The Commission is today proposing a set of actions to manage the current phase of the COVID-19 pandemic and prepare for the next one. By working together, the EU has so far saved hundreds of thousands of lives thanks to COVID-19 vaccines, kept its single market operational, minimised travel restrictions and mobilised manufacturing capacity of critical products when supply chains were disrupted. In the new phase of the pandemic, where preparedness and response need to be sustained, coordination will be, once more, essential. The Commission therefore calls on Member States to take actions before autumn to ensure vigilance and continued coordination of health preparedness and response.
Remaining vigilant while transitioning out of the acute COVID-19 phase
The current lower levels of COVID-19 infection offer the Member States the opportunity to strengthen their surveillance, healthcare systems, and overall pandemic preparedness. In particular, the Commission invites Member States to:

Step up vaccination and boosting, taking into account the simultaneous circulation of COVID-19 and seasonal influenza;
Set up integrated surveillance systems that are no longer based on the identification and reporting of all COVID-19 cases, but rather on obtaining reliable and representative estimates;
Continue targeted testing and sequencing of sufficient samples to accurately estimate variant circulation and detect new variants;
Invest in the recovery of healthcare systems and assess the wider health impacts of the pandemic, including on mental health and delays in treatments and care;
Apply EU coordinated rules to ensure free and safe travel, both within the EU and with international partners;
Support the development of the next generation of vaccines and therapeutics;
Intensify collaboration against mis- and disinformation on COVID-19 vaccines;
Continue to deploy global solidarity and improve global governance.

In addition, the Commission is announcing actions to ensure resilient supply chains throughout the pandemic, both for medical countermeasures and for critical products across all industrial ecosystems. It is also launching today a tender, under the EU FAB initiative, to reserve capacities for manufacturing mRNA, protein and vector-based vaccines. This will reserve newly created manufacturing capacity for use in future health emergencies. The tender is addressed to vaccine producers with facilities in the EU/EEA, who can send in their request to participate until 3 June 2022 16.00 CEST.
Medium and long term include the further enhancing of pandemic preparedness and strengthening response coordination between Member States, as well as at the global level, implementing the European Health Union proposals, tackling wider health impacts of the pandemic, including “long COVID” and the burden on mental health, and speeding up digitalisation in health.
Members of the College said:
The President of the European Commission, Ursula von der Leyen, said: “We are entering a new phase of the pandemic, as we move from emergency mode to a more sustainable management of COVID-19. Yet, we must remain vigilant. Infection numbers are still high in the EU and many people are still dying from COVID-19 worldwide. Moreover, new variants can emerge and spread fast. But we know the way forward. We need to further step-up vaccination and boosting, and targeted testing – and we need to continue to coordinate our responses closely in the EU.”
Vice-President for Promoting our European Way of Life, Margaritis Schinas, said: «The COVID-19 pandemic is not over and the virus is here to stay. While the health situation is improving, we must prepare for different scenarios, and do it in a coordinated way. New variants are not a question of if but rather a question of when. Improvisation and fragmentation are not an option. Vigilance and preparedness remain as essential as ever and we must continue our work without respite. For these reasons, we are taking actions at national and EU level building on the successful EU-wide coordination for health preparedness and response. We shift from firefighters to architects, of a Health Union that protects public health while keeping society and economy open and resilient.” 
Commissioner for Internal Market, Thierry Breton, said: “The COVID-19 pandemic has demonstrated the importance of readily available vaccine production capacity in times of crisis. Following an unprecedented ramp-up, the EU reached a production capacity equivalent to 3-4 billion vaccines per year. EU FAB will allow us to preserve some of this capacity and keep it operational for future health crises. This is a cornerstone of the industrial dimension of our health emergency preparedness.”
Commissioner for Health and Food Safety, Stella Kyriakides, said: “Vaccination, our strong coordinated EU approach and natural immunity provides a much welcome window of opportunity to move from emergency mode to a more sustainable management of COVID-19. Infection numbers are still high in the EU, but the pressure on the healthcare sector has been reduced and our societies and economies have reopened again. Our citizens can finally enjoy this period with much fewer restrictions on daily life, after two and half extraordinary and difficult years. It is however crucial that Member States maintain a high level of vigilance and preparedness for new outbreaks and variants– the pandemic is not yet over. We need to do more to vaccinate globally, now that vaccine supply is no longer a challenge. How COVID-19 continues to impact our lives in the coming years will be heavily dependent on the decisions we take today, in the EU and globally.”
Background
While fluctuating case numbers are observed across Europe, increases are not leading to severe disease or death as often as before thanks to widespread vaccination. The now dominant Omicron variant is less severe than previous variants. However, infections are still in the millions worldwide.   Many people are in lockdowns in some parts of the world. Many are still suffering or dying from COVID-19. Waning immunity against infection, and possible winter seasonality also increase the risk that new variants of SARS-CoV-2 – the virus that causes COVID-19 – will emerge and spread.
While Member States are implementing new approaches to manage the ongoing pandemic, fragmented preparedness and response strategies risk undermining the benefits that EU-wide coordination of health security measures has brought so far.
This Communication therefore puts forward an approach for the management of this new phase of the pandemic, building on the successful EU-wide coordination for health preparedness and response.
The “EU FAB” initiative was announced in February 2021 to set up ever warm vaccine production facilities and ensure that current EU/EEA manufacturing capacities for mRNA, protein and vector-based vaccine types are maintained for future public health emergencies. To establish EU FAB, a tender procedure will be published in Tender Electronic Daily, Supplement to the Official Journal.
Compliments of the European Commission.
The post COVID-19: EU Commission calls on Member States to step up preparedness for the next pandemic phase first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The Commission is today proposing an ambitious and sustainable legal migration policy. As part of the comprehensive approach to migration set out in the Pact on Migration and Asylum, the Commission is proposing legal, operational and policy initiatives that will benefit the EU’s economy, strengthen cooperation with non-EU countries and improve overall migration management in the long term. The set of proposals also includes specific actions to facilitate integration of those fleeing Russia’s invasion of Ukraine into the EU’s labour market.
Vice-President for Promoting our European Way of Life, Margaritis Schinas, said: “Whilst our Member States are busy managing the arrival of over 5 million people from Ukraine, this does not preclude the need to lay the foundations of a sustainable and common approach to labour migration to address EU skills needs in the long term. With today’s initiatives we recognise that legal migration has a positive impact all round: it gives those who want to migrate an opportunity to improve their circumstances while providing more skilled workers for host countries, who in turn boost the economy for all.”
Commissioner for Home Affairs, Ylva Johansson, said: “Annually, 2 to 3 million nationals from non-EU countries come to the EU legally, in contrast to 125,000 to 200,000 irregular arrivals. Legal migration is essential to our economic recovery, the digital and green transition and to creating safe channels to Europe, while reducing irregular migration. With today’s package, we are simplifying the application process for living and working in the EU and improving rights for residents and their family members. I am confident we are putting in place a solid way forward to attract new talent into the EU for today and tomorrow.”
An enhanced legislative framework
To provide a more effective framework for legal pathways to the EU, the Commission is proposing to revise the Single Permit Directive and the Long-Term Residents Directive.

A streamlined procedure for the single permit for combined work and residence will make the process quicker and easier for applicants and employers. It will allow applicants to lodge applications from both non-EU countries and EU Member States and will also enhance safeguards for equal treatment and protection from labour exploitation.

The revision of the Long-term Residents Directive will make it easier to acquire the EU long-term residence status by simplifying the admission conditions, for instance by allowing the cumulation of residence periods in different Member States. In addition, the revision will enhance the rights of long-term residents and their family members, including improvements to family reunification and facilitated intra-EU mobility.

Better matching skills and labour market needs
The Commission is proposing to step-up operational cooperation at EU level between Member States as well as with partner countries. Work is already advanced with a number of key initiatives to match labour market and skills needs of Member States and partner countries. Following the launch of Talent Partnerships in June 2021, the Commission is now proposing a number of steps to operationalise them with the aim of agreeing on the first Talent Partnerships by the end of 2022.
The Commission is proposing to establish the first EU-wide platform and matching tool, an EU Talent Pool, to make the EU more attractive for non-EU nationals looking for opportunities and help employers find the talent they need. To address the urgent need to facilitate access to the labour market for new arrivals from Ukraine, the Commission is proposing a pilot initiative that should be up and running by summer 2022.
A forward-looking legal migration policy
Finally, the Commission is exploring further potential avenues for legal migration to the EU in the medium to longer term. The Commission sees the potential for focusing on forward-looking policies around three areas of action: care, youth and innovation. The aim will be to:

Attract skills and talent in sectors where there are labour shortages and needs, for example in the long-term care sector;
Create opportunities for young people to explore new countries, to benefit from work and travel; and
Promote innovation entrepreneurship within the EU and invest in our European tech sovereignty.

Background
Whilst Member States alone decide on the volumes of legal migrants they wish to admit, the EU can support them with practical and operational tools. Over the past two decades, the EU has developed a legal framework largely harmonising Member States’ conditions of entry and residence for non-EU nationals. An evaluation of this legal framework in 2019 underlined that more could be done to increase the impact of the EU legal migration framework on the EU’s demographic and migration challenges. After a wide public consultation and following two resolutions from the European Parliament in 2021, the Commission was asked to present a set of proposals to facilitate legal migration to the EU with the objective of reducing bureaucracy, strengthening harmonisation, promoting fundamental rights and equal treatment, and preventing labour exploitation.
Compliments of the European Commission.
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Today, the Commission is proposing the digitalisation of the Schengen visa process, replacing the visa sticker, and introducing the possibility to submit visa applications online through the European online visa platform. The New Pact on Migration and Asylum set the objective to fully digitalise visa procedures by 2025. It is an opportunity to effectively improve the visa application process by reducing the costs and the burden on Member States as well as the applicants, while also improving the security of the Schengen area.
Vice-President for Promoting our European Way of Life, Margaritis Schinas, said: “Today we are bringing the EU’s visa policy into the digital age. With some Member States already switching to digital, it is vital the Schengen area now moves forward as one. We are proposing a fully digitalised visa application to help both travellers and Member States ensure smother and more secure application process.”
Commissioner for Home Affairs, Ylva Johansson said: “A modern visa process is crucial to make travel to the EU easier for tourism and business. Half of those coming to the EU with a Schengen visa consider the visa application burdensome, one-third have to travel long distance to ask for a visa.  It is high time that the EU provides a quick, safe and web-based EU visa application platform for the citizens of the 102 third countries that require short term visa to travel to the EU.”
In today’s digital age, applying for a visa is still a lengthy and heavily paper-based process with applicants having to travel to submit and collect their passport with a visa afterwards, leading to accumulating costs both for travellers and Member States. Several Member States have taken steps to move visa applications online but there are differences in the extent to which they have done this. Only a few offer the possibility of paying online. These procedures also proved problematic during the COVID-19 pandemic where applicants were no longer able to freely go to consulates to apply for visas.
Harmonising and unifying visa application procedures within the Schengen area will help to avoid so called ‘visa shopping’ by applicants who may be tempted to lodge an application with a Schengen country that offers faster visa application processing than with a country that is actually their destination. The digitalisation of the visa process will also reduce security risks posed by the physical visa stickers, which could still be prone to falsification, fraud and theft. Today’s proposal is also in line with the general EU approach to encourage the modernisation and digitisation of public services.
Through digitalisation, applying for a Schengen visa will become easier and the visa itself will be more secure:

Visa applicants will be able to apply for a visa online, including paying the visa fee through a single EU platform, regardless of the Schengen country they want to visit;
The platform will automatically determine which Schengen country is responsible for examining an application, in particular when the applicant intends to visit several Schengen countries;
The platform will provide applicants with up-to-date information on Schengen short-stay visas, as well as all necessary information regarding the requirements and procedures (such as supporting documents, visa fee or the need for an appointment to collect biometric identifiers);
Appearing in person at the consulate would only be mandatory for first time applicants for the collection of biometric identifiers, for applicants whose biometric data are no longer valid or those with a new travel document;
The visa will include state-of-the-art security features, which will be more secure than the current visa sticker;
The new system will ensure that fundamental rights are always protected.

Background
The European Commission in 2018 proposed to amend the Visa Code by adopting visa policies to new challenges and equally stressed that digital visas are the way forward for the longer term. When revising the EU Visa Code in 2019, the European Parliament and the Council stated the aim of developing a common solution to allow Schengen visa applications to be lodged online, thereby making full use of the recent legal and technological developments. The COVID-19 pandemic, which led to the slowing down of Schengen visa operations worldwide, due to the difficulty of receiving visa applicants in consulates and visa application centres, prompted Member States to call upon the Commission to speed up work on digitalisation of visa procedures. The Pact on Migration and Asylum proposed by the Commission in September 2020 set the objective of making the visa procedure fully digitalised by 2025, with the introduction of a digital visa and the ability to submit visa applications online.
Next steps
The Commission proposal will now be discussed by the European Parliament and the Council. Member States will have then five years to switch to the common online visa platform. Based on the outcome of the negotiations between the co-legislators, the development of the platform could start in 2024 and become operational in 2026. Considering the five year transition period, all Member States could use the platform in 2031.
Compliments of the European Commission.
The post Visa Digitalisation: Visa travel to the EU becomes easier first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

As businesses, government agencies, and nonprofits reopen and employees return to in‑person offices, many pandemic safety measures are being modified. But if your company checked employees’ or customers’ vaccine status or collected other COVID-related information, have you considered what to do with the data now? Businesses that maintain that information or that developed apps or other products to facilitate its collection can pass along an important pointer to others planning to enter the burgeoning health app marketplace: Sensitive health information should come with a “Caution: Handle with Care” label.
Does your business develop vaccine verification apps?
Some vaccine verification “passport” apps store a digital copy of a person’s vaccination card. Others give the user a digital record to save in other apps or in a mobile wallet. In addition to a person’s vaccine status and possibly their test results, some apps collect other information to verify the person’s identity – for example, their name, date of birth, zip code, email address, and phone number. Some apps even tap into state or pharmacy vaccination records. Once verified, apps may keep the data on the phone, others may access data from the cloud, and still other may create a digital credential (often a QR code) that other apps can scan. If your company creates vaccine verification apps or if you’re developing other health-related apps, here are some key considerations.

Make accurate representations. Clearly explain how people’s information will be used and shared and then live up to those promises. If your company has deployed apps to read credentials at storefronts, ensure that those businesses understand your practices and the limits on how they may use the data you share.

Keep your app updated and your customers in the loop.  If your app needs to be updated to protect against new security vulnerabilities, follow through and do just that. And if a customer needs to update information on file to continue to use your app, communicate that clearly.

Review and update your privacy claims. Companies are creating apps that may evolve over time to share new or different information, particularly as they relate to public health developments. If your privacy claims don’t keep pace with changes to your data practices, consumers could be misled.

Minimize the data that is shared. When verifying a consumer’s vaccination status, it may be sufficient to communicate their status to another entity without sharing the person’s name, date of birth, email address, type of vaccine, etc. That principle applies equally to other health-related apps.

Protect the data you use for verification. If your app transmits sensitive data to verify a person’s status, use transit encryption. People using those apps (or other health apps) commonly rely on open Wi-Fi access points at coffee shops, airports, and other locations where it’s easy for info thieves to intercept data. If your app stores information on a phone, consider protecting or obscuring the data. This helps protect users in the event of viruses (the digital kind), malware, or a lost device.

Apply the lessons of the pandemic as you develop new health-related apps. Health apps are here to stay. But before your company rushes to market with a new product, train your team to prioritize best practices for secure development. If you Start with Security – and keep it Job #1 as you design, develop, and test – you can reduce the risk of rolling out a product with a fatal flaw. Another important resource: NIST’s Secure Software Development Framework (SSDF). Before your product goes live, verify that it works as advertised and that security measures are operational. One unskippable step: testing your product to ensure it’s not susceptible to common security vulnerabilities.

If you’re dealing with health data or kids’ data, understand applicable standards and regulations. Additional legal provisions may apply when health information and kids’ information is involved. Seek guidance on the Children’s Online Privacy Protection Act and the COPPA Rule, the Health Insurance Portability and Accountability Act (HIPAA), the Health Breach Notification Rule, and other relevant laws.

Does your business, nonprofit, or other group check people’s vaccine status?
If your company verifies the vaccine status of employees, customers, or others – whether by using an app, checking vaccine cards in person, getting scans of cards via email, etc. – here is some advice to keep in mind. These principles will remain relevant as new health apps enter the market.

Consider your objective.  When checking the status of customers or employees, are you doing that to ensure they’re vaccinated – or do you need more information to comply with legal obligations or possibly conduct contact tracing? Identifying your goal can be an important step to figuring out how to best achieve it.

When checking someone’s vaccination status, less is usually more. Consider whether you can simply confirm a person is vaccinated by viewing their vaccination card or a digital credential. If you don’t need more detailed information, don’t ask for it and don’t collect it in the first place. You don’t have to protect data you never had

Research the marketplace.  If you decide to use an app or other technology to assist in checking vaccination status or performing other health-related functions, exercise the utmost care in selecting service providers Investigate the companies, learn more about their software, and ask questions about their privacy and data security practices. What information will they be sharing with you? What information will an app be collecting from you, your customers, or your employees? Are the representations you make to others consistent with your service provider’s practices?

Provide a secure environment. If you do use technology to collect personal information, do you have a secure network through which the information is transmitted? And if you must maintain information, can you store it securely?

If you need to maintain information about a person’s vaccine status, consider how long you have to retain it. Once you no longer have a legitimate need for someone’s vaccine status or other health-related information, dispose of it securely.

Use the return to the in-person workplace – or the transition to a more permanent remote office – as a chance to take stock of the data you collect and retain. If you don’t have an ongoing need for a consumer’s date of birth to verify their status, don’t store it. Or if you use an app at a storefront to verify vaccination status of customers, think critically about how long data related to any one customer visit needs to be stored. But don’t stop there. Look beyond COVID-related circumstances to take a fresh look at your information collection and retention practices. Why collect or keep data you don’t need?

Author:

Megan Cox, Attorney, FTC Division of Privacy & Identity Protection

Compliments of the U.S. Federal Trade Commission.
The post FTC | What the pandemic has taught businesses about the collection of health information first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The Commission welcomes the swift political agreement reached today between the European Parliament and EU Member States on the proposal on the Digital Services Act (DSA), proposed by the Commission in December 2020. The DSA sets out an unprecedented new standard for the accountability of online platforms regarding illegal and harmful content. It will provide better protection for internet users and their fundamental rights, as well as define a single set of rules in the internal market, helping smaller platforms to scale up.
European Commission President Ursula von der Leyen said:  “Today’s agreement on the Digital Services Act is historic, both in terms of speed and of substance. The DSA will upgrade the ground-rules for all online services in the EU. It will ensure that the online environment remains a safe space, safeguarding freedom of expression and opportunities for digital businesses. It gives practical effect to the principle that what is illegal offline, should be illegal online. The greater the size, the greater the responsibilities of online platforms. Today’s agreement – complementing the political agreement on the Digital Markets Act last month – sends a strong signal: to all Europeans, to all EU businesses, and to our international counterparts.”
Executive Vice-President for a Europe Fit for the Digital Age, Margrethe Vestager, added: “With the DSA we help create a safe and accountable online environment. Platforms should be transparent about their content moderation decisions, prevent dangerous disinformation from going viral and avoid unsafe products being offered on market places. With today’s agreement we ensure that platforms are held accountable for the risks their services can pose to society and citizens.”
Commissioner for the Internal Market Thierry Breton further commented: “With the DSA, the time of big online platforms behaving like they are “too big to care” is coming to an end. The DSA is setting clear, harmonised obligations for platforms – proportionate to size, impact and risk. It entrusts the Commission with supervising very large platforms, including the possibility to impose effective and dissuasive sanctions of up to 6% of global turnover or even a ban on operating in the EU single market in case of repeated serious breaches. EU institutions have worked hand in hand in record time, with determination and ambition to protect our citizens online.”
A new framework for digital services
The new framework under the DSA is founded on European values, including the respect of human rights, freedom, democracy, equality and the rule of law. It will rebalance the rights and responsibilities of users, online intermediaries, including online platforms as well as very large online platforms, and public authorities.
The DSA contains EU-wide due diligence obligations that will apply to all digital services that connect consumers to goods, services, or content, including new procedures for faster removal of illegal content as well as comprehensive protection for users’ fundamental rights online.
In scope of the DSA are various online intermediary services. Their obligations under the DSA depend on their role, size, and impact on the online ecosystem. These online intermediary services include:

Intermediary services offering network infrastructure: Internet access providers, domain name registrars;
Hosting services such as cloud computing and webhosting services;
Very large online search engines with more than 10% of the 450 million consumers in the EU, and therefore, more responsibility in curbing illegal content online;
Online platforms bringing together sellers and consumers such as online marketplaces, app stores, collaborative economy platforms and social media platforms;
Very large online platforms, with a reach of more than 10% of the 450 million consumers in the EU, which could pose particular risks in the dissemination of illegal content and societal harms.

Concretely, the DSA contains:

Measures to counter illegal goods, services or content online, such as:

a mechanism for users to easily flag such content and for platforms to cooperate with so-called ‘trusted flaggers’;
new obligations on traceability of business users in online market places;

New measures to empower users and civil society, including:

the possibility to challenge platforms’ content moderation decisions and seek redress, either via an out-of-court dispute mechanism or judicial redress;
provision of access to vetted researchers to the key data of the largest platforms and provision of access to NGOs as regards access to public data, to provide more insight into how online risks evolve;
transparency measures for online platforms on a variety of issues, including on the algorithms used for recommending content or products to users;

Measures to assess and mitigate risks, such as:

obligations for very large platforms and very large online search engines to take risk-based action to prevent the misuse of their systems and undergo independent audits of their risk management systems;
Mechanisms to adapt swiftly and efficiently in reaction to crises affecting public security or public health;
New safeguards for the protection of minors and limits on the use of sensitive personal data for targeted advertising.

Enhanced supervision and enforcement by the Commission when it comes to very large online platforms. The supervisory and enforcement framework also confirms important role for the independent Digital Services Coordinators and Board for Digital Services.

Next Steps
The political agreement reached by the European Parliament and the Council is now subject to formal approval by the two co-legislators. Once adopted, the DSA will be directly applicable across the EU and will apply fifteen months or from 1 January 2024, whichever later, after entry into force. As regards the very large online platforms and very large online search engines the DSA will apply from an earlier date, that is four months after their designation.
Background
The Commission made its proposal on the Digital Services Act on 15 December 2020, together with the proposal for the Digital Markets Act, on which the European Parliament and Council reached a political agreement on 22 March 2022, an updated Q&A document is available here. The political agreements on these two files will work together to ensure a safe, open and fair online environment in the EU.
Compliments of the European Commission.
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1 Introduction
The recent increase in energy prices raises the question of the extent to which households will reduce their consumption in response. With the global economy in the process of recovering from the coronavirus (COVID-19) pandemic, the prices of many commodities – including oil and gas – have soared over the last year or so. Since demand for energy is inelastic in the short run, those large price increases imply significant declines in households’ purchasing power, which will need to be absorbed through (i) reduced consumption of non-energy goods and services, (ii) a reduction in savings or (iii) an increase in income. This article assesses the extent to which those three margins are playing a role in the transmission of higher energy prices to aggregate consumption. In addition, it analyses the distributional impact of higher energy prices, as the effect on individual households tends to vary considerably. Since the distributional impact of such price rises has the potential to be very significant, that may warrant a separate policy response independently of the macroeconomic implications of those developments.
The rise in energy prices should be seen in the context of an exceptional economic recovery, but other factors are also playing a role. While the impact that energy prices have on consumption has been studied before, the recovery following the COVID-19 crisis is atypical from a historical perspective. Thus far, it has been characterised by a surge in global demand for durable and non-durable consumer goods, leading to unprecedented bottlenecks in production and trade, with households having accumulated record levels of savings in the course of the pandemic.[1] Moreover, the supply of energy has been hampered by a lag in the production of oil, as well as geopolitical tensions – especially Russia’s recent invasion of Ukraine – and technical disruptions affecting the provision of natural gas to European countries.[2] It is important to account for these confounding factors in order to understand the aggregate impact that higher energy prices will have on private consumption and formulate an appropriate policy response.
This article presents new evidence for the euro area and is structured as follows. Section 2 outlines relevant existing literature. Section 3 presents new empirical evidence from both an aggregate and a disaggregated perspective. The aggregate perspective focuses on identifying the source of energy price fluctuation, while the disaggregated perspective focuses on distributional implications beyond the aggregate impact. Importantly, in order to provide a timely assessment of the macroeconomic and distributional implications of large changes in energy prices, the aggregate and disaggregated analyses are both based on survey data. Section 4 concludes and identifies a number of policy implications
READ MORE HERE
Authors:

Niccolò Battistini
Virginia Di Nino
Maarten Dossche
Aleksandra Kolndrekaj

Compliments of the European Central Bank.
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Keynote speech by Christine Lagarde, President of the ECB, at the Peterson Institute for International Economics | Washington, D.C., 22 April 2022 |

It is a pleasure to be in Washington to speak with you today.
The economic fallout from Russia’s invasion of Ukraine may mark a defining moment for globalisation in the 21st century.
Russia’s unprovoked aggression has triggered a fundamental reassessment of economic relations and dependencies in our globalised economy. And in a post-invasion world, it has become increasingly untenable to isolate trade from universal values such as respect for international law and human rights.
Throughout human history, economic relations and values have fundamentally shaped how we understand and interact with the world. This point is well captured by those world maps from Medieval times.
These mappae mundi, as they are known, depicted world views informed by trade links and value systems. Well-trodden trade routes from ancient times meant that Asia and North Africa figured prominently in them. Mappae mundi, like the famous Ebstorf Map, often portrayed the holy city of Jerusalem at the centre of the world.
Today, rising geopolitical tensions mean our global economy is changing. And once more, fluctuating value systems and shifting alliances are creating a new global map of economic relations.
It is still too early to say how this will play out, but one can already see the emergence of three distinct shifts in global trade. These are the shifts from dependence to diversification, from efficiency to security, and from globalisation to regionalisation.
These shifts have implications for Europe. And we must respond accordingly if we are to thrive in this new and increasingly uncertain global terrain. But that does not mean restricting open trade. Rather, we must work towards making trade safer in these unpredictable times, while also leveraging our regional strength.
That will not be easy. But as Christopher Columbus once said, “You can never cross the ocean until you have the courage to lose sight of the shore.”
Globalisation past and present
The years following the fall of the Berlin Wall marked a golden era for globalisation. The drive for increased efficiency saw global value chains blossoming alongside a rising tide of trade, with production becoming increasingly unbundled across borders. Today, around half of global trade is related to global value chain, or GVC activities.[1]
Europe in particular benefited from the march of globalisation. Trade as a share of GDP rose from 31% to 54% in the euro area between 1999 and 2019, whereas in the United States it rose from just 23% to 26%.[2] Europe’s integration with global value chains was deeper too, with GVC participation roughly 20 percentage points higher than in the United States.[3]
The economic benefits of all this were real. Integration with global value chains led to lower import prices, technology spillovers, and productivity gains from the international division of labour.[4] And when regions were faced mainly with local shocks, trade openness helped buffer the domestic effects, allowing countries to diversify risks and exploit multiple sources of external demand.[5]
But two factors have emerged in recent years that expose the vulnerabilities of this model.
First, the efficiency gains of this unfolding of production have been shown to be prone to risks. As global supply chains have become progressively leaner and more efficient through “just-in-time” production, they have also become extremely vulnerable to disruptions in the face of global shocks that affect multiple sectors at once.[6]
In fact, as we saw during the pandemic, global value chains materially transmitted and amplified global shocks. During the contractionary phase of the pandemic, GVC-related spillovers amplified the decline in global imports and exports by 25%, according to one study.[7] And during the recovery phase, mismatches between burgeoning global demand and restrained supply have contributed to surging industrial goods inflation. Supply bottlenecks are found to have contributed to half of the rise in manufacturing producer price inflation in the euro area.[8]
Second, it has become clear how much global production relies on critical raw materials sourced from just a few countries – an arrangement that can quickly become a vulnerability when geopolitics change and countries with different strategic goals emerge as more risky trading partners. For example, China was estimated to control over half of the global rare earths mining capacity in 2020, and 85% of rare earths refining.[9]
In Europe’s case, the European Commission has found that 34 products used in the EU are extremely exposed to supply chain disruptions given their low potential for diversification and substitution inside the Union.[10] And this vulnerability has become more evident as a result of the Russia-Ukraine war.
The euro area is highly dependent on Russia for, among other things, cobalt and vanadium. These are key inputs for the 3D printing, drone and robotics industries. And Ukraine accounts for around one-fifth of Europe’s supply of wire harnesses for cars.[11] The war has already forced wiring plants in the country to shut down, causing some car manufacturers in the EU to halt production. The export-oriented agricultural sector has also been affected.
Perhaps most importantly, the war has exposed the vulnerability of Europe’s energy supply. In 2020 the EU imported around 60% of its energy, a reliance that has actually increased since 2000, despite a growing share of renewables in energy production.[12] And just four countries accounted for over 70% of the bloc’s natural gas imports, with over 40% coming from Russia alone.[13]
These two factors have underlined that the earlier advance of globalisation largely relied on a “Goldilocks” scenario of relative economic and geopolitical stability. However, economies could be subject to huge volatility if shocks were global and correlated, and if there were excessive dependencies on particular suppliers.
So, many countries are now faced with the question of how to respond to these new vulnerabilities. The answer is not to withdraw within our borders and erect trade barriers. History shows that retreating from global trade comes with substantial costs. One study finds that the United States’ self-imposed embargo on international shipping back in 1808 cost roughly 8% of its gross national product.[14]
Instead of restricting trade, we should work towards making trade safer. And there are signs that three shifts are taking place in world trade in response to this new global map.
Three shifts in global trade
The first shift is from dependence to diversification.
Having learnt the lessons of the pandemic, firms are unlikely to remain dependent on relatively linear global supply chains. But that does not, in the first instance, mean that they will seek to deglobalise and reshore production. Initially we are likely to see a greater focus on diversifying suppliers and stockpiling essential inputs.
Research finds that higher diversification can almost halve a supply shock’s negative impact on a country’s GDP.[15] And indeed, existing supply chains that were more geographically diversified helped to mitigate the effects of domestic shocks during the pandemic.[16] By contrast, greater supply chain concentration is found to increase economic volatility.[17]
This diversification trend is already underway. By late 2021 almost half of companies had diversified their supplier base, in contrast to just 5% that had implemented reshoring measures.[18] At the same time, companies moved away from relying on “just-in-time” supply chain management towards a “just-in-case” approach. Less than 15% of companies were relying on “just-in-time” deliveries by the end of last year.[19]
However, diversification is likely to have limits – and this brings me to the second shift, which is from efficiency to security.
In recent years we have seen a shift towards new industrial policies, mainly led by China and the United States, in which geopolitical biases are being introduced into strategic supply chains at the expense of efficiency considerations. The US administration has explicitly identified “friend-shoring” as a policy goal in its recent supply chain strategy.[20]
Now, the war may prove to be a tipping point for Europe and other regions too, making the alliances to which suppliers’ countries belong more important. International firms will still face strong incentives to organise production where costs are lowest, but geopolitical imperatives might restrict the perimeter in which they can do so.
For strategic industries such as semiconductors or pharmaceuticals, the very limited reshoring of supply chains we saw during the pandemic will probably change as a deliberate result of public policy. Europe, for example, is aiming to double its share of the global market for semiconductor production to 20% by 2030.[21]
But even industries that are not considered strategic are likely to anticipate the fracturing of the global trading order and adjust production themselves. A recent survey found that 46% of German companies receive significant inputs from China. Of those, almost half are planning to reduce their dependency on China.[22] In the United States, almost 40% of members of the US-China Business Council have moved sourcing due to uncertainties about supply.[23]
For energy and critical raw materials, increasing security will require a different strategy. After all, these resources are distributed unevenly around the world, and cannot be substituted with domestic alternatives. Regions will increasingly have to source their critical inputs from a smaller pool of potential suppliers that are deemed reliable and in line with their shared strategic interests. And they will need to do so in the context of a green transition that is making certain raw materials – like copper, cobalt and nickel – increasingly more important than others. A new geopolitical race to secure access to resources is therefore likely.
Achieving greater security will not come without costs, and this is why the third shift – from globalisation to regionalisation – is also likely to gather pace. The price of increased security could in principle take the form of lower international risk-sharing and higher transitional costs.
In this changing geopolitical landscape, global export markets may not be as open or as reliable as before. Therefore, the scope for insuring against business cycle risks by “rotating” demand across multiple trade partners may become more restricted.
This change could particularly affect Europe given its high exposure to world trade. Between 2010 and 2014, when Europe was recovering from the global financial crisis, external demand as a share of euro area GDP more than doubled.[24] But if other regions begin to turn inwards, that escape valve to relieve pressure from shocks is likely to weaken.
Moreover, the transitional costs related to a large-scale reorientation of supply will be significant. For example, establishing fully domestic semiconductor manufacturing supply chains within the United States could cost up to USD 1 trillion, according to one estimate. That is more than twice the value of the global semiconductor market.[25] In addition, a rapid shift from lower-cost to higher-cost suppliers is likely to have implications for price dynamics, at least during the transition.[26]
In this context, the first best option is still to defend the rules-based multilateral trading system that powered the rise of global trade. But as a fallback, regionalisation allows countries to recreate some of the benefits of globalisation on a smaller scale and to limit these costs.
Regionalisation creates an opportunity for deeper regional risk-sharing – both through trade and financial integration. This can to some extent substitute for lower risk-sharing at the global level. It facilitates common funding of strategic priorities and investment in transitions, helping generate economies of scale. And it may also help to offset cost pressures emanating from higher energy prices and the associated elevated transportation costs.
Regionalisation is not a new phenomenon – in recent decades it has gone hand-in-hand with faster globalisation. But now, for the first time, we may see these two forces diverge. Fragmentation at the global level may ultimately spur greater integration at the regional level because the latter can help to manage the costs of a changing world.
European resilience in a changing world
So how should Europe respond to these changes?
Europe’s main challenge today is to achieve “open strategic autonomy” – that is, to strike a careful balance between insuring against risk in areas where our vulnerabilities are excessive and avoiding protectionism. Having spent decades investing in regionalisation, the EU is well placed to succeed in a world where the global order is more fragmented, while still acting as a force for trade openness.
Three advantages stand out.
First, Europe has the world’s largest single market, which gives Member States a strong base in which to establish new supply chains if strategic imperatives require it. In fact, over 70% of the euro area’s participation in global value chains was already regional in 2019.[27]
Second, we have long pursued a form of “managed globalisation” within our single market. Although barriers to commerce and exchange have been steeply reduced, we have set up strong common institutions to police the market and ensure that countries have recourse to binding arbitration in the event of disputes. This is likely to make openness more sustainable within Europe at a time when it could be under threat at the global level.
Third, we have already made considerable headway towards pooling resources, which will be important in managing the ongoing transitions. The investment needs we face are massive, especially if we are to decouple quickly from Russia. But we have already set up innovative European instruments that can help, including the €750 billion Next Generation EU fund established in response to the pandemic. Almost 40% of that spending has been allocated to the green transition.
At the same time, Europe has the potential to implement a positive-sum form of regionalisation that also makes the global economy more robust.
The single market allows the EU to use its economic weight to steer openness in a rules-based direction, and to set values and standards in other parts of the world – which it already does via the so-called Brussels effect.[28] And because regions become more dynamic internally when they integrate further, we could see Europe emerging as another economic engine on which the global economy can rely to sustain growth.
Recent decisions will help in this regard. Next Generation EU investment, for example, could increase real GDP in the EU by 1.5% by 2024.[29] Moreover, were EU leaders to raise military expenditure to 2% of GDP in response to the Russian threat, this would imply an increase in government spending of 0.7% of GDP. That could add another 0.2 percentage points to euro area growth by 2024.
But if Europe is to seize this moment, we cannot afford to stand still. New challenges may require us to design new instruments or repurpose old ones. And there are also existing integration projects that have somewhat stalled but are vital in this new environment.
We are still lacking a complete single market for services, which will become an even greater hindrance to growth in a world of remote work. And European capital markets remain segmented, limiting risk-sharing via cross-border debt and equity holdings. Only around 20% of shocks in the euro area are mitigated in this way, compared with at least 60% in the United States.[30]
Nevertheless, I am optimistic about Europe overall, in large part because the changing dynamics driving integration are likely to make the benefits of the EU more visible to its citizens.
In recent decades integration has been largely internally driven and triggered by economic crises. There have been notable achievements – such as constructing the banking union – but it is questionable how visible these successes are in people’s everyday lives.
But external threats are now becoming more prevalent again, and this is driving integration in areas which arguably inspire stronger feelings in EU citizens. For example, over three-quarters of Europeans are in favour of a common EU defence and security policy.[31]
Therefore, one outcome of this changing global environment could be to make the benefits of European integration more tangible, and thereby increase the legitimacy of the EU overall.
Conclusion
Let me conclude.
The Russia-Ukraine war has not only cast a shadow over Europe, it has also raised several questions about where the global economy is heading in the 21st century. The shifts we are seeing may mean uncertain times lie ahead for trade.
However, being back in Washington, D.C., I am reminded of the words of one of the founding fathers of the United States, Benjamin Franklin. He once wrote: “No nation was ever ruined by trade.”
The benefits of globalisation are indisputable. Open trade should not have to suffer in this global reordering. But that outcome is not guaranteed. It requires us to combine the pursuit of a rules-based international order with a drive to reduce our strategic vulnerabilities. And Europe is well placed to achieve this synthesis, guided by the compass of open strategic autonomy.
Thank you for your attention.
Compliments of the European Central Bank.

Borin, A., Mancini M. and Taglioni, D. (2021), “Measuring Exposure to Risk in Global Value Chains”, Policy Research Working Paper Series, No 9785, World Bank, Washington, D.C., September.

Lagarde, C. (2021), “Globalisation after the pandemic”, 2021 Per Jacobsson Lecture at the IMF Annual Meetings, 16 October.

Euro area; data up to 2014; see ECB Working Group on Global Value Chains (2019), “The impact of global value chains on the euro area economy”, Occasional Paper Series, No 221, ECB, Frankfurt am Main.

The World Bank finds that a 1% increase in GVC participation is associated with an increase of more than 1% in per capita income in the long run. See World Bank (2020), “World Development Report 2020: Trading for Development in the Age of Global Value Chains”, World Bank, Washington, D.C.

Caselli, F. et al. (2015), “Diversification Through Trade”, NBER Working Paper Series, No 21498, August.

Baldwin, R. and Freeman, R. (2021), “Risks and global supply chains: What we know and what we need to know”, NBER Working Paper Series, No 29444, October.

Cigna, S., Gunnella, V., and Quaglietti, L. (2022), “Global value chains: measurement, trends and drivers”, Occasional Paper Series, No 289, ECB, Frankfurt am Main, January.

Celasun, O., Hansen, N-J., Mineshima, A., Spector, M. and Zhou. J (2022), “Supply Bottlenecks: Where, Why, How Much, and What Next?”, IMF Working Papers, No 2022/031, International Monetary Fund, February.

The White House (2021), “Building resilient supply chains, revitalizing American manufacturing, and fostering broad-based growth”, June.

European Commission (2021), “Strategic dependencies and capacities”, Commission Staff Working Document, 5 May.

Financial Times (2022), “Europe’s car plants halted by lack of low-cost Ukrainian component”, 16 March.

Data on energy imports dependency can be found on Eurostat; see also European Commission, “From where do we import energy?”.

Figures for 2019. European Commission, “From where do we import energy?”.

See Irwin, D. (2001), “The Welfare Cost of Autarky: Evidence from the Jeffersonian Trade Embargo, 1807-1809”, NBER Working Paper Series, No 8692, December.

International Monetary Fund (2022), “World Economic Outlook”, April.

See Espitia, A., Mattoo, A., Rocha, N., Ruta, M. and Winkler, D. (2021), “Pandemic Trade: COVID-19, Remote Work and Global Value Chains”, Policy Research Working Paper Series, No 9508, World Bank, January; and OECD (2021), “Global value chains: Efficiency and risks in the context of COVID-19”, Policy Responses to Coronavirus (COVID-19).

D’Aguanno, L., Davies, O., Dogan, A., Freeman, R., Lloyd, S., Reinhardt, D., Sajedi, R. and Zymek, R. (2021), “Global value chains, volatility and safe openness: Is trade a double-edged sword?”, Bank of England Financial Stability Paper, No 46, January; McIntyre, A., Li, M.X., Wang, K. and Yun, H. (2018), “Economic Benefits of Export Diversification in Small States”, IMF Working Papers, No 18/86, April.

Economist Impact (2022), “Trade in Transition 2022”.

Economist Impact (2022), “Trade in Transition 2022”.

The White House (2021), “Building resilient supply chains, revitalizing American manufacturing, and fostering broad-based growth”, June.

European Commission (2022), “Digital sovereignty: Commission proposes Chips Act to confront semiconductor shortages and strengthen Europe’s technological leadership”, press release, 8 February.

Baur, A. and Flach, L. (2022), “Deutsch-chinesische Handelsbeziehungen: Wie abhängig ist Deutschland vom Reich der Mitte?”, ifo Schnelldienst, No 4, 31 March.

US-China Business Council (2021), “Member survey”.

Lagarde, C. (2021), “Globalisation after the pandemic”, 2021 Per Jacobsson Lecture at the IMF Annual Meetings, 16 October.

Deloitte (2022), “Government trends 2022: Building resilient, connected, and equitable government of the future”.

I have recently touched on this topic. See Lagarde, C. (2022), “Monetary policy in an uncertain world”, speech at “The ECB and Its Watchers XXII” conference, 17 March.

Cigna, S., Gunnella, V., and Quaglietti, L. (2022), “Global value chains: measurement, trends and drivers”, Occasional Paper Series, No 289, ECB, Frankfurt am Main, January.

Bradford, A. (2015), “The Brussels Effect”, Northwestern University Law Review, Vol. 107, No 1.

Pfeiffer, P., Varga, J. and in ‘t Veld, J. (2021), “Quantifying Spillovers of Next Generation EU Investment”, Discussion Paper, No 144, European Commission, July.

Cimadomo, J., Hauptmeier, S., Palazzo, A.A. and Popov, A. (2018), “Risk sharing in the euro area”, Economic Bulletin, Issue 3, ECB, Frankfurt am Main.

Eurobarometer (2022), “Standard Eurobarometer 96 – Winter 2021-2022”, April.

The post Speech by Christine Lagarde | A new global map: European resilience in a changing world first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The European Commission takes note of the decision by Kingspan and European Architectural Systems (i.e. the parent company of Trimo) to terminate their proposed agreement according to which Kingspan intended to acquire sole control over Trimo. This marks the end of the Commission’s investigation into this transaction. Kingspan, based in Ireland, is a manufacturer of insulating panels, including mineral fibre sandwich panels, and other building materials and solutions. Trimo, based in Slovenia, is active mainly in the manufacture of mineral fibre sandwich panels. Following the results of the initial enquiry with the market, on 12 April 2021, the Commission opened an in-depth investigation into the proposed transaction. The Commission was concerned that the proposed transaction would negatively affect competition in several national markets for mineral fibre sandwich panels.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Kingspan and Trimo are leading suppliers of high quality mineral fibre sandwich panels. Together, they would have become by far the largest player in Europe.
When we opened our in-depth investigation, we had concerns that the proposed transaction would negatively affect competition in certain building materials markets, leading to higher prices, reduced quality or less choice for customers.
Our preliminary findings set out in our Statement of Objections addressed to Kingspan indicated that indeed the merger was likely to lead to price increases for mineral fibre sandwich panels in several national markets, to the detriment of customers that rely on this material for their activities.
Mineral fibre sandwich panels are used in the construction industry to insulate and make more energy efficient industrial and commercial buildings. These two aspects are key to achieving our European Green Deal objectives. We must therefore ensure that these products remain available to customers at affordable prices”
Background
More information will be available on the Commission’s competition website, in the Commission’s public case register under the case number M.9938.
Compliments of the European Commission.
The post Statement by Executive Vice-President Vestager On the decision by Kingspan and European Architectural Systems to abandon the proposed transaction involving the purchase of Trimo first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Thank you Adam for this introduction. It is a pleasure to be in D.C. and to be at the Peterson Institute for the first time in person, even if unfortunately the audience is still virtual. It is right to remain prudent – and to remind ourselves that the pandemic is not yet over. One step at a time!
It is now almost two months since Russia’s unprovoked and unjustified invasion of Ukraine. Two months of indiscriminate killings, bombings of civilian targets and absolutely shocking violence. Two months of a war happening just across from EU and NATO borders, the effects of which are being felt the world over. Indeed, this week’s IMF Spring Meetings are overshadowed by the impact of the war on the world economy.
But the consequences of Putin’s senseless war extend beyond the economy. It is also reshaping the energy landscape and triggering a shift in defence policies. I will focus this morning on the war’s economic impact, while also touching on its broader implications in these two areas – energy and defence – from a European and transatlantic perspective. 
[Economic implications]
This new crisis hit us just as our economies were shaking off the effects of the COVID-19 shock and the global recession of 2020.
We started this year with EU GDP back at pre-pandemic levels. Unemployment had reached record lows. Accumulated savings were high. And business and consumer surveys were painting a picture of growing confidence.
This swift turnaround since 2020 stands in stark contrast with the global financial crisis of 2008. Then, it took about seven years for EU economic output to reach pre-crisis levels.
This success is a testament to the strength and the coordination of our fiscal and monetary policy response, both within Europe but also at G7 and G20 level.
The US economy had a similarly fast and strong recovery, with some differences compared to the EU due to different safety nets and support mechanisms.
Of course, as we entered 2022 we were already facing a number of challenges: notably rising energy prices and supply chain disruptions, both contributing to mounting inflation.
And indeed GDP may have returned to pre-crisis levels, but it had not reached yet its pre-crisis trend. Which is really the key indicator to consider our recovery complete.
Nevertheless, the fundamentals of our economy were solid and our assumption was that these challenges would subside over the course of the year. The European economy was on course to reach its trend level later in 2022. Our Winter Economic Forecast, which I presented on 10 February, projected 4% growth in the EU for this year.
The war in Ukraine has shattered these assumptions and changed the picture dramatically. Surging commodity prices have driven inflation to new records. Broken trade links are exacerbating supply chain strains. And confidence has been damaged. Let me touch on each of these.
First, significantly higher commodity prices, notably oil and gas, but also wheat prices, among others, are putting further pressure on already high consumer inflation.
In the euro area, inflation reached 7.4% in March, the highest level since the introduction of the single currency. However, this number masks significant divergence between the 19 euro area Member States. Four are experiencing double-digit inflation while in a couple it remains more subdued at around 5%.
Inflation has similarly shot up in the US, even though there are some differences when it comes to the main drivers.  The largest driver of inflation in the euro area are energy prices, which reached almost 45% last month. Let me recall that in January 2021, energy inflation was still in negative territory.
In the US, inflation is mostly driven by strong demand and the consumption boom triggered by the policy response to the pandemic.
However, it is also clear that inflation in Europe is becoming more broad-based. The effects of the war are adding to pre-existing drivers of price rises, related to the effects of the post-pandemic recovery. At the same time, it is important to underline that inflation expectations remain anchored and that, for the moment, we see only limited second-round effects.
Second, the war and its consequences – including the successive rounds of sanctions that the EU and the US have imposed on Russia – are exacerbating pressures on already strained global supply chains. This is affecting output in a number of sectors, as well as exerting further upward pressure on prices.
Explicit embargoes, implicit bans and voluntary withdrawal from trade are inevitably having an impact on commerce. This may prove particularly important for some Member States with stronger links to Russia. In the Baltic states, for instance, exports to Russia account for some 5% to 8.5% of total exports, compared to 1.8% for the EU as a whole.
So while we continue to stand by the sanctions decisions which we have coordinated with our allies, we also have to be honest with our citizens: this strategy is not without a price.
These developments increase both the need and the likelihood that supply chains will undergo major reorganisations. Strengthening trade links with other partners will take time and may be costly in the short term. They will however reduce our strategic dependence from Russia.
Third, consumer confidence has dropped markedly since the invasion, while business confidence has so far been less affected. We will need to continue to track this soft data carefully in the coming weeks and months. The first data reflecting the impact of the war will be the preliminary GDP flash for the first quarter, which Eurostat will publish at the end of this month.
My conclusion is crystal clear: we see a significant economic impact from the war. The global impact is particularly deep for the EU. The duration of the war will determine its cost, both humanitarian and economic.
EU Member States have started to adopt a variety of measures to tackle this crisis. These include economic and material support to Ukraine, assistance to refugees, as well as continued support to the economy to deal with high energy prices and disruptions in production.
These initiatives will inevitably weigh on budget deficits. According to our preliminary assessment, the initiatives taken by governments so far will increase budget deficits by at least 0.6% of GDP this year.
Overall, it is clear that the 4% growth we had projected for this year looks out of reach. It is too soon to reveal by how much we will need to trim this forecast. I will be able to provide a first indication on May 16, when I will present our Spring Economic Forecast.
To ensure our economies successfully navigate these troubled waters, we need to maintain agile and responsive fiscal policies, much like we did during the COVID crisis. The Commission will provide updated guidance for fiscal policy in 2023 as part of the European Semester spring package that we will present on 23 May.
We must also continue to implement effectively the national recovery and resilience plans Member States put in place in the wake of the pandemic. This is key to supporting confidence and delivering the investments and reforms our economies need, now more than ever.
Beyond the economic impact of the war, there are – as I mentioned – deeper implications for our policies in other areas and for the transatlantic alliance more broadly.
This crisis has been in many ways a wake-up call for Europe: it is high time to reduce our dependencies in strategic sectors and to strengthen our autonomy.
The pandemic had already prompted this wider rethink, especially with regard to reassessing our supply chains in key areas. But the war has drastically accelerated this process, in particular in the fields of energy and defence.
[Energy]
As Secretary of State Anthony Blinken aptly put it recently, Russia is now using energy as a weapon. This clearly changes everything. It has sparked a seismic shift in the energy landscape.
The US was quick to impose an embargo on Russian energy imports. As you know, in Europe we have banned coal imports from Russia and are actively discussing the possibility of further sanctions involving oil and gas.
This approach reflects the different exposure to Russian energy on the two sides of the Atlantic. The US is a net exporter of energy with low exposure to Russia. In Europe, ninety percent of the gas we consume is imported and Russia provides almost half of those imports, in varying levels across Member States. Russia also accounts for 27% of oil and 46% of coal imports.
Nevertheless, the EU has already taken very bold decisions. We have sent a clear message to the Kremlin: we will not be blackmailed.
In March, the Commission announced the REPowerEU plan, with the goal of slashing EU demand for Russian gas by two thirds before the end of the year, and to make Europe independent from Russian fossil fuels by 2027.
The challenge will be to square the seemingly impossible trilemma of keeping energy prices affordable, ensuring security of supply and pursuing our green goals.
Soaring energy prices are harming the competitiveness of our firms and impacting low income households most severely. We have encouraged Member States to make use of a toolbox of measures to tackle high energy prices, from cutting VAT rates to providing direct support to the most vulnerable groups. This has been followed by a new temporary State aid framework. And we are discussing more far-reaching options, such as setting regulated prices.
Cutting our dependence on Russian energy while securing sufficient gas for next winter means we must increase imports from other suppliers.
Discussions with partners have intensified in recent weeks and have led to the recent deal announced by President Biden and President von der Leyen for the US to provide additional supplies of LNG to the EU. This deal marks an important step in our efforts to diversify gas supplies and is a powerful symbol of the strength of our alliance in times of crisis.
Boosting imports from other suppliers is one way to secure alternatives to Russian gas in the short-term. But make no mistake: the best way to ensure we can meet our energy needs is to diversify our energy sources and reduce our dependency on fossil fuels altogether.
The case for a rapid clean energy transition has never been stronger and clearer. The EU is already a global leader in this respect. But in the current situation, we need to do more, and we need to do it faster. It would be a mistake to put on hold the green transition while we face this crisis and we must avoid doing that.
At the recent summit in Versailles, EU leaders tasked the Commission to present concrete measures to make REPowerEU a reality. One month from now, on May 23, we will present our plan. As you can imagine, work is ongoing and it is too soon to share details. What I can say is that REPowerEU must be backed by the necessary national and European resources. The Recovery and Resilience Facility will have an important role to play.  
[Defence]
Finally, the war in Ukraine also marks a turning point for Europe’s defence policy and for the transatlantic relationship.
Positions that were held for decades have shifted in a matter of days.
For the first time in its history, the EU agreed to deliver arms and other equipment to a country under attack. With the latest announcement from earlier this month we have now pledged 1.5 billion euros in military aid to Ukraine. Unprecedented.
In Versailles, EU leaders committed to bolster our defence capabilities, pledging to: substantially increase defence expenditure; develop joint projects and joint procurement of defence capabilities within the EU; increase investments in technologies and innovation for security and defence; and further develop our defence industry.
Russia’s invasion of a country bordering NATO has also strengthened the transatlantic alliance – and its attractiveness to countries like Finland and Sweden where we have witnessed a sea change in public opinion on this matter in recent weeks. And we will see the consequence in the coming weeks.
The Versailles Declaration stresses that the EU’s efforts in this field are complementary to NATO, which remains the foundation of collective defence for its members.
Indeed, where would we be now if the Baltic states, Poland or Romania were not in NATO? I believe that NATO’s eastward expansion has actually put us in a better place to deal with Putin’s history of aggressing Russia’s neighbours.
Boosting our defence capabilities will require significant investments in our industrial and technological base.
The new defence investment needs come on top of those to deliver on the green and digital transition. We are currently working on an updated analysis of our investment needs in these strategic sectors, which will be ready with our REPowerEU plan later in May.
But we are talking about mobilising hundreds of billions of additional investments each year. While most of these investments will need to come from the private sector, financing them will require a more supportive framework of fiscal rules and potentially new tools at the European level.
[Conclusion]
Two years since the start of the pandemic, Russia’s invasion of Ukraine has plunged us into another crisis.
While its economic impact will only gradually become fully clear, its broader significance was evident from that fateful 24 February.
When Russian tanks rolled across the border, they did not just trample on Ukraine’s sovereignty but on the very notion of the international rules-based order. Ukraine is being shelled for its Western aspirations – for trying to build a liberal democracy based on freedom and the rule of law and for seeking closer ties to the West and the European Union. This is simply unacceptable.
This is why Europe and its allies have taken a strong and united stance: while staying clear from a dangerous direct participation in the war, we are providing full support to Ukraine.
In this confrontation, our economic resilience is crucial not just to protect our citizens, but also our model of Western liberal democracy. That is what is at stake now. This war might drag on for longer than we think. In the weeks and months ahead, we need to maintain the same unity that we have shown over the past two months, both across the ocean and within the EU.
This crisis will also spell the end of globalisation as we have known it and reshape global alliances. The notion of Wandel durch Handel, of bringing about change through trade, has shown its limitations. We need to rethink our relations with autocratic regimes and strengthen our ties with like-minded partners.  We do not need a revival of protectionism. What we need is a new and more secure globalisation. The balance, of course, will not be an easy one to find.
This year marks the 75th anniversary of the Marshall Plan, a project that was decisive in so many ways: it cemented transatlantic solidarity; it kickstarted Europe’s postwar recovery; and it sowed the seeds for economic integration on our continent.
And when peace returns to Ukraine, we will need a new Marshall Plan to rebuild the country – better, stronger, greener, more secure – and to help it along its path towards the European Union. An immense challenge, which together we must turn into an opportunity: for Ukraine, for Europe, and for our transatlantic community of democracies.
Thank you.
Compliments of the European Commission.
The post Speech by Commissioner Gentiloni at the Peterson Institute for International Economics: Transatlantic economic policy in times of war first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.