, see Decision No EX-20-10
Compliments of the European Union Intellectual Property Office (EUIPO).
The post EUIPO | No more fax, no more CDs, no more attachments first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Blog post by Frank Elderson, Member of the Executive Board of the ECB, 13 February 2021 |

Climate change requires urgent action, and the window of opportunity is closing fast. The ECB must be committed to doing its part. Yet, such commitment may raise a few eyebrows: why should the ECB care about climate change and how does that square with its mandate? These are important questions that we take seriously: the European Union is underpinned by the rule of law, and the ECB can only act within the limits set by the founding Treaties.
Addressing climate change was not an urgent issue when the ECB’s mandate was drafted. Yet its authors wisely provided us with rules and principles on what we are required to do, what we could do, and where the limits of our responsibility to address future challenges, including climate change, lie. What emerges from a careful reading of the Treaties is that they demarcate a vital policy space within which we must now take our decisions.
First, the ECB’s primary objective is to maintain price stability. Climate change can directly affect inflation. This may happen when more frequent floods or droughts destroy crops and raise food prices, for example. Mitigation policies can also affect consumer prices such as electricity and petrol directly or indirectly, for instance through higher production costs. These issues clearly lie at the heart of our mandate. Moreover, the effectiveness of monetary policy could be hampered by the impact of climate-related structural change, or by disruption to the financial system. For example, losses from disasters and stranded assets could impair credit creation. During the sovereign debt crisis and the pandemic, the ECB has taken resolute action and developed new policy tools to preserve the singleness and effectiveness of monetary policy. The Court of Justice of the European Union has confirmed that catering for the preconditions required for the pursuit of our primary objective falls within our mandate to maintain price stability.
Second, the Treaties gave the ECB the – sometimes overlooked – obligation “to support the general economic policies in the Union”. This support must not prejudice the objective of price stability. According to EU law, this includes contributing to “the sustainable development of Europe based on […] a high level of protection and improvement of the quality of the environment”. This mandate, which is sometimes referred to as the ECB’s “secondary objective”, stipulates a duty, not an option, for the ECB to provide its support.
Beyond that, the Treaties explicitly state that environmental protection requirements must be integrated into the definition and implementation of all EU policies and activities, which include actions taken by the ECB. More generally, the Treaties require consistency between EU policies. These provisions, although not conferring a specific mandate for ECB climate change action, do require us to take into account the EU’s environmental objectives and policies when pursuing both our primary and secondary objectives.
And in any case, the ECB must respond to risks related to climate change that may have an impact on its balance sheet.
The Treaties also set limits on what climate-related actions the ECB can take. First, the ECB’s support for EU policies should be without prejudice to the primary objective of price stability. Second, we must not encroach on the competences of other authorities that are responsible for environmental policy at the EU or national level. Unlike for price stability, we are not policymakers in this field but rather we need to defer to the balance struck between environmental concerns and other societal interests by the EU’s political institutions and Member States. We must contribute to the success of climate change-related policies, but we cannot make such policies ourselves. What is more, the principle of proportionality requires that the content and form of our actions not exceed what is necessary to achieve the objectives of the Treaties. Finally, the ECB must act “in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources”.
These underlying rules determine general – but clear – obligations and limits on how the ECB must contribute to society’s urgent need to tackle climate change. They provide substantial scope for necessary action across our various functions. Climate considerations form an essential part of our ongoing monetary policy strategy review. We are already taking action where there is overlap between climate change and our areas of competence relating to financial stability, we have clarified our supervisory expectations of how banks should manage climate risks, we are conducting a climate stress test, and are one of 83 members of the Network for Greening the Financial System. These considerations and actions demonstrate the ECB’s determination to fulfil its mandate while giving the necessary level of urgency to climate change issues.

Compliments of the European Central Bank.
The post ECB | Greening monetary policy first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Good evening to all of you. Before I debrief you on today’s Eurogroup, let me mention that we had the chance to welcome two new colleagues to our meeting today – the new Italian minister, Daniele Franco, whose government was just sworn in this weekend, and indeed, it was his first day in his new role. And the new Estonian minister, Mrs. Keit Pentus-Rosimannus, who presented the policy priorities of the new Estonian government. The Commission also presented its assessment on the updated draft budgetary plan that Lithuania presented after the formation of their new government in December.
So moving to the substance of the meeting, the Eurogroup continues to engage very closely in the health and economic situation of the euro area. We started today with an update on the health situation from Dr. Mike Ryan and Dr. Bruce Aylward of the World Health Organisation, which informed our discussions on the economic situation. The faster we can overcome this pandemic, the quicker we can deal with its economic consequences.
Dr. Ryan and Dr. Aylward both emphasised that a high level of uncertainty remains, especially with regard to the circulation of the virus and the emergence of new variants. But they also highlighted the huge progress that has been made in terms of testing, treatment and vaccination since coronavirus emerged one year ago. The steady progress of the vaccination campaigns in particular raises the prospect of gradual change. The commission’s economic forecast confirms that economic growth is expected to resume in the spring after a very challenging winter. The forecast is premised on a gradual opening up of the economy in the first half of the year, and an acceleration of growth in the second half of the year.
This gradual recovery will of course be supported and reinforced by the joint Recovery Fund. The RRF, which will enter into force on the 18th of February, will play an important role in ensuring a sustained and robust economic recovery as opposed to just a temporary rebound.
But the situation remains serious. The level of employment is clearly well below where we want it to be. And while COVID-19 has affected every part of the economy of the eurozone, it has been a particular challenge for young women and men, but also those who are employed in contact-intensive parts of our economies. This reaffirms the need to continue protecting our citizens from this pandemic and for supportive economic policies to remain in place for as long as they are needed. There is an inherent risk of withdrawing support too early, as opposed to withdrawing it too late.
In light of the uncertainty and challenge, there continues to be a great need to coordinate our monetary and our budgetary efforts. From a Eurogroup perspective, it is important that we approach national budgetary preparations in a coordinated manner to help shape our policy decisions, particularly as the process of vaccination gathers steam and our recovery slowly begins.
And we have learnt so much in dealing with this disease. It is good to note that lockdowns were more targeted the second time round and that many businesses and households have been able to adapt to changing and very challenging circumstances.
And when we start to emerge from the health crisis, our policy response will need to adapt gradually. It’s something we will be talking about regularly in the coming months because we all have an interest in a successful and a united return to growth. We will soon be issuing the schedule that we have agreed for the discussions that we will be having on budgetary policy. And my aim is to reach a common understanding on the appropriate budgetary stance by the summer so that we can guide our budgetary discussions for next year.
The second main topic on our agenda concerned the international role of the euro. This discussion took place on the basis of the Commission communication of 19 January on the European economic and financial system. The aim is to reduce our dependence on other currencies and to strengthen our autonomy in various situations. At the same time, an increased international use of our currency also implies potential trade-offs which we will continue to monitor.
Ministers also agreed that our actions to support the international role of the euro should be broad-based, encompassing progress on amongst other things, Economic and Monetary Union, Banking Union, Capital Markets Union and the implementation of Next Generation EU. During the discussion, ministers also emphasised the potential of green bond issuance to enhance the use of the euro by the markets while also contributing to achieving our climate transition objectives.
Let me emphasise in conclusion that this discussion is not about rivalling other currencies, but it is instead about increasing the resilience of our own currency and giving our firms and our citizens greater choice and security. We’ll be coming back to some of these issues soon to prepare a Leaders’ discussion on this topic in March.
Finally, we took stock of the state of play with the solvency of the corporate sector. The support that we have put in place at the national level and the framework we have agreed at the European level have all helped to keep many businesses afloat during lockdowns. This has been a success story, but we are aware that difficult times could lie ahead. Most businesses certainly have a bright future, but of course, many businesses are going to need time to repair their balance sheets and unfortunately, there could be some that will not be viable in the longer term due to changing health circumstances, and what that will mean for how economies are structured.
As the recovery phase is kicking in, we will move to a phase of more targeted measures with the difficult question of how to identify viable firms that will still need our support. Our insolvency frameworks will need to be adaptable in order to minimise economic damage. And this is a discussion that we will return to in April.
To conclude today’s discussions did acknowledge the many challenges that we are still responding to, that we are still working hard to overcome. It does come down to 3 Cs –  certainty, coordination and consensus. In the face of health and economic uncertainty, we are working hard to redouble our coordination efforts to further create a consensus to help the euro area navigate through the uncertainty created by this pandemic. We will be intensifying our efforts to do this in 2021, given the value of this consensus in 2020, and I look forward to working closely, in particular with Commissioner Gentiloni and his colleagues in the Commission and all members of the Eurogroup to help us put in place the strongest policy framework to respond back to challenges which we will overcome.
Contact:

Maria Tomasik, Spokesperson for the Eurogroup President | maria.tomasik@consilium.europa.eu

Compliments of the Council of the European Union. 
The post Remarks by Paschal Donohoe following the Eurogroup video conference of 15 February 2021 first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The criminal network defrauded Dutch tax authorities of an estimated €9 million
On 10 February 2021, the investigation service of the Dutch tax authorities -FIOD (Fiscale Inlichtingen en OpsporingsDienst) busted a criminal network involved in international VAT fraud with electronic devices traded via an online company. Fraudsters established a complex trading scheme with Secure Digital (SD) memory cards for electronic devices, which is believed to have defrauded the Dutch treasury of an estimated €9 million between 2017 and 2019. The international sting involved the collaboration of judicial and law enforcement authorities in Croatia, Czech Republic, Hungary, and Poland with the support of Europol and Eurojust. During the action day, investigators carried out thirteen house searches and seized communications equipment and documents.
A COMPLEX MISSING TRADER INTRA-COMMUNITY FRAUD (MTIC)
The illegal VAT scheme consisted in the suspicion of a fake trading circuit of memory cards involving a string of companies in the EU. The criminal gang purchased SD cards with VAT from Dutch companies identified as missing traders. The goods were then sold to companies in Croatia, and the Czech Republic and exempted of VAT according to intra-EU tax rules. To evade tax payment, the scheme finally used conduit companies based in Croatia and Poland to sell back the VAT-exempt goods to the missing traders in the Netherlands.
The organised crime group also used “buffers” to conceal the illicit transaction chain. These companies purchased the SD cards from the missing traders and only paid VAT on a small margin made from the transactions. As a common practice in MTIC fraud the payment for the transactions was made in advance. It is believed that over the past three years, at least eight missing traders in the Netherlands were involved in this fraud. The criminal gang integrated this so-called ‘VAT carousel fraud’ into the regular commercial activity of an online company selling electronic devices in order to avoid paying VAT.
EUROPOL SUPPORT
Europol actively supported the operation by providing analytical support and operational coordination for an effective cross-border cooperation. Moreover, Europol deployed a mobile office in the field to support the Dutch authorities in real-time.
Europol’s European Financial and Economic Crime Centre (EFECC) helps with identifying and dismantling organised criminal networks involved in cross-border VAT fraudand the tracing and confiscating of the proceeds of MTIC fraud. MTIC is committed through a chain of linked companies when the fraudsters sell goods or services from one EU country to another, taking advantage of the fact that it is legitimate not to charge VAT on such cross-border transactions. MTIC scammers obtain €60 billion in criminal profits every year in the EU by avoiding the payment of VAT or by corruptly claiming repayments of VAT from national authorities.
Compliments of Europol.
The post VAT fraud clampdown: International scam with memory cards uncovered in The Netherlands first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

MEPs approved the EU’s key instrument to help countries recover from Covid-19, debated the vaccines situation and called for tighter recycling rules.

Covid recovery
On Tuesday, MEPs approved the Recovery and Resilience Facility, designed to help EU countries recover from the Covid-19 pandemic.
The impact of Covid-19 on young people and sport
MEPs called on the Commission and EU countries to do more to prevent the pandemic affecting young people and the sports sector in a report adopted on Wednesday.
Vaccinations
In a debate on Wednesday, MEPs said the EU should take measures to boost the production of vaccines.
Relief measures for aviation sector
To support the transport sector during the coronavirus crisis, MEPs agreed to extend rules for the use of airport slots to prevent empty flights and prolonged the validity of some licences used in the transport sector on Wednesday.
Circular Economy Action Plan
The Parliament called for tighter recycling rules and binding 2030 targets for materials use and consumption in a resolution adopted on 9 February 2021. The report represents Parliament feels should be included in the European Commission’s proposed Circular Economy Action Plan to achieve a circular economy by 2050.
Reducing inequalities
On Tuesday, MEPs called for a minimum wage, equal labour conditions for platform workers and a better work-life balance in order to fight inequality and in-work poverty.
Human trafficking
In a report adopted on Tuesday, MEPs called on the EU to step up the fight against human trafficking and strengthen protection for victims.
Social media and democracy debate
On Wednesday, MEPs called on the EU to regulate social media to protect freedom of expression while limiting harmful content.
Russia
On Tuesday, MEPs hit out at the Council for failing to adequately react to Russia’s aggressive policies and criticised EU foreign policy chief Josep Borrell for his recent visit to Moscow.
Myanmar
On Thursday MEPs called for democracy in Myanmar to be restored and demanded the unconditional release of all those illegally arrested followed Sunday’s military coup.
Abortion ban in Poland
In a debate on Tuesday morning, MEPs condemned the rollback on abortion rights in Poland following the entry into force of the Constitutional Tribunal’s ruling.

Compliments of the European Parliament

The post Plenary highlights: Covid-19 recovery, vaccines, circular economy first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Paris, 11 February 2021 | Speech by François Villeroy de Galhau, Governor of the Banque de France |
I would like to welcome you to the Banque de France for this 5th edition of the Rencontres on “Climate Change and Sustainable Finance”, organised jointly with Option Finance. Central banks’ commitment to the climate cause may seem obvious today, and this despite the urgency of addressing the Covid pandemic.  But it was not the case five years ago, and few issues have seen such a rapid and massive change in mindset and initiative. At the Banque de France and increasingly within the Eurosystem, we are driven by a simple but tenacious ambition: to do our utmost to support and add to the collective action in the fight against global warming. We cannot do everything – nothing will replace an appropriate carbon price and therefore, let me be clear, a carbon tax in one form or another. But we can do a lot. The Banque de France spearheaded the creation of the Network for Greening the Financial System (NGFS), which was launched in Paris in December 2017 and is chaired by our Dutch colleague Frank Elderson. This network – which has already achieved a lot regarding the supervision of banks and insurance companies – now counts more than 80 members, including the US Federal Reserve since 15 December 2020. Since 2019, the Banque de France has also been the first Eurosystem central bank to publish a full report on its responsible investment policy; we are committed to completely exiting coal by 2024. Our European Central Bank, for its part, has been, under the leadership of Christine Lagarde, the first central bank to include the fight against climate change in its strategic review.
Today supervision, responsible investment, support to green finance, which Bruno Le Maire has just forcefully stressed… and tomorrow the greening of monetary policy itself: this morning, I would like to explore together with you this new frontier that lies before us. It is perhaps the least obvious one, but one of the most important. The journey will sometimes be a little technical – I agree – but the roadmap will be all the more precise. I will first come back to the meaning of our monetary action in the face of climate change (I). I will then present three concrete levers for acceleration (II).
I. Why must the Eurosystem act on climate change?
Should monetary policy be “greened”? The subject easily gives rise to heated debate: on the one hand, there are the “conservatives” – not to mention the climate sceptics – who are concerned only about central banks’ action against inflation, and denounce the risks of “politicisation” and “mission creep”. And on the other hand, there are the activists who are calling for a change of mandate, with a focus on the fight against climate change and the conversion of instruments – including the American movement for a “Green QE”. In my opinion, the truth is simpler and stronger. The Eurosystem’s consideration for climate change is neither an abuse of its mission, nor a mere militant conviction or a fad; it is an imperative that we must pursue in the very name of our current mandate and to ensure the smooth implementation of monetary policy.
1.1 In the very name of our mandate
Without even having to mention our “secondary” objectives, which include environmental protection, climate change is linked to the core of the Eurosystem’s monetary mandate: price stability. Shocks related to climate change are potentially difficult to manage for central banks because of their stagflationary nature, as they may result in both upward pressure on prices and a slowdown in activity. Transitional policies – which bring about taxation changes, such as a carbon tax, or regulatory changes – can affect prices, notably energy prices, generate inflationary pressures and weigh on activity, as is already the case in the automotive sector. In addition to transition risks, climate events are already having increasingly visible effects on activity and food prices. The price of wheat has currently reached a historic high, partly for climate reasons. In Europe itself, the drought in the summer of 2018 had caused the Rhine to drop to a historically low level and slowed growth in Germany by disrupting river transport.
In the longer term, climate change will weigh on the potential growth of our economies. Numerous studies show that higher temperatures reduce labour productivity by about 2% for every degree above 25°C. According to simulations by the Banque de France, real GDP in Europe is expected to be 2 to 6% lower in 2050, in the event of a disorderly rather than orderly climate transition.
1.2 For the smooth implementation of monetary policy
Climate risk is also a source of financial risk. It is therefore essential, as my colleague and friend Jens Weidmann, President of the Bundesbank, says, that “central banks […] practice what they preach” for the banks they supervise, i.e. better factor climate risk into their own operations. Moreover, preserving financial stability is a prerequisite for ensuring the smooth transmission of monetary policy, as the NGFS also recently recalled.
Let’s face it: the ECB’s balance sheet is “exposed” to climate risk through the securities it purchases and the assets pledged as collateral by banks, to an extent that is insufficiently taken into account. This is primarily due to the lack of comprehensive and standardised information that is needed for all economic agents to factor in climate risk. I will come back to this need for standardisation later. But more fundamentally, the difficulties in pricing climate risk are due to the very characteristics of these risks, and in particular to what we call “green swans”, which generate radical uncertainty and whose consequences can be systemic. In this respect, market neutrality – which guides the execution of our market operations – should not put a brake on carbon neutrality. Market operations are conducted in a neutral manner as long as they comply with the central banks’ risk control rules. And yet, climate risk is precisely a financial risk that is currently insufficiently measured by markets.
Another difficulty is often put forward, but it can be overcome: the fact that climate risk is long-term, while many of our risk measures are short- to medium-term. This is a real technical challenge: the “probability of default” is usually one year; our economic forecasts cover a two to three-year horizon. We must therefore work to “lengthen” our measures, but the fact that a “tragedy of the horizon” exists is not a call for a status quo. On the contrary! Climate change calls for early and resolute action as the benefits of corrective measures will essentially only be felt in the longer term.
II. How should the central bank intervene?
How can this be concretely achieved? Let me start by stressing a key point: the Eurosystem’s highly accommodative monetary policy is already helping to finance the transition thanks to very low interest rates and abundant liquidity. Green investment will have to be very significant, we are aware of this, – with more than EUR 1,000 billion in public and private investment planned as part of the European Green Deal; but never has monetary policy been so favourable for achieving this. The greening of the central bank’s actions does not therefore require a further easing of monetary policy, but rather a recalibration of its tools. By next September, we will decide within the Governing Council on the conclusions of our “Strategic Review”. To contribute to this debate, I would today like to present our ambitions in the form of a simple triptych: forecast, disclose and incorporate climate risk.
2.1 Forecast, and therefore model
First ambition: to deepen our understanding of the effects of climate change not only on prices but also on growth, both over the business cycle and over much longer time horizons. We are not starting from scratch! Much progress has already been made, notably driven by the NGFS. Our models already incorporate, over a three-year horizon, the effects of tax measures to facilitate the transition, such as the carbon tax. However, changes in the behaviour of economic agents are more difficult to take into account, even though – via expectations – their economic consequences could be felt well before their implementation. We will also need to further examine the impact of the energy sector on economic dynamics, particularly on international trade or the valuation of certain financial assets. Beyond the monetary policy horizon, it is important to assess the impact of climate risk on potential growth and its consequences on the central bank’s policy space to achieve its primary objective. I am referring in particular to the long-term effects of more frequent and more severe extreme climate events on capital accumulation, the labour market and migration flows.
2.2 Disclose, and, for this, impose our standards
This brings me to our second ambition: imposing transparency on all our counterparties, not only financial but also corporate, for both collateral and asset purchase programmes. This transparency is a prerequisite for better risk assessment. To do so, I believe that the Eurosystem should require issuers to disclose their climate-related exposures using a metric that needs to be harmonised. As far as the rating agencies themselves are concerned, we could decide to only work with those that include climate-related risks sufficiently.
This transparency requirement goes hand in hand with a harmonised regulatory framework. I repeat, and I regret to say that neither in Europe, nor even in France, are we today in a position to compare – and therefore to correctly assess – the heterogeneous data published by financial institutions and companies.  From this perspective, the standardisation of data and the draft Non-Financial Reporting Directive – which will be discussed this year – for adoption hopefully next year, under the French Presidency – will be the battle to be fought in 2021. And it would be unacceptable – at a time when progress on climate change is moving in the right direction and Europe has won the first round of climate-related values – for Europe to lose the second round, i.e. that of measuring these values using standards and published data.
2.3 Incorporate climate risk, into order to reduce it in all of our operations and in the economy
The third part of our triptych, the very core of our activity, and the most powerful: reducing our climate risk in concrete terms, through our asset purchase and collateral policies. This ambition requires great dexterity; but it is rooted in a conviction: we have in our hands the tools to move forward, concretely, strongly.
I propose to start decarbonising the ECB’s balance sheet in a pragmatic, gradual and targeted manner for all corporate assets, whether they are held on the central bank’s balance sheet (purchases) or taken as collateral, without including government securities. There are at least two arguments for such a priority: 1/ it is very difficult to differentiate between the climate policies of the euro area countries. 2/ Conversely, non-financial corporations are clearly identified as players whose activities are the most carbon intensive. Thanks to their transparency efforts, we now know how to calculate climate indicators for more than 90% of the value of corporate bonds eligible with the Eurosystem. We also know how to do this for the bank loans of the largest debtors, which are also the most important in climate terms. The second step would be to extend the decarbonisation strategy to securities issued by financial institutions. To achieve this, banks will need to be able to assess their indirect emissions, generated by the activities they finance.
After determining the scope, the decarbonisation method remains to be defined. I believe that we should seek to achieve an adjustment of the valuation of all these assets according to the climate transition risk. This solution has the considerable advantage of avoiding the threshold effects that would result in simply excluding certain securities. Ultimately, we will be able to and must directly measure the additional financial risk associated with climate risk, and reduce the value of the assets accordingly: this is notably the aim of all the climate stress test methods that we are now actively working on at the Banque de France and the ACPR, such as in the framework of the NGFS.
But pending their actual completion, we could choose a good “proxy” for this financial risk, namely climate alignment; i.e. aligning assets and firms with the 2°C trajectory set by the Paris Agreement. More specifically, the Eurosystem could use indicators that measure the effort that an issuer makes over a given period to reduce its carbon emissions compared with its peers in the same economic sector. Here, we have most of the data. The most advanced 2° alignment methodologies, even if they have yet to be finalised, are advantageous in that they take into account both past efforts and future commitments to reduce “carbon” emissions over a predetermined horizon. This sector-specific and dynamic assessment over time provides a greater incentive and would prevent all issuers in carbon-intensive sectors from being blindly “punished” (contrary to an exclusion-based approach).
For collateral, this asset valuation adjustment could be directly applied. But our ambition must equally apply at least as much to corporate bond purchase programmes. Here, we are obliged to purchase assets at the market price; but I believe it is possible and desirable to recalibrate the purchase limits per company (tilting) on the basis of climate criteria. For instance, the Eurosystem could limit its securities purchases from issuers whose climate performance is not compatible with the Paris agreement. Conversely, securities issued by “aligned” companies could be purchased in larger quantities. This approach, applying to all companies and our Corporate Sector Purchase Programme, would be more comprehensive than a Green QE, whose quantitative impact would be lower because it would be targeted at green bonds only.
This action programme is ambitious: in the fight against global warming, the Eurosystem would thus target the direct effects – better conducting its monetary policy and reducing its own risks – as well as the indirect effects – steering the behaviour of companies and financial institutions, through its disclosure policy, as well as its asset purchase and collateral policies. And this programme is demanding: it requires in-depth work on our macroeconomic models as well as on the climate assessment of assets. But we can make this decision quickly – by the end of this year – and then implement it in three to five years. Then the Eurosystem, together with the European Central Bank, under the impetus created by Christine Lagarde, and the Banque de France, will be the pioneers in this global fight. We must do so, in the very name of our mandate.
However, the central banks alone will not be able to do enough. Let us transform this fight into an opportunity, that of a combination of fiscal, monetary and structural policies within the framework of a genuine green policy-mix combining carbon prices, public investment, sector-specific rules and monetary action. “The future is not what will happen to us, but what we are going to do. It calls us, or rather it pulls us to it,” said Bergson. There is still time to prove him right.
Compliments of the Banque de France.
The post Speech | The role of central banks in the greening of the economy first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Europe remains in the grip of the coronavirus pandemic. The resurgence in the number of cases, together with the appearance of new, more contagious strains of the coronavirus, have forced many Member States to reintroduce or tighten containment measures. At the same time, the start of vaccination programmes throughout the EU provides grounds for cautious optimism.
Economic growth poised to recover as containment measures ease
The Winter 2021 Economic Forecast projects that the euro area economy will grow by 3.8% in both 2021 and 2022. The forecast projects that the EU economy will grow by 3.7% in 2021 and 3.9% in 2022.
The euro area and EU economies are expected to reach their pre-crisis levels of output earlier than anticipated in the Autumn 2020 Economic Forecast, largely because of the stronger than expected growth momentum projected in the second half of 2021 and in 2022.
After strong growth in the third quarter of 2020, economic activity contracted again in the fourth quarter as a second wave of the pandemic triggered renewed containment measures. With those measures still in place, the EU and euro area economies are expected to contract in the first quarter of 2021. Economic growth is set to resume in the spring and gather momentum in the summer as vaccination programmes progress and containment measures gradually ease. An improved outlook for the global economy is also set to support the recovery.
The economic impact of the pandemic remains uneven across Member States and the speed of the recovery is also projected to vary significantly.
Inflation outlook to remain subdued
The forecast projects that inflation in the euro area is set to increase from 0.3% in 2020 to 1.4% in 2021, before moderating slightly to 1.3% in 2022. The inflation forecast for the euro area and the EU has increased slightly for 2021 compared to the autumn but is, overall, expected to remain subdued. The delayed recovery is set to continue dampening aggregate demand pressures on prices. In 2021, it will be temporarily pushed up by positive base effects in energy inflation, tax adjustments – especially in Germany – and the impact of pent-up demand hitting some remaining supply constraints. In 2022, as supply adjusts and base effects taper out, inflation is expected to moderate again.
High uncertainty and significant risks remain
Risks surrounding the forecast are more balanced since the autumn, though they remain high. They are mainly related to the evolution of the pandemic and the success of vaccination campaigns.
Positive risks are linked to the possibility that the vaccination process leads to a faster-than-expected easing of containment measures and therefore an earlier and stronger recovery. Also, NextGenerationEU, the EU’s recovery instrument of which the centrepiece is the Recovery and Resilience Facility (RRF), could fuel stronger growth than projected, since the envisaged funding has – for the most part – not yet been incorporated into this forecast.
In terms of negative risks, the pandemic could prove more persistent or severe in the near-term than assumed in this forecast, or there could be delays in the roll-out of vaccination programmes. This could delay the easing of containment measures, which would in turn affect the timing and strength of the expected recovery. There is also a risk that the crisis could leave deeper scars in the EU’s economic and social fabric, notably through widespread bankruptcies and job losses. This would also hurt the financial sector, increase long-term unemployment and worsen inequalities.
Members of the College said:
Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People said: “Today’s forecast provides real hope at a time of great uncertainty for us all. The solid expected pick-up of growth in the second half of this year shows very clearly that we are turning the corner in overcoming this crisis. A strong European response will be crucial to tackle issues such as job losses, a weakened corporate sector and rising inequalities. We will still have a great deal to do to contain the wider socio-economic fallout. Our recovery package will go a long way to supporting the recovery, backed up by vaccination roll-out and a likely upswing in global demand.”
Paolo Gentiloni, Commissioner for Economy said: “Europeans are living through challenging times. We remain in the painful grip of the pandemic, its social and economic consequences all too evident. Yet there is, at last, light at the end of the tunnel. As increasing numbers are vaccinated over the coming months, an easing of containment measures should allow for a strengthening rebound over the spring and summer. The EU economy should return to pre-pandemic GDP levels in 2022, earlier than previously expected – though the output lost in 2020 will not be recouped so quickly, or at the same pace across our Union. This forecast is subject to multiple risks, related for instance to new variants of COVID-19 and to the global epidemiological situation. On the other hand, the impact of Next Generation EU should provide a strong boost to the hardest-hit economies over the coming years, which is not yet integrated into today’s projections.”
Background
The Winter 2021 Economic Forecast provides an update of the Autumn 2020 Economic Forecast which was presented in November 2020, focusing on GDP and inflation developments in all EU Member States.
This forecast is based on a set of technical assumptions concerning exchange rates, interest rates and commodity prices, with a cut-off date of 28 January 2021. For all other incoming data, including assumptions about government policies, this forecast takes into consideration information up until and including 2 February. Unless policies are credibly announced and specified in adequate detail, the projections assume no policy changes.
Crucially, the forecast hinges upon two important technical assumptions concerning the pandemic. First, it assumes that after a significant tightening in the fourth quarter of 2020, containment measures remain strict in the first quarter of 2021. The forecast assumes that containment measures will then begin to ease towards the end of the second quarter, and then more markedly in the second half of the year when the most vulnerable and an increasing share of the adult population should have been vaccinated. Second, it assumes that containment measures will remain marginal towards the end of 2021 with only targeted sectoral measures still present in 2022.
The incorporation of NextGenerationEU, including the RRF, in the forecast remains in line with the usual no-policy-change assumption and is unchanged from the Autumn Forecast. The forecast only incorporates those measures that have either been adopted or credibly announced and specified in sufficient detail, notably in national budgets. In practice, this means that the economic projections of only a few Member  States  take account of some measures expected to be financed under RRF.
This forecast takes into account that the EU and the United Kingdom agreed on a Trade and Cooperation Agreement, which is provisionally in application since 1 January 2021 and which includes a Free Trade Agreement (FTA).
The European Commission’s next forecast will be the Spring 2021 Economic Forecast in May 2021.
Compliments of the European Commission.
The post Winter 2021 Economic Forecast: A challenging winter, but light at the end of the tunnel first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.