The European Commission has published today its Renovation Wave Strategy to improve the energy performance of buildings. The Commission aims to at least double renovation rates in the next ten years and make sure renovations lead to higher energy and resource efficiency. This will enhance the quality of life for people living in and using the buildings, reduce Europe’s greenhouse gas emissions, foster digitalisation and improve the reuse and recycling of materials. By 2030, 35 million buildings could be renovated and up to 160,000 additional green jobs created in the construction sector.
Buildings are responsible for about 40% of the EU’s energy consumption, and 36% of greenhouse gas emissions. But only 1% of buildings undergo energy efficient renovation every year, so effective action is crucial to making Europe climate-neutral by 2050. With nearly 34 million Europeans unable to afford keeping their homes heated, public policies to promote energy efficient renovation are also a response to energy poverty, support the health and wellbeing of people and help reduce their energy bills. The Commission has also published today a Recommendation for Member States on tackling energy poverty.
Executive Vice-President for the European Green Deal, Frans Timmermans said: “We want everyone in Europe to have a home they can light, heat, or cool without breaking the bank or breaking the planet. The Renovation Wave will improve the places where we work, live and study, while reducing our impact on the environment and providing jobs for thousands of Europeans. We need better buildings if we want to build back better.”
Commissioner for Energy, Kadri Simson, said: “The green recovery starts at home. With the Renovation Wave we will tackle the many barriers that today make renovation complex, expensive and time consuming, holding back much needed action. We will propose better ways to measure renovation benefits, minimum energy performance standards, more EU funding and technical assistance encourage green mortgages and support more renewables in heating and cooling. This will be a game changer for home-owners, tenants and public authorities.”
The strategy will prioritise action in three areas: decarbonisation of heating and cooling; tackling energy poverty and worst-performing buildings; and renovation of public buildings such as schools, hospitals and administrative buildings. The Commission proposes to break down existing barriers throughout the renovation chain – from the conception of a project to its funding and completion – with a set of policy measures, funding tools and technical assistance instruments.
The strategy will include the following lead actions:

Stronger regulations, standards and information on the energy performance of buildings to set better incentives for public and private sector renovations, including a phased introduction of mandatory minimum energy performance standards for existing buildings, updated rules for Energy Performance Certificates, and a possible extension of building renovation requirements for the public sector;
Ensuring accessible and well-targeted funding, including through the ‘Renovate’ and ‘Power Up’ Flagships in the Recovery and Resilience Facility under NextGenerationEU, simplified rules for combining different funding streams, and multiple incentives for private financing;

Increasing capacity to prepare and implement renovation projects, from technical assistance to national and local authorities through to training and skills development for workers in new green jobs;
Expanding the market for sustainable construction products and services, including the integration of new materials and nature-based solutions, and revised legislation on marketing of construction products and material reuse and recovery targets;
Creating a New European Bauhaus, an interdisciplinary project co-steered by an advisory board of external experts including scientists, architects, designers, artists, planners and civil society. From now until summer 2021 the Commission will conduct a broad participatory co-creation process, and will then set up of a network of five founding Bauhaus in 2022 in different EU countries.
Developing neighbourhood-based approaches for local communities to integrate renewable and digital solutions and create zero-energy districts, where consumers become prosumers selling energy to the grid. The strategy also includes an Affordable Housing Initiative for 100 districts.

The review of the Renewable Energy Directive in June 2021 will consider strengthening the renewable heating and cooling target and introducing a minimum renewable energy level in buildings. The Commission will also examine how the EU budget resources alongside the EU Emissions Trading System (EU ETS) revenues could be used to fund national energy efficiency and savings schemes targeting lower income populations. The Ecodesign Framework will be further developed to provide efficient products for use in buildings and promote their use.
The Renovation Wave is not only about making the existing buildings more energy efficient and climate neutral. It can trigger a large-scale transformation of our cities and built environment. It can be an opportunity to start a forward-looking process to match sustainability with style. As announced by President von der Leyen, the Commission will launch the New European Bauhaus to nurture a new European aesthetic that combines performance with inventiveness. We want to make liveable environments accessible to everyone, and again marry the affordable with the artistic, in a newly sustainable future.
Background
The COVID-19 crisis has turned the spotlight on our buildings, their importance in our daily lives and their fragilities. Throughout the pandemic, the home has been the focal point of daily life for millions of Europeans: an office for those teleworking, a make-shift nursery or classroom for children and pupils, for many a hub for online shopping or entertainment.
Investing in buildings can inject a much-needed stimulus into the construction sector and the macro-economy. Renovation works are labour-intensive, create jobs and investments rooted in often local supply chains, generate demand for highly energy-efficient equipment, increase climate resilience and bring long-term value to properties.
To achieve the at least 55% emissions reduction target for 2030, proposed by the Commission in September 2020, the EU must reduce buildings’ greenhouse gas emissions by 60%, their energy consumption by 14%, and the energy consumption of heating and cooling by 18%.
European policy and funding has already had a positive impact on the energy efficiency of new buildings, which now consume only half the energy of those built over 20 years ago. However, 85% of buildings in the EU were built over 20 years ago, and 85-95% are expected to still be standing in 2050. The Renovation Wave is needed to bring them up to similar standards.
Compliments of the European Commission.
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Today, the World Trade Organization (WTO) allowed the EU to raise tariffs up to $4 billion worth of imports from the U.S. as a countermeasure for illegal subsidies to the American aircraft maker, Boeing. The decision builds upon the WTO’s earlier findings recognising the U.S. subsidies to Boeing as illegal under the WTO law.
Executive Vice-President for an Economy that Works for People and Commissioner for Trade, Valdis Dombrovskis, said: “This long-awaited decision allows the European Union to impose tariffs on American products entering Europe. I would much prefer not to do so – additional duties are not in the economic interest of either side, particularly as we strive to recover from the Covid-19 recession. I have been engaging with my American counterpart, Ambassador Lighthizer, and it is my hope that the U.S. will now drop the tariffs imposed on EU exports last year. This would generate positive momentum both economically and politically, and help us to find common ground in other key areas. The EU will continue to vigorously pursue this outcome. If it does not happen, we will be forced to exercise our rights and impose similar tariffs. While we are fully prepared for this possibility, we will do so reluctantly.”
In October last year, following a similar WTO decision in a parallel case on Airbus subsidies, the U.S. imposed retaliatory duties that affect EU exports worth $7.5 billion. These duties are still in place today, despite the decisive steps taken by France and Spain in July this year [LINK] to follow suit Germany and the UK in ensuring that they fully comply with an earlier WTO decision on subsidies to Airbus.
Under the current economic circumstances, it is in the mutual interest of the EU and the U.S. to discontinue damaging tariffs that unnecessarily burden our industrial and agricultural sectors.
The EU has made specific proposals to reach a negotiated outcome to the long running transatlantic civil aircraft disputes, the longest in the history of the WTO. It remains open to work with the U.S. to agree a fair and balanced settlement, as well as on future disciplines for subsidies in the civil aircraft sector.
While engaging with the U.S., the European Commission is also taking appropriate steps and involving EU Member States so that it can use its retaliation rights in case there is no prospect of bringing the dispute to a mutually beneficial solution. This contingency planning includes finalising the list of products that would become subject to EU additional tariffs.
Background
In March 2019, the Appellate Body, the highest WTO instance, confirmed that the U.S. had not taken appropriate action to comply with WTO rules on subsidies, despite the previous rulings. Instead, it continued its illegal support of its aircraft manufacturer Boeing to the detriment of Airbus, the European aerospace industry and its many workers. In its ruling, the Appellate Body:

confirmed the Washington State tax programme continues to be a central part of the U.S. unlawful subsidisation of Boeing;
found that a number of ongoing instruments, including certain NASA and U.S. Department of Defence procurement contracts constitute subsidies that may cause economic harm to Airbus;
confirmed that Boeing continues to benefit from an illegal U.S. tax concession that supports exports (the Foreign Sales Corporation and Extraterritorial Income Exclusion).

Today’s decision confirming the EU right to retaliate stems directly from that previous decision.
In a parallel case on Airbus, the WTO allowed the United States in October 2019 to take countermeasures against European exports worth up to $7.5 billion. This award was based on an Appellate Body decision of 2018 that had found that the EU and its Member States had not fully complied with the previous WTO rulings with regard to Repayable Launch Investment for the A350 and A380 programmes. The U.S. imposed these additional tariffs on 18 October 2019. The EU Member States concerned have taken in the meantime all necessary steps to ensure full compliance.
Compliments of the European Commission.
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The international community has made substantial progress towards reaching a consensus-based long-term solution to the tax challenges arising from the digitalisation of the economy, and agreed to keep working towards an agreement by mid-2021, according to a Statement released today.
The OECD/G20 Inclusive Framework on BEPS, which groups 137 countries and jurisdictions on an equal footing for multilateral negotiation of international tax rules, agreed during its 8-9 October meeting that the two-pillar approach they have been developing since 2019 provides a solid foundation for a future agreement.
Recognising that the negotiations have been slowed by both the COVID-19 pandemic and political differences, Inclusive Framework members said that the blueprints of the two-pillar approach released today reflect convergent views on key policy features, principles and parameters for a future agreement. They identified remaining political and technical issues where differences of views remain to be bridged, and next steps in the multilateral process.
Participants approved for public consultation a new Blueprint for Pillar One of the project, which would establish new rules on where tax should be paid (“nexus” rules) and a fundamentally new way of sharing taxing rights between countries. The aim is ensure that digitally-intensive or consumer-facing Multinational Enterprises (MNEs) pay taxes where they conduct sustained and significant business, even when they do not have a physical presence, as is currently required under existing tax rules.
Participants also approved for public consultation a new Blueprint for Pillar Two of the project, which would introduce a global minimum tax that would help countries around the world address remaining issues linked to base erosion and profit shifting by MNEs.
The absence of a consensus-based solution, on the other hand, could lead to a proliferation of unilateral digital services taxes and an increase in damaging tax and trade disputes, which would undermine tax certainty and investment, the OECD said. Under a worst-case scenario – a global trade war triggered by unilateral digital services taxes worldwide – the failure to reach agreement could reduce global GDP by more than 1% annually.
“It is clear that new rules are urgently needed to ensure fairness and equity in our tax systems, and to adapt the international tax architecture to new and changing business models. Without a global, consensus-based solution, the risk of further uncoordinated, unilateral measures is real, and growing by the day,” said OECD Secretary-General Angel Gurría. “It is imperative that we take this work across the finish line. Failure would risk tax wars turning into trade wars at a time when the global economy is already suffering enormously.”
A new economic impact analysis released today shows the combined effect of the two-pillar solution under discussion. Up to 4% of global corporate income tax (CIT) revenues, or USD 100 billion of revenue gains annually, could result from implementation of the global minimum tax under Pillar Two. The analysis also shows that a further USD 100 billion could be redistributed to market jurisdictions through Pillar One plans to ensure a fairer international tax framework.
The ongoing work will be presented in a new OECD Secretary-General Tax Report and discussed during the next meeting of G20 Finance Ministers and Central Bank Governors, under the Saudi Arabian Presidency, on 14 October.
For more information on the OECD/G20 BEPS Project, and to access a highlights brochure and FAQs, visit: www.oecd.org/tax/beps/beps-actions/action1/.
Watch the live webcast of the press conference
Compliments of the OECD.
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Today, the Commission announces the first provisional results of the implementation of the Coronavirus Response Investment Initiative (CRII) and Coronavirus Response Investment Initiative Plus (CRII+).
From the beginning of the crisis, and thanks to the flexibility introduced in the Cohesion Policy, the EU mobilised over €13 billion in investments to tackle the effects of the coronavirus pandemic, through the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund (CF). The EU funds helped national, regional and local communities in countering the negative socio-economic impact of the coronavirus pandemic.
In total, €4.1 billion have been reallocated towards healthcare to purchase vital machinery and personal protective equipment to save lives. €8.4 billion have been mobilised through issuing grants, loans and a series of personalised financial instruments to support the economy and, in particular, Small and Medium enterprises (SMEs) to adapt to the crisis. Finally, around €1.4 billion have been channelled through the ESF to help people and save jobs.
To ensure maximum transparency and accountability, the Commission launches today a dedicated webpage on the Cohesion Open Data Platform to show how the EU Cohesion policy is supporting Member States to overcome the coronavirus crisis. With daily updates, the platform will show all information regarding programme amendments, where the resources are going and how these are invested. With a constant update, the overview of the platform will become everyday more complete.
Commissioner for Cohesion and Reforms, Elisa Ferreira, said: “Cohesion policy is at the heart of fighting the coronavirus pandemic and ensuring a rapid recovery. The results of our stocktaking show that all Member States are taking advantage of the Coronavirus Response Investment Initiative for the benefit of citizens, businesses and the health sector. As from today, such successful results are clearly visible to everyone on our interactive Coronavirus Dashboard, at just a click away.”
President of the European Committee of the Regions, Apostolos Tzitzikostas, added: “Thanks to simplified rules, cohesion policy has shown its added value bringing together EU’s Member States, regions and cities, to protect our people, save jobs and preserve local economies during the pandemic. We need to treasure this lesson making easier the access to EU funds and involving all levels of government to shape and deliver recovery plans. To get the utmost out of every invested euro and ensure that money goes where it is needed the most, we need cohesion to be the guiding compass for all EU investments.”
Background
The Coronavirus Response Investment Initiative (CRII) and Coronavirus Response Investment Initiative Plus (CRII+)  allow Member States to benefit from a temporary increase of the EU co–financing up to 100% and to use Cohesion policy funding to support the most exposed sectors because of the pandemic, such as healthcare, SMEs and labour markets.
Compliments of the European Commission.
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Today the Council adopted a recommendation on a coordinated approach to the restrictions of free movement in response to the COVID-19 pandemic. This recommendation aims to avoid fragmentation and disruption, and to increase transparency and predictability for citizens and businesses.

The COVID-19 pandemic has disrupted our daily lives in many ways. Travel restrictions have made it difficult for some of our citizens to get to work, to university or to visit their loved ones. It is our common duty to ensure coordination on any measures which affect free movement and to give our citizens all the information they need when deciding on their travel.
Michael Roth, Germany’s Minister of State for Europe

Any measures restricting free movement to protect public health must be proportionate and non-discriminatory, and must be lifted as soon as the epidemiological situation allows.
Common criteria and mapping
Every week, member states should provide the European Centre for Disease Prevention and Control (ECDC) with the data available on the following criteria:

number of newly notified cases per 100 000 population in the last 14 days
number of tests per 100 000 population carried out in the last week (testing rate)
percentage of positive tests carried out in the last week (test positivity rate)

Based on this data, the ECDC should publish a weekly map of EU member states, broken down by regions, to support member states in their decision-making. Areas should be marked in the following colours:

green if the 14-day notification rate is lower than 25 and the test positivity rate below 4%

orange if the 14-day notification rate is lower than 50 but the test positivity rate is 4% or higher or, if the 14-day notification rate is between 25 and150 and the test positivity rate is below 4%

red if the 14-day notification rate is 50 or higher and the test positivity rate is 4% or higher or if the 14-day notification rate is higher than 150

grey if there is insufficient information or if the testing rate is lower than 300 

Free movement restrictions
Member states should not restrict the free movement of persons travelling to or from green areas.
If considering whether to apply restrictions, they should respect the differences in the epidemiological situation between orange and red areas and act in a proportionate manner. They should also take into account the epidemiological situation in their own territory.
Member states should in principle not refuse entry to persons travelling from other member states. Those member states that consider it necessary to introduce restrictions could require persons travelling from non-green areas to:

undergo quarantine
undergo a test after arrival

Member states may offer the option of replacing this test with a test carried out before arrival.
Member states could also require persons entering their territory to submit passenger locator forms. A common European passenger locator form should be developed for possible common use.
Coordination and information to the public
Member states intending to apply restrictions should inform the affected member state first, prior to entry into force, as well as other member states and the Commission. If possible the information should be given 48 hours in advance.
Member states should also provide the public with clear, comprehensive and timely information on any restrictions and requirements. As a general rule, this information should be published 24 hours before the measures come into effect.
Background information
The decision on whether to introduce restrictions to free movement to protect public health remains the responsibility of member states; however, coordination on this topic is essential. Since March 2020 the Commission has adopted a number of guidelines and communications with the aim of supporting member states’ coordination efforts and safeguarding free movement within the EU. Discussions on this topic have also taken place within the Council.
On 4 September, the Commission presented a draft Council recommendation on a coordinated approach to restrictions to freedom of movement.
The Council recommendation is not a legally binding instrument. The authorities of the member states remain responsible for implementing the content of the recommendation.
Compliments of the Council of the European Union.
The post COVID-19: EU Council adopts a recommendation to coordinate measures affecting free movement first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

MEPs voted for changes at the European Commission, more ambitious climate targets, and discussed the rule of law in EU countries during the 5-8 October plenary session in Brussels.
On Wednesday, Parliament approved the appointment of Mairead McGuinness as commissioner for financial services, financial stability and the Capital Markets Union as well as Executive Vice-President Valdis Dombrovskis’ change of portfolio to include responsibility for trade.
MEPs called on Wednesday for reinforcement of the rule of law across Europe through a new mechanism linking receipt of EU funds by a member state to respect for the rule of law. In a separate vote, they called for EU values to be fully and unconditionally respected in Bulgaria.
All EU countries must become climate neutral by 2050, MEPs said in a vote on the EU climate law. Parliament also called for a 2030 emissions reduction target of 60% (compared to 1990 levels) and an interim target for 2040 to ensure the Union is on track to reach its mid-century goal of climate neutrality. In a separate vote, MEPs called for the EU to promote forest management models that ensure forests are environmentally and economically sustainable.
Members also discussed Brexit and the economic recovery in a debate with Council President Charles Michel on last week’s EU summit and the upcoming one on 15-16 October.
On Thursday, MEPs called for EU countries to take stronger action to counter the impact of the Covid-19 crisis on young people by ensuring that those who register for the Youth Guarantee schemes are offered “good-quality, varied and tailored jobs, training or internships”.
Regarding Brexit, MEPs endorsed two proposals on Thursday concerning the Channel Tunnel with the goal of maintaining the same set of rules governing the whole railway tunnel once the UK has the status of a third country.
This week’s plenary also approved a deal struck with the Council on common rules to boost EU crowdfunding platforms and protect investors. The new single set of rules aims to help crowdfunding services function smoothly across the internal market and to foster cross-border business funding.
On Thursday, with public health in mind, MEPs objected Commission proposals on food products containing titanium dioxide and acrylamide.
Compliments of the European Parliament.
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October 06, 2020 | Speech by Kristalina Georgieva, IMF Managing Director | Washington, D.C.
As prepared for delivery
1. Introduction: A World Turned Upside Down
Dear Minouche, thank you for the warm welcome! I am honored to celebrate with all of you the 125th anniversary of the London School of Economics. It is a proud moment for the students and faculty, and for the alumni.
As an alumna of LSE and as Managing Director of the IMF, I know that our institutions share so many of the same values. I was reminded of that last year, when I saw a large new sculpture—the globe—on the LSE campus. We are connected by our global perspective, by caring deeply about the world we live in and its future.
Mark Wallinger’s sculpture could not symbolize any better what we are facing today: our world is turned upside down by the pandemic—by the loss of more than a million lives, by the economic impact on billions of people. In low-income countries, the shocks are so profound that we face the risk of a “lost generation.”
To confront this crisis, we can take inspiration from a previous generation. William Beveridge, a former LSE Director, issued his famous report in 1942, which led to the creation of the UK’s National Health Service. And in 1944, John Maynard Keynes and Harry Dexter White led the establishment of the Bretton Woods system—including the IMF and the World Bank.
They forged a better world in the worst possible moment, in the midst of war. We need the same spirit now for the post-pandemic world—build one that is more inclusive and more resilient.
That will be the focus of the IMF’s 189 member countries when we meet in our virtual Annual Meetings next week. It is what I will concentrate on today.
2. Global Outlook: The Long Ascent
First, let’s look at the economic picture. Global economic activity took an unprecedented fall in the second quarter of this year, when about 85 percent of the world economy was in lockdown for several weeks.
The IMF in June projected a severe global GDP contraction in 2020. The picture today is less dire. We now estimate that developments in the second and third quarters were somewhat better than expected, allowing for a small upward revision to our global forecast for 2020. And we continue to project a partial and uneven recovery in 2021. You will see our updated forecast next week.
We have reached this point, largely because of extraordinary policy measures that put a floor under the world economy. Governments have provided around $12 trillion in fiscal support to households and firms. And unprecedented monetary policy actions have maintained the flow of credit, helping millions of firms to stay in business.
But some were able to do more than others. For advanced economies, it is whatever it takes. Poorer nations strive for whatever is possible.
This gap in response capacity is one reason why we see differentiated outcomes. Another reason is the effectiveness of measures to contain the pandemic and restart economic activities. For many advanced economies, including the United States and the Euro Area, the downturn remains extremely painful, but it’s less severe than expected. China is experiencing a faster-than-expected recovery. Others are still hurting badly, and some of our revisions are on the downside.
Emerging markets and low-income and fragile states continue to face a precarious situation. They have weaker health systems. They are highly exposed to the most affected sectors, such as tourism and commodity exports. And they are highly dependent on external financing. Abundant liquidity and low interest rates helped many emerging markets to regain access to borrowing—but not a single country in Sub-Saharan Africa has issued external debt since March.
So, my key message is this: The global economy is coming back from the depths of the crisis. But this calamity is far from over. All countries are now facing what I would call “The Long Ascent”—a difficult climb that will be long, uneven, and uncertain. And prone to setbacks.
As we embark on this “ascent,” we are all joined by a single rope—and we are only as strong as the weakest climbers. They will need help on the way up.
The path ahead is clouded with extraordinary uncertainty. Faster progress on health measures, such as vaccines and therapies, could speed up the “ascent”. But it could also get worse, especially if there is a significant increase in severe outbreaks.
Risks remain high, including from rising bankruptcies and stretched valuations in financial markets. And many countries have become more vulnerable. Their debt levels have increased because of their fiscal response to the crisis and the heavy output and revenue losses. We estimate that global public debt will reach a record-high of about 100 percent of GDP in 2020.
There is also now the risk of severe economic scarring from job losses, bankruptcies, and the disruption of education. Because of this loss of capacity, we expect global output to remain well below our pre-pandemic projections over the medium term. For almost all countries, this will be a setback to the improvement of living standards.
This crisis has also made inequality even worse because of its disproportionate impact on low-skilled workers, women, and young people. There are clearly winners and losers—and we risk ending up with a Tale of Two Cities. We need to find a way out.
3. The Path Forward: Confronting the Crisis and Pushing for Transformations
So, what is the path forward? We see four immediate priorities:

First, defend people’s health. Spending on treatment, testing, and contact tracing is an imperative. So too is stronger international cooperation to coordinate vaccine manufacturing and distribution, especially in the poorest countries. Only by defeating the virus everywhere can we secure a full economic recovery anywhere.

Second, avoid premature withdrawal of policy support. Where the pandemic persists, it is critical to maintain lifelines across the economy, to firms and workers — such as tax deferrals, credit guarantees, cash transfers, and wage subsidies. Equally important is continued monetary accommodation and liquidity measures to ensure the flow of credit, especially to small and medium-sized firms—thus supporting jobs and financial stability. Cut the lifelines too soon, and the Long Ascent becomes a precipitous fall.

Third, flexible and forward-leaning fiscal policy will be critical for the recovery to take hold. This crisis has triggered profound structural transformations, and governments must play their role in reallocating capital and labor to support the transition. This will require both stimuli for job creation, especially in green investment, and cushioning the impact on workers: from retraining and reskilling, to expanding the scope and duration of unemployment insurance. Safeguarding social spending will be critical for a just transition to new jobs.

Fourth, deal with debt—especially in low-income countries. They entered this crisis with already high debt levels, and this burden has only become heavier. If they are to fight the crisis and maintain vital policy support; if they are to prevent the reversal of development gains made over decades, they will need more help—and fast. This means access to more grants, concessional credit and debt relief, combined with better debt management and transparency. In some cases, global coordination to restructure sovereign debt will be necessary, with full participation of public and private creditors.

In all these areas, our member countries can count on the IMF. We will help them all the way up the mountain. We will strive to be their ‘sherpa,’ We will help show the way with sound policy advice. We will provide the training some may need. And above all, we will be there with financial support and help ease the debt burden for those who otherwise may not make it.
We have provided financing at unprecedented speed and scale to 81 countries. We have reached over $280 billion in lending commitments—more than a third of that approved since March. And we are ready to do more: we still have substantial resources from our 1 trillion in total lending capacity to put at the service of our members as they embark on their “ascent.”
Again, this will be a difficult climb. It requires new paths up the mountain. We cannot afford simply to rebuild the old economy, with its low growth, low productivity, high inequality, and worsening climate crisis.
That is why we need fundamental reforms to build a more resilient economy—one that is greener, smarter, more inclusive—more dynamic. This is where we need to direct the massive investments that will be required for a strong and sustainable recovery.
New IMF research shows that increasing public investment by just 1 percent of GDP across advanced and emerging nations can create up to 33 million new jobs.
We know that, in many cases, well-designed green projects can generate more employment and deliver higher returns, compared with conventional fiscal stimulus.
We also know that an accelerated digital transformation is underway, promising higher productivity and new jobs with higher wages. We can unlock this potential by retooling tax systems and investing in education and digital infrastructure. Our goal must be for everyone to have access to the internet and the skills to succeed in the 21 st century economy.
4. Conclusion: Keep Climbing!
All this can be done—because we know that previous generations had the courage and resolve to climb the mountains they faced. It is now our turn; this is our mountain.
As one climber put it: “Every mountain top is within reach if you just keep climbing.”
The same goes for the Long Ascent and the polices needed to move forward. Joined by a single rope, we can overcome the crisis and achieve a more prosperous and more resilient world for all.
Thank you very much!
Compliments of the IMF.
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Published on 10/07/2020 19:00 in Banque de France | Speech – François Villeroy de Galhau, Paris Europlace International Financial Forum |
Ladies and Gentlemen,
It is my pleasure to conclude this Europlace International Financial Forum, and to congratulate Chairman Augustin de Romanet and his team for having overcome all obstacles. Today, Paris is, thanks to you, a financial capital of Europe…. and it is more than a short-lived satisfaction, it is a lasting and collective success. The title of today’s session – “From crisis to recovery…” – reminds us of a quote from Hannah Arendt: “a crisis becomes a disaster only when we respond to it with preformed judgments, that is, with prejudices.[i]” Today crises are multifaceted and our duty as policymakers is to prevent them from turning into disasters. To this end, we have to put aside prejudices and come up with concrete solutions. In my speech today, I will focus on two short-term challenges: Brexit obviously, and perhaps more surprisingly the future of Europe payments.
I. Preparing for Brexit: a top priority
Brexit is a burning and unavoidable issue. I will not comment on the UK’s domestic politics nor on the ongoing negotiations with the EU. But amidst all this deep fog, one thing remains clear: achieving a fair and well-balanced Brexit deal would be in the economic interest of first and foresmost Britain but also the EU.  But what is at stake for the EU is nothing less than preserving the integrity of our single market and its competitiveness. In this regard, EU countries should maintain consistency in regulatory practices vis-à-vis all third countries – including the U.K.
Even if there is a trade deal, which I do still wish and hope, Britain will have left the single market and hence things will change anyway significantly for financial services. It means that firms operating under the European passport must quickly finalise their relocation to the EU if they want to operate here as of next year. As of September, the ACPR authorised 43 entities to ensure continuity of activities in France, including 4 credit institutions, 21 investment firms and 7 third country branches. If we include asset relocations of French groups from their branches in the UK, approximately 150 billion euros in assets will have been relocated to France by the end of this year. In addition, 31 entities, mainly investment firms, have applied for a license in France and their projects are currently being assessed by the ACPR. All these are good news, but let me bring two matters to your attention. A handful of small firms, notably in payments electronic money and investment, must urgently accelerate the process or risk being caught out in January. Concerning European major institutions, the EU will not permit empty shells with only partial relocation of staff or booking arrangements. What has been agreed on with the SSM – within the framework of Target operating models (TOM) – in relation to the relocation of staff and assets has to be implemented at once and in any event before the end of this year.
Regarding CCPs, equivalence decisions by the Commission will ensure continuity of access to UK CCPs after 31 December 2020, until 30 June 2022. Beyond this transition, it is key to address the financial stability risks stemming from an excessive dependence on UK CCPs. The 18 month limited equivalence decision aims to give market participants the time needed to reduce their exposure to UK CCPs that are systemically important for the Union. This timeframe will also be used by ESMA to conduct a comprehensive review of the systemic importance of UK CCPs to the Union as foreseen by EMIR 2.2. This will include a fully reasoned assessment whether some of the clearing services are of such substantial systemic importance that the CCP should for euro-denominated activities be relocated on the continent. Considering the size and the concentration of some of these clearing services, betting on the status quo would be a losing proposition, including for clearing members: a swift relocation is in the interest of all participants and relies as such on the attractiveness of the clearing offer that EU CCPs are encouraged to build in order to help the emergence of a new liquidity pool.
Clearly, Brexit is, and will remain, bad news mainly for the United Kingdom, but also for Europe. Yet Brexit also represents an opportunity to restructure the European financial system. The euro area starts with strong assets: an effective monetary Eurosystem, the legal framework for a single financial market and essential components of a Banking Union. However we do not yet have a “financial Eurosystem” with strong pan-European financial institutions and market infrastructure. There is at last a move in favour of banks consolidation in the euro area, which I always supported. The ECB fostered it with its welcome proposal on the recognition of badwills. But beyond domestic consolidations in some jurisdictions where it is not yet entirely done, we need more cross-borders ones; it should be part of a real Banking Union. On markets, let’s be clear: there will not be a single City for the continent, but rather an integrated polycentric network of financial centres, with specialisations based on areas of expertise. A polycentric system of this nature can clearly function, as illustrated by the United States: New York’s financial centre is favoured by corporate and investment banks, Chicago’s financial centre handles futures, while Boston specialises in asset management. Likewise, Paris is well qualified to become the “market hub” of this new European constellation. France will be the biggest capital market in the EU on the other side of Brexit. According to a recent study by the British Think Tank New Financial, it will take the lead in the EU in 14 of 30 sectors studied[ii].
This polycentric structure would improve the circulation of the abundant savings in the euro area – a surplus amounting to EUR 360 billion last year – channelling them towards financing needs on the continent. Besides, euro area businesses have been lacking equity financing for many years now. The Capital Markets Union – and what I more broadly call a “Financing Union for Investment and Innovation” – is even more essential given the prospect of Brexit. European governments all agree in principle; but so far it remains a blind spot in the recovery strategy. Let us at last turn words into action.
II. Preparing Europe payments for the digital currency age
Payments are not a usual topic for Europlace and distinguished financial forums. Indeed, they used to be considered as technical, back-office and even boring stuff. But a revolution is underway, and if we collectively miss it, it would mean a massive disintermediation of banks in the two key assets linked to payments: daily customer relations, and personal data. And it would also mean a major loss of sovereignty for Europe. To this day, the coexistence and complementarity of central bank and commercial bank money as settlement assets has structured the payment landscape. Yet this structure is increasingly being questioned. The development of cheap and innovative digital payment solutions is leading to a decline of the use of cash in transactions, and an increase of cashless payments, which leads to a wider use of commercial bank money.
Besides, our European ecosystem has become critically dependent on non-European players – already major global card-schemes, and more and more Bigtechs – with little control over business continuity and data protection. Meanwhile, the development of crypto-assets and so-called “stablecoins” aims to create a new category of settlement assets. Stablecoins may compete against both commercial and central bank money, even though they do not offer the same guarantees in terms of credit risk, liquidity, service continuity, and neutrality.
Indeed, current digitalisation triggers at least two important risks: (i) the risk that BigTechs will build private financial infrastructures and “monetary” systems, competing with the public monetary sovereignty; and (ii) the symmetric risk that some jurisdictions judge that the only way to respond to the overwhelming private payments’ wave would be to issue and spread on a domestic but also a global basis, “their” CBDCs (Central Bank Digital Currency).
I already called – including here at Europlace – for a holistic European payments strategy. The good news is that in the last months we made decisive progress in designing it, thanks to the commitment of the Commission and the ECB. Christine Lagarde as President, and Fabio Panetta as Board’s member in charge of payments changed the game through their personal involvement. There are three key elements:
1/ A European regulation of stablecoins, as drafted by the European Commission. This so-called “MiCa” has two strengths: its rightly speaks of “Crypto-assets”, and not “Crypto-currencies” which is a misleading expression. And on substance, the draft requires a strict and dual supervision – by national authorities and EBA – to ensure consumer protection and financial stability in a fair and consistent way within the European single market.
2/ A European acceleration on CBDC, which is not yet a decision, as published by the ECB last Friday.
As a principle, central banks need to have an in-depth understanding of innovation and shouldn’t be afraid to “learn by doing”. The Banque de France is now engaging with the innovators from the private sector to conduct a program of 8 experiments on wholesale CBDC.
We, the ECB and the Eurosystem, need to be ready to issue a money in digital form in case of need. Let me be clear: we cannot allow ourselves to lag behind on CBDC. That may mean that we create if necessary a retail CBDC, in order to ensure the accessibility of central bank money for the general public, in particular in countries where the use of cash in payments is declining. And it may mean also that we decide to issue a wholesale CBDC, with the aim of improving the functioning of financial markets and institutions. Within the Eurosystem, the ECB has established a high-level task force (HLTF) therefore, and just published its report.
We will now in parallel (i) engage actively in a public consultation from next Monday, (ii) study within the HLTF all the regulatory, technical, financial stability issues, (iii) start experimentations within NCBs, of which the Banque de France intends to be an active contributor including in Retail CBDC. Following this “three-tracks approach”, towards mid-2021 the Eurosystem will decide whether to launch a digital euro project, which would start with an investigation phase. Whatever the decision, it would complement cash, not replace it. The Eurosystem, the Banque de France, will never abandon cash, as it is part citizen’s freedom in choosing their means of payments, and hence their trust in the currency.
3/ A European mobilisation on private payments infrastructure, thanks to the engagement of major European banks – including French ones – in the so-called “European payments initiative” (EPI). We definitely need to go beyond existing national schemes, and offer cross-border solutions and a pan European brand. EPI needs to be detailed, opened up to other banks and jurisdictions, and  accelerated. But it definitely warrants the full support of the Eurosystem. We should additionally ensure that efficient public infrastructure such as TIPS is compatible.
Let me stress that there is no contradiction between considering a euro-CBDC and supporting EPI. We may probably need both, and we should in any case build them to be complementary. My preference would be to seek a renewed public/private partnership for the dissemination of central bank money in a retail form. Possible impacts on the banking sector could be reduced with different tools: for instance, limiting the quantity of digital euro in circulation, and distributing it through commercial banks.  Validating such an intermediated model would provide enough customer proximity and value added to intermediaries (like front-end solutions).
The good news is that we now have a consistent European payments strategy. The challenge is that we have to implement it. The challenge is to deliver. And we do not have much time to win the battle – one to two years. This sense of urgency should lead us all to collective action now.
As a conclusion, allow me to say a few words on French banks. They entered the crisis with a sound financial situation both in terms of solvency and liquidity. They provided with great efficiency the vital liquidity shield that companies needed during the acute phase of the crisis. We, as supervisors, acted with pragmatism by easing some regulatory constraints. But pragmatism doesn’t mean laxity. Strong challenges are still ahead, including risk monitoring – as we are not yet out of the Covid crisis –, digitalisation, and improved profitability. But that is another story… that we might discuss together another time. Thank you for your attention.
Contacts:

Mark Deen | mark.deen[at]banque-france.fr

Déborah Guedj | deborah.guedj[at]banque-france.fr

Compliments of the Banque de France.

[i] Hannah Arendt “The Crisis in Education”, The Crisis of Culture.
[ii] Panagiotis Asimakopoulos, “What do EU capital markets look like on the other side of Brexit? – Analysis of the size and depth of capital markets in the EU27”, New financial, September 2019

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October 06, 2020 | Speech by Jerome H. Powell, Chair of the U.S. Federal Reserve, at the National Association for Business Economics Virtual Annual Meeting |
Good morning. It has been just eight months since the pandemic first gained a foothold on our shores, bringing with it the sharpest downturn on record, as well as the most forceful policy response in living memory. Although it is too early for definitive conclusions, today I will offer a current assessment of the response to the economic fallout of this historic event and discuss the path ahead.
The Pre-COVID Economy
As the coronavirus spread across the globe, the U.S. economy was in its 128th month of expansion—the longest in our recorded history—and was generally in a strong position. Moderate growth continued at a slightly above-trend pace. Labor market conditions were strong across a range of measures. The unemployment rate was running at 50-year lows. PCE (personal consumption expenditures) inflation was running just below our 2 percent target.
The economy did face longer-term challenges, as all economies do. Labor force participation among people in their prime working years had been trending down since the turn of the millennium, and productivity gains during the expansion were disappointing. Income and wealth disparities had been growing for several decades. As the expansion continued its long run, however, productivity started to pick up, the labor market strengthened, and the benefits of growth began to be more widely shared. In particular, improved labor market conditions during the past few years encouraged more prime-age workers to rejoin or remain in the labor force. Meanwhile, real wage gains for all workers picked up, especially for those in lower paying jobs.
Most economic forecasters expected the expansion and its benefits to continue, and with good reason. There was no economy-threatening asset bubble to pop and no unsustainable boom to bust. While nonfinancial business leverage appeared to be elevated, leverage in the household sector was moderate. The banking system was strong, with robust levels of capital and liquidity. The COVID-19 recession was unusual in that it was not triggered by a buildup of financial or economic imbalances. Instead, the pandemic shock was essentially a case of a natural disaster hitting a healthy economy.
Given the condition of the economy, in the early stages of the crisis it seemed plausible that, with a rapid, forceful, and sustained policy response, many sectors of the economy would be able to bounce back strongly once the virus was under control. That response would need to come from actions across all levels of government, from health and fiscal authorities, and from the Federal Reserve.
It also seemed likely that the sectors most affected by the pandemic—those relying on extensive in-person contact—would face a long and difficult path to recovery. These sectors and people working in them would likely need targeted and sustained policy support.
Some asked what the Fed could do to address what was essentially a medical emergency. We identified three ways that our tools could help limit the economic damage from the pandemic: providing stability and relief during the acute phase of the crisis when much of the economy was shut down; vigorously supporting the expansion when it came; and doing what we could to limit longer-run damage to the productive capacity of the economy.
The Recession and Nascent Recovery
When it became clear in late February that the disease was spreading worldwide, financial markets were roiled by a global flight to cash. By the end of the month, many important markets were faltering, raising the threat of a financial crisis that could exacerbate the economic fallout of the pandemic. Widespread economic shutdowns began in March, and in the United States, with many sectors shut down or operating well below capacity, real GDP fell 31 percent in the second quarter on an annualized basis. Employers slashed payrolls by 22 million, with those on temporary layoff rising by 17 million. Broader measures of labor market conditions, such as labor force participation and those working part time for economic reasons, showed further damage.
In response, we deployed the full range of tools at our disposal, cutting rates to their effective lower bound; conducting unprecedented quantities of asset purchases; and establishing a range of emergency lending facilities to restore market function and support the flow of credit to households, businesses, and state and local governments. We also implemented targeted and temporary measures to allow banks to better support their customers.
The fiscal response was truly extraordinary. The unanimous passage of the CARES Act and three other bills passed with broad support in March and April established wide-ranging programs that are expected to provide roughly $3 trillion in economic support overall—by far the largest and most innovative fiscal response to an economic crisis since the Great Depression.
What have these policies managed to accomplish so far?
First, the substantial fiscal aid has given vital support to households. The rise in transfers supported necessary spending and contributed to a sharp increase in household saving. Goods consumption is now above its pre-pandemic level. Services consumption remains low, although it seems likely that much of this weakness is the byproduct of health concerns and social distancing, rather than reductions in income and wealth. Consumption held up well through August after the expiration of expanded unemployment insurance benefits, indicating that savings from transfer payments continue to support economic activity. A recent Fed survey showed that households in July had surprisingly upbeat views of their current financial well-being, with 77 percent of adults either “doing okay” or “living comfortably,” an improvement even over the reading immediately preceding the pandemic.1 Still, since it appears that many will undergo extended periods of unemployment, there is likely to be a need for further support.
Second, aid to firms—in particular, the Paycheck Protection Program—and the general boost to aggregate demand have so far partly forestalled an expected wave of bankruptcies and lessened permanent layoffs. Business investment appears to be on a renewed upward trajectory and new business formation similarly appears to be rebounding, pointing to some confidence in the path ahead.
Third, after briefly seizing up in March, financial markets have largely returned to normal functioning, albeit in the context of extensive ongoing policy support. Financial conditions are highly accommodative, and credit is available on reasonable terms for many—though not all—households and businesses. Interest-sensitive spending has been relatively strong, as shown in the housing and auto sectors.
Taken together, fiscal and monetary policy actions have so far supported a strong but incomplete recovery in demand and have—for now—substantially muted the normal recessionary dynamics that occur in a downturn. In a typical recession, there is a downward spiral in which layoffs lead to still lower demand, and subsequent additional layoffs. This dynamic was disrupted by the infusion of funds to households and businesses. Prompt and forceful policy actions were also likely responsible for reducing risk aversion in financial markets and business decisions more broadly.
While the combined effects of fiscal and monetary policy have aided the solid recovery of the labor market so far, there is still a long way to go. Payrolls have now recovered roughly half of the 22 million decline. After rising to 14.7 percent in April, the unemployment rate is back to 7.9 percent, clearly a significant and rapid rebound. A broader measure that better captures current labor market conditions—by adjusting for mistaken characterizations of job status, and for the decline in labor force participation since February—is running around 11 percent.
The burdens of the downturn have not been evenly shared. The initial job losses fell most heavily on lower-wage workers in service industries facing the public—job categories in which minorities and women are overrepresented. In August, employment of those in the bottom quartile of the wage distribution was still 21 percent below its February level, while it was only 4 percent lower for other workers.2 Combined with the disproportionate effects of COVID on communities of color, and the overwhelming burden of childcare during quarantine and distance learning, which has fallen mostly on women, the pandemic is further widening divides in wealth and economic mobility.
The Road Ahead
I will now turn to the outlook. The recovery has progressed more quickly than generally expected. The most recent projections by FOMC (Federal Open Market Committee) participants at our September meeting show the recovery continuing at a solid pace. The median participant saw unemployment declining to 4 percent and inflation reaching 2 percent by the end of 2023. Of course, the economy may perform better or worse than expected. The outlook remains highly uncertain, in part because it depends on controlling the spread and effects of the virus. There is a risk that the rapid initial gains from reopening may transition to a longer than expected slog back to full recovery as some segments struggle with the pandemic’s continued fallout. The pace of economic improvement has moderated since the outsize gains of May and June, as is evident in employment, income, and spending data. The increase in permanent job loss, as well as recent layoffs, are also notable.
We should continue do what we can to manage downside risks to the outlook. One such risk is that COVID-19 cases might again rise to levels that more significantly limit economic activity, not to mention the tragic effects on lives and well-being. Managing this risk as the expansion continues will require following medical experts’ guidance, including using masks and social-distancing measures.
A second risk is that a prolonged slowing in the pace of improvement over time could trigger typical recessionary dynamics, as weakness feeds on weakness. A long period of unnecessarily slow progress could continue to exacerbate existing disparities in our economy. That would be tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic.
The expansion is still far from complete. At this early stage, I would argue that the risks of policy intervention are still asymmetric. Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses. Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth. By contrast, the risks of overdoing it seem, for now, to be smaller. Even if policy actions ultimately prove to be greater than needed, they will not go to waste. The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods.
Given this audience, I would be remiss were I not to mention our review of our monetary policy strategy, tools, and communications, which concluded recently with our adoption of a flexible average inflation-targeting regime. My colleagues and I have discussed this new framework in detail in recent remarks. Today I will just note that the underlying structure of the economy changes over time, and that the FOMC’s framework for conducting monetary policy must keep pace. The recent changes to our consensus statement reflect our evolving understanding of several important developments. There has been a decline in estimates of the potential or longer-run growth rate of the economy and in the general level of interest rates, presenting challenges for the ability of monetary policy to respond to a downturn. On a more positive note, we have seen that the economy can sustain historically high levels of employment, bringing significant societal benefits and without causing a troubling rise in inflation. The new consensus statement acknowledges these developments and makes appropriate changes in our monetary policy framework to position the FOMC to best achieve its statutory goals.
The forward rate guidance adopted at our September meeting reflects our new consensus statement. The new guidance says that, with inflation running persistently below our longer-run 2 percent goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of policy until these outcomes are achieved. The Committee also left the target range for the federal funds rate unchanged at 0 to 1/4 percent, and it expects it will be appropriate to maintain this target range until labor market conditions have reached levels that are consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.
We expect that the new framework and guidance will support our efforts in pursuit of a strong economic recovery.
Thank you. I look forward to our discussion.
Compliments of the U.S. Federal Reserve.
The post Speech by U.S. FED Chair Powell: Recent Economic Developments and the Challenges Ahead first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Greenhouse gas budget to ensure EU reaches Paris goal

Independent scientific body set up to monitor progress

All direct and indirect fossil fuel subsidies should be phased out by 2025 at the latest

All member states must become climate neutral by 2050, says Parliament in a vote on the EU climate law, calling for ambitious 2030 and 2040 emissions reduction targets.
On Wednesday, Parliament adopted its negotiating mandate on the EU climate law with 392 votes for, 161 against and 142 abstentions. The new law aims to transform political promises that the EU will become climate neutral by 2050 into a binding obligation and to give European citizens and businesses the legal certainty and predictability they need to plan for the transformation.
MEPs insist that both the EU and all member states individually must become climate-neutral by 2050 and that thereafter the EU shall achieve “negative emissions”. They also call for sufficient financing to achieve this.
The Commission must propose by 31 May 2023, through the ordinary decision-making procedure, a trajectory at EU level on how to reach carbon neutrality by 2050, say MEPs. It must take into account the total remaining EU greenhouse gas (GHG) emissions until 2050 to limit the increase in temperature in accordance with the Paris Agreement. The trajectory shall be reviewed after each stocktake at global level.
MEPs also want to set up an EU Climate Change Council (ECCC) as an independent scientific body to assess whether policy is consistent and to monitor progress.
A more ambitious 2030-target needed
The EU’s current emissions reductions target for 2030 is 40% compared to 1990. The Commission recently proposed to increase this target to “at least 55%” in the amended proposal for an EU climate law. MEPs today raised the bar even further, calling for a reduction of 60% in 2030, adding that national targets shall be increased in a cost-efficient and fair way.
They also want an interim target for 2040 to be proposed by the Commission following an impact assessment, to ensure the EU is on track to reach its 2050 target.
Finally, the EU and member states must also phase out all direct and indirect fossil fuel subsidies by 31 December 2025 at the latest, say MEPs, while they underline the need to continue efforts to combat energy poverty.
Quote
After the vote, Parliament rapporteur Jytte Guteland (S&D, Sweden) said: “The adoption of the report sends a clear message to the Commission and the Council, in light of the upcoming negotiations. We expect all member states to achieve climate neutrality by 2050 at the latest and we need strong interim targets in 2030 and 2040 for the EU to achieve this.
I’m also satisfied with the inclusion of a greenhouse gas budget, which sets out the total remaining quantity of emissions that can be emitted until 2050, without putting at risk the EU’s commitments under the Paris Agreement.”
Next steps
Parliament is now ready to start negotiations with member states once Council has agreed upon a common position.
Background
Following the European Council decision (2019) to endorse the 2050 climate-neutrality objective, the Commission in March 2020 proposed the EU climate law that would make it a legal requirement for the EU to become climate-neutral by 2050.
Parliament has played an important role in pushing for more ambitious EU climate legislation and declared a climate emergency on 28 November 2019.
Compliments of the European Parliament.
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