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Category: Europe

  • MIL-OSI Russia: Belgium: Staff Concluding Statement of the 2025 Article IV Mission

    Source: IMF – News in Russian

    February 5, 2025

    A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF’s Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.

    The authorities have consented to the publication of this statement. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.

    An IMF team led by Jean-François Dauphin visited Brussels to conduct the 2025 Article IV consultation with Belgium. The mission’s discussions (January 22-February 3) took place before the formation of the new government and the present statement, which summarizes the mission’s findings and recommendations, does not reflect the new government’s policy intentions.

    The IMF team thanks the Belgium authorities andother counterpartsfor the constructive dialogue and productive collaboration. It congratulates the new government on its nomination and looks forward to future engagement.

    ******

    The Belgian economy has been resilient to a series of shocks, but growth has slowed, and disinflation has faced headwinds. The labor market has been strong but shows signs of cooling. Labor-cost competitiveness has declined with wage growth outpacing sluggish productivity growth. Absent policy change, pressures from an aging population will weigh on Belgium’s social model and further increase the fiscal deficit and public debt, heightening vulnerability to changes in market sentiment. The outlook is subject to high uncertainty, amid risks that could push growth down and inflation up, including deepening geoeconomic and trade fragmentation, and adverse energy price developments.

    • Sustained fiscal consolidation is needed to support disinflation, rebuild buffers, lower market vulnerabilities, and address spending pressures from aging and the green transition. All federal and federated entities need to contribute to the adjustment. Rationalizing current spending while preserving (or increasing) public investment in infrastructure, healthcare, and education and enhancing its efficiency is a priority.
    • To preserve macrofinancial stability, current capital buffer requirements and prudential limits on mortgage loans should be maintained. Recent progress in strengthening systemic risk assessment, supervision, the macroprudential framework, and crisis management and resolution preparedness is welcome and should be sustained.
    • Reforms are needed to enhance growth potential through higher labor force participation, increased productivity, and a more efficient resource allocation. Priorities include increasing the income gap between work and nonwork through tax and social benefits reforms, reforming the wage-setting mechanism, and upgrading labor skills. Together with efforts with EU partners to deepen the single market, further product market reforms to reduce barriers to entry, foster greater competition, and improve the insolvency regime will improve firm dynamics and the diffusion of innovation. Sustaining the green transition requires strong commitment and enhanced coordination among the federal and regional governments.

    Economic outlook and risks

    Growth is expected to be stable in 2025 and inflation to slowly return to target. Output is expected to grow by 1.1 percent in 2025 and slightly increase by 2027 supported by monetary policy easing and a higher contribution from net exports. Inflation is projected to gradually decline as wage growth moderates and the projected drop in international energy prices passes through to retail prices. The external current account is expected to return to small surpluses over the medium term as energy prices ease and external demand increases. Under unchanged policies, pressures from the aging population would further increase the fiscal deficit to about 7 percent and public debt about 125 percent of GDP in 2030, heightening vulnerabilities.

    The baseline outlook is subject to sizeable risks, tilted down for growth and up for inflation. Growth could be weaker if the expected recovery in external demand falters amid escalating geoeconomic tensions and trade fragmentation. Inflation could be higher than projected due to adverse energy price developments, or if persistently-high core inflation affects expectations. Fiscal sustainability concerns could arise and lead to a sharp increase in borrowing costs—especially if global risk aversion increases—, necessitating abrupt fiscal consolidation with negative consequences for growth and potentially financial stability.

    Rebuilding Fiscal Buffers Despite Pressures

    Significant fiscal consolidation is needed to address large structural deficits and rising public debt that were exacerbated by the pandemic and energy crisis. In the short term, consolidation will help further reduce inflation, notwithstanding still-high wage growth and looser monetary policy. This would also help address significant upside risks to inflation. Critically, a sustained reduction in fiscal deficits is needed to reduce vulnerability to changes in market sentiment, rebuild space to address potential future shocks, address long-term spending pressures, and ultimately, preserve the core of Belgium’s social model, which places a high premium on solidarity and equity.

    Consolidation under the new EU economic governance framework (EGF) would significantly improve fiscal sustainability. Given the magnitude of the needed adjustment, the medium-term fiscal structural plan (MTFSP) under the EGF would benefit from a seven-year rather than a four-year adjustment path, accompanied by credible and front-loaded growth-enhancing reforms. Under such an adjustment, an annual reduction in the structural primary balance of about 0.5 percentage points of GDP until 2031 will be necessary to reach an overall deficit below 3 percent of GDP by 2031 and maintain it until 2041, per the EGF.

    Fiscal adjustment should center on rationalizing current spending, while making room for public investment. Rationalizing social benefits and the public wage bill is crucial for achieving budgetary savings. Public investment should be preserved, or ideally, increased to mitigate the growth impact of fiscal consolidation, support green transition, and bolster the economy’s productive capacity.

    Improving the efficiency of public investment is critical amid competing demands for resources. This includes laying out clear infrastructure investment strategies, strengthening project appraisal, selection, and governance, and improving coordination within and among the federal and federated entities. In healthcare, increasing the focus on preventive care and reforming the organization and role of hospitals would help absorb part of the projected increase in spending due to aging and better prepare the system to the evolving need of an older population. Education reforms can help achieve the same education outcomes at lower costs or improve outcomes without increasing spending.

    Pension reforms are essential to address cost pressures from aging. The focus should be on raising the effective retirement age in line with healthy-life expectancy and facilitating longer employment through life-long learning and upskilling. Additionally, reviewing eligibility criteria for specific pension regimes (e.g., disability pensions) and limiting increases in pension benefits by reviewing automatic indexation are necessary steps. A review of special provisions (e.g., arduous jobs) could inform reforms to balance fairness and costs.

    Tax reforms should aim to shift part of the tax burden from labor to capital, without revenue loss, and to reduce tax exemptions. Belgium has the highest labor-tax wedge in the OECD. Reducing labor taxation will help increase the employment rate. All revenue from capital (e.g., interests, dividends, and capital gains) should be taxed in the same way to ensure neutrality in investment decisions, ideally by incorporating these revenues into the overall taxable income subject to personal income tax. Reducing preferential regimes and treatments in the tax system, a significant source of foregone revenue, also needs to be part of the reform package. Tax reforms should be coordinated among the federal and federated entities for their revenue and distributional impacts.

    The new EGF provides an opportunity to strengthen Belgian’s fiscal framework through a revitalized fiscal council and greater accountability among federated entities. The implementation of the 2013 federal-regional coordination agreement has proved challenging, given the complexities of Belgium’s fiscal federalism. The new EGF provides a renewed opportunity to introduce binding rules for burden sharing the fiscal adjustment, with clear accountability for the federal and all federated entities. A strengthened fiscal council (e.g., with enhanced staffing and direct reporting to parliaments) would help ensure that the federal and each federated entity’s fiscal behavior is consistent with Belgium’s European commitments.

    Preserving Macrofinancial Stability

    Overall systemic risks in the financial sector remain moderate but are evolving due to changing macroeconomic and market conditions. While the economy is slowing and real estate markets cooling, interest rates are now decreasing. Household indebtedness has stabilized, and corporate indebtedness has declined due to substantial investments being largely cash financed. Corporate bankruptcies have been increasing but remain aligned with pre-pandemic trends. Risks from residential real estate have moderated, but commercial real estate market activity has dropped sharply, and vacancies have risen, reflecting low demand for office space. Overall, exposures to real estate remain broadly stable.

    With the level of financial stability risks expected to remain unchanged, capital buffers and prudential limits on residential mortgages should be maintained . Since last year, macroprudential policies have tightened, with capital buffers significantly raised. The NBB also appropriately encouraged banks to lengthen new mortgage maturities to ease the debt servicing burden of households and pre-empt borrower distress. Progress has been made in implementing the 2023 Financial Stability Assessment Program (FSAP) recommendations and this effort should be accelerated now that a new government is in place and the required legislative changes can be pushed forward.

    Strengthening Labor Markets

    Labor market fragmentation and rigidity in Belgium are impeding growth potential. The coexistence of local or sectoral pockets of high vacancies and pockets of high unemployment highlights inefficiencies in labor allocation that hinder potential growth. Employment gaps for low-skilled workers, older workers, women, and individuals with an immigration background or disabilities remain high. Fostering a more inclusive labor market will enhance overall economic performance and mitigate fiscal pressures.

    Enhancing labor market incentives is essential. Labor market, tax, and social benefit reforms should consistently aim to increase the income gap between work and nonwork and reduce the cost of hiring and dismissal. Reducing the duration of unemployment benefits and linking social benefits to income levels would incentivize re-entry into the labor force. Policy efforts should also focus on facilitating re-integration of workers from long-term sick leave.

    Reforming the wage-setting mechanism will help increase labor market efficiency, improve competitiveness, and reduce fiscal costs. Automatic wage and social benefit indexation protected household purchasing power during the inflation shock. However, it also increased structural fiscal deficits and led to labor-cost increases exceeding those of major trading partners when accounting for productivity differential, weighing on competitiveness. Consideration should be given to abolishing the automatic indexation and the 1996 wage law which, together, define a floor and a ceiling for wage growth, that do not allow for an optimal allocation of labor and increased employment. At a minimum, the labor market would already benefit from reforms including adjusting the basis for indexation to exclude volatile prices, broadening the group of comparator countries in the wage law, using productivity-adjusted wage growth as the basis for comparison, and allowing firms to partially index wages considering specific local and sectoral labor market conditions.

    Reforms in education and life-long training are necessary to upskill the labor force, enhance employment rates, and promote growth. While educational outcomes in Belgium are comparable to peers, they are achieved at a higher cost. Addressing teacher shortages, reducing grade repetition rates, and achieving greater equality of educational outcomes irrespective of backgrounds will require a comprehensive reform of the educational system. Actions should seek to align education with the needs of Belgian companies, better leverage teachers’ time, and strengthen support provided to students who face difficulties. These reforms would help increase employment, productivity, and the creation and diffusion of innovation.

    Boosting Productivity

    Boosting productivity will require further product market reforms to improve firm dynamics and the diffusion of innovation. Despite significant investment in innovation, Belgium’s long-term productivity slowdown is worse than peers, suggesting room to improve the transmission of innovation to productivity gains. Lagging productivity is linked to insufficient firm dynamics—the entry, growth, and exit of firms—, with Belgium experiencing some of the lowest firm entry and exit rates in the EU. To enhance productivity and dynamics, further product market reforms are necessary to reduce regulatory and administrative barriers and improve the insolvency regime.

    Deepening the European single market and advancing the capital market union would benefit firms in Belgium. Removing remaining barriers to trade within the EU and harmonizing regulations and bankruptcy frameworks would enhance Belgian firms’ access to a much larger customer base, improve competition and firm dynamics, and provide buffers against risks from geo-fragmentation. Moreover, developing venture capital within an EU-wide push toward capital market union would help widen Belgian firms’ options to finance growth.

    Sustaining the Green Transition

    Despite progress, much effort remains needed to achieve climate objectives. The expansion of the EU emissions trading system should be complemented by timely implementation of carbon taxation and phasing out fossil fuel subsidies, while ensuring support for vulnerable population. The consolidation of federal and regional climate efforts into a coherent and cohesive national strategy is essential. Improved coordination and accountability among the federal and regional governments will facilitate the design, execution, and evaluation of climate policies. Adequate investments in the green transition are necessary to ensure Belgium meets its climate goals and contributes to the European Green Deal.

    IMF Communications Department
    MEDIA RELATIONS

    PRESS OFFICER: Camila Perez

    Phone: +1 202 623-7100Email: MEDIA@IMF.org

    https://www.imf.org/en/News/Articles/2025/02/05/CS-Belgium-2025

    MIL OSI

    MIL OSI Russia News –

  • MIL-OSI Banking: Statement of the Monetary Policy Committee 5 February 2025

    Source: Central Bank of Iceland

    The Monetary Policy Committee (MPC) of the Central Bank of Iceland has decided to lower the Bank’s interest rates by 0.5 percentage points. The Bank’s key interest rate – the rate on seven-day term deposits – will therefore be 8.0%. All Committee members voted in favour of the decision.

    MIL OSI Global Banks –

  • MIL-OSI Europe: Latest news – Exchange of views on the humanitarian situation in the Democratic Republic of Congo – Committee on Development

    Source: European Parliament

    On Wednesday 5 February, Development Committee MEPs will participate in an extraordinary meeting of the European Parliament’s Delegation to the Africa-EU Parliamentary Assembly on the topic of the humanitarian situation in the Democratic Republic of Congo. The discussion will focus on the humanitarian aspects of the crisis following the M23 offensive in North Kivu and the subsequently soaring displacement and humanitarian needs in the area.

    The meeting will feature contributions from:

    • Dr Denis Mukwege, Nobel Peace Prize 2018 and Sakharov Prize 2014 laureate (remotely),

    • Ms Thérèse Kayikwamba Wagner, Minister of Foreign Affairs, Democratic Republic of Congo,

    • Ms Nathalie-Aziza Munana, Minister of Social Affairs and Solidarity, Democratic Republic of Congo (remotely),

    • Mr Maciej Popowski, Director-General for European Civil Protection and Humanitarian Aid Operations (ECHO), European Commission.

    The meeting can be followed via the following link.

    MIL OSI Europe News –

  • MIL-OSI Europe: Written question – Vignettes for low-emission zones – E-000355/2025

    Source: European Parliament

    Question for written answer  E-000355/2025
    to the Commission
    Rule 144
    Oihane Agirregoitia Martínez (Renew)

    A number of municipalities and coastal areas have established low-emission zones (LEZs) by means of local, community and regional legislation, however, mandatory use of vignettes identifying the type of vehicle being driven – and thus its emissions – differs from one Member State to another.

    In the EU, where free movement is a cornerstone that must be upheld, the obligation to use different vignettes issued by different Member State administrations is detrimental in areas where cross-border economic activities play a vital role. Opaque administrative and bureaucratic red tape leads to disillusion with the EU.

    Taking into account that it is often municipalities and community associations that decide LEZ categorisations and that the absence of harmonised environmental vignettes restricts the movement of vehicles:

    • 1.Is the Commission considering working on a single, harmonised European vignette for the categorisation of vehicles in the Member States?
    • 2.If so, what steps would have to be taken?

    Submitted: 27.1.2025

    Last updated: 5 February 2025

    MIL OSI Europe News –

  • MIL-OSI Europe: Written question – Romania’s Făget Sud – Colonia Făget area in need of urgent protection as a proposed Natura 2000 site – E-000333/2025

    Source: European Parliament

    Question for written answer  E-000333/2025
    to the Commission
    Rule 144
    Nicolae Ştefănuță (Verts/ALE)

    The Făget Sud – Colonia Făget area in Romania, proposed as a Natura 2000 site and endorsed by the Romanian Academy in February 2024, continues to face severe threats due to inaction by the Romanian authorities. Despite receiving a reasoned opinion from the Commission in October 2024 (INFR(2020)2297), Romania has delayed the formal designation of the site and failed to implement temporary protective measures. Illegal construction, habitat destruction and administrative delays jeopardise this ecologically valuable area. We urge the Commission to address this critical issue and ask the following:

    • 1.What steps can the Commission take to ensure that the Romanian authorities comply with their obligations under Directive 92/43/EEC, including granting immediate temporary protection for the Făget Sud – Colonia Făget area?
    • 2.Considering the lack of progress and the documented violations, will the Commission consider escalating the infringement procedure to the Court of Justice of the European Union to enforce compliance and prevent further environmental degradation?
    • 3.Can the Commission strengthen monitoring mechanisms and provide additional support to ensure that Romania fulfils its responsibilities under EU environmental law, particularly for the designation of Natura 2000 sites?

    Submitted: 26.1.2025

    Last updated: 5 February 2025

    MIL OSI Europe News –

  • MIL-OSI Europe: Written question – Urgent implementation and strengthening of tariff measures on fertilisers from Russia and Belarus – P-000434/2025

    Source: European Parliament

    Priority question for written answer  P-000434/2025
    to the Commission
    Rule 144
    Marta Wcisło (PPE)

    The Commission’s highly anticipated decision to introduce tariffs on fertilisers from Russia and Belarus should be implemented without delay. While this decision is a step in the right direction, any delay risks allowing Russian fertiliser exporters to profit from the European market during the peak demand season. Additionally, other fertiliser-related product codes must be included in the measures to close potential loopholes that Russia could exploit as part of its hybrid warfare strategy.

    • 1.Does the Commission intend to include code 3103 of the Combined Nomenclature[1] (covering phosphorus fertilisers such as triple superphosphate (TSP) and single superphosphate (SSP)) within the scope of the regulation, given that, if it does not, the Russian Federation could continue to supply these products to European markets by strategically manipulating the classifications under code 3105 (mineral or chemical fertilisers containing two or three of the fertilising elements nitrogen, phosphorus and potassium)?
    • 2.Does the Commission intend to include code 3104 (muriate of potash (MOP), sulphate of potash (SOP)), given that the primary beneficiary of sales of these potash fertilisers is the Russian oligarch-owned company Uralkali and that there are sufficient alternative suppliers from Germany, Spain, Israel, Canada, Laos and Jordan to ensure market stability?
    • 3.What transitional measures does the Commission plan to implement between now and 1 July 2025 to prevent excessive imports from Russia before the tariffs take effect?

    Submitted: 31.1.2025

    • [1] Commission Implementing Regulation (EU) 2023/2364 of 26 September 2023 amending Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff, OJ L, 2023/2364, 31.10.2023, ELI: http://data.europa.eu/eli/reg_impl/2023/2364/oj.
    Last updated: 5 February 2025

    MIL OSI Europe News –

  • MIL-OSI Europe: Latest news – Delegation Meeting, on 3 February 2025 – Delegation to the EU-North Macedonia Joint Parliamentary Committee

    Source: European Parliament

    Members of the Delegation to the EU-North Macedonia JPC met on 3 February 2025, from 16:00 to 17:00.

    They have exchange views on the political and economic situation in North Macedonia, and on the status of EU relations with the country, with

    · Ms Sigrid BRETTEL, Head of the Albania/North Macedonia Unit, DG NEAR, European Commission

    · Mr Ivo SCHUTTE, Deputy Head of Division of the ‘Western Balkans’, European External Action Service

    MIL OSI Europe News –

  • MIL-OSI Europe: Written question – Greek banks profiteering from interest, fees and excessive charges – E-000352/2025

    Source: European Parliament

    Question for written answer  E-000352/2025
    to the Commission
    Rule 144
    Nikolaos Anadiotis (NI)

    Last year, Greek banks reported a significant increase in their net revenues from interest, fees and charges, which amounted to more than EUR 10 billion[1]. This increase has raised serious concerns about the financial burden on citizens amid broader economic challenges.

    For example, charges on payments of public fines, utility bills, ATM withdrawals from other banks, money transfers, PIN/card reissuance, dormant accounts, international SEPA transfers, simple over-the-counter transactions and annual debit card fees – such practices significantly boost the profitability of the banking sector at the expense of consumers and SMEs, which already face increased costs for borrowing and financial services. Banks in several other EU countries have also brought in considerable net revenues – although much lower than in Greece – raising questions about the fairness of these practices, in particular in the light of the ongoing inflationary pressures and economic instability.

    In view of this, can the Commission say:

    • 1.Is it aware of the significant increase in revenue generated by banks from interest, fees and charges, particularly in Greece but also across the EU as a whole?
    • 2.If the Greek banks’ charges are incompatible with European legislation, will it harmonise them or limit them across Europe?
    • 3.What measures does it intend to take to address this serious and worrying development and to ensure that Greek consumers are treated more fairly and that the unscrupulous exploitation of all is put to an end?

    Submitted: 27.1.2025

    • [1] https://www.datajournalists.co.uk/2024/10/03/na-poioi-thisayrizoyn-parti-10-dis-eyro-mesa-se-1-etos-gia-tis-trapezes/.
    Last updated: 5 February 2025

    MIL OSI Europe News –

  • MIL-OSI Europe: Written question – Italy’s violation of the European Media Freedom Act – E-000339/2025

    Source: European Parliament

    Question for written answer  E-000339/2025
    to the Commission
    Rule 144
    Sandro Ruotolo (S&D)

    On Friday 24 January, the CEO of RAI – whose top managers are appointed by the Government, an arrangement at odds with Article 5 of the European Media Freedom Act (EMFA) – sent out a circular announcing the designation of ‘editorial managers’ for all of the national broadcaster’s programmes.

    The decision has been met with strong criticism, especially by the Union of RAI Journalists, USIGRAI, which labelled the move an attempt to control the state broadcaster’s editorial line by curbing the autonomy of its presenters and directors.

    We cannot let RAI become a tool in the hands of whichever government is in office, especially given the existence of EU regulations like the EMFA.

    The decision to directly manage Italy’s public broadcaster will compromise its editorial independence and impartiality and is a blatant violation of Article 3 of the EMFA. Having come into force on 8 November 2024, Article 3 obliges Member States to ensure that recipients of media services in the Union have ‘the right to receive a plurality of news and current affairs content, produced with respect for editorial freedom of media service providers’.

    In the light of the above:

    • 1.Does the Commission not agree that the RAI CEO’s decision is a flagrant breach of EU media legislation?
    • 2.If it does, what steps will it take to ensure that the Italian government complies with the EMFA?

    Submitted: 27.1.2025

    Last updated: 5 February 2025

    MIL OSI Europe News –

  • MIL-OSI Europe: Written question – Continued EU financial support to the UN Relief and Works Agency for Palestine Refugees in the Near East – P-000354/2025

    Source: European Parliament

    Priority question for written answer  P-000354/2025/rev.1
    to the Commission
    Rule 144
    Kristoffer Storm (ECR)

    In the light of reports that Israeli hostages were hidden in UN shelters and that Hamas terrorists took advantage of UN camps, can the Commission answer the following questions:

    • 1.Does the Commission know whether hostages were held in UN shelters, and does this raise concerns about potential misuse of the EU’s financial support to the UN Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) in this case?
    • 2.If evidence confirms that hostages were held in UN shelters, will the Commission halt its financial support to UNRWA?

    Submitted: 27.1.2025

    Last updated: 5 February 2025

    MIL OSI Europe News –

  • MIL-OSI Europe: Written question – Europe lags behind in the development of Artificial Intelligence – E-000341/2025

    Source: European Parliament

    Question for written answer  E-000341/2025
    to the Commission
    Rule 144
    Nikolaos Anadiotis (NI)

    Europe[1] appears to be significantly lagging behind in investment in and development of Artificial Intelligence (AI) technologies compared to the United States and China[2] and the competition between them[3], impacting not only technological progress but also the ability to attract skilled human resources. This has negative implications for the future of the EU.

    In this context, what are the Commission’s strategies for: a) strengthening investment in the field of AI in order to make Europe competitive at the global level, b) creating an attractive framework to draw in talent and develop skills in AI within Europe, and c) promoting ethics, transparency and security in AI technologies, as well as harmonising their development and use with the values and rights of European citizens?

    Submitted: 27.1.2025

    • [1] https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52024SA0008(01)
    • [2] https://github.com/deepseek-ai/DeepSeek-R1
    • [3] https://breakingthenews.net/Article/Nasdaq-futures-tumble-3-amid-DeepSeek-concerns/63416020
    Last updated: 5 February 2025

    MIL OSI Europe News –

  • MIL-OSI Europe: Written question – Public procurement that takes security of supply into account – E-000360/2025

    Source: European Parliament

    Question for written answer  E-000360/2025
    to the Commission
    Rule 144
    Alexander Bernhuber (PPE)

    A balanced public procurement framework that takes into account both sustainability and security of supply can make a decisive contribution to bolstering the resilience of the European food supply chain. However, this requires that a balance be struck between the objectives of equal treatment and the strategic interests inherent in being prepared for crises.

    • 1.In so far as concerns sustainability and regional procurement, how does the Commission plan to support public procurers with regard to increasing the inclusion of regional products in order to promote short supply chains, sustainable diets and a reduction in transport emissions, without jeopardising the principles of non-discrimination and fair competition?
    • 2.How does the Commission intend to structure public procurement criteria in such a way as to promote sustainable products while strengthening security of supply in times of crisis?
    • 3.Based on the final report of the Strategic Dialogue on the revision of Directive 2014/24/EU, what concrete strategic measures are planned to promote regional and sustainable products – such as products from small farms or artisanal food products – in public procurement?

    Submitted: 27.1.2025

    Last updated: 5 February 2025

    MIL OSI Europe News –

  • MIL-OSI Europe: Briefing – Understanding EU counter-terrorism policy – 05-02-2025

    Source: European Parliament

    Faced with a persistent terrorist threat, the European Union (EU) is playing an increasingly ambitious role in counter-terrorism. While primary responsibility for combating crime and ensuring security lies with the Member States, the EU provides cooperation, coordination and (to some extent) harmonisation, as well as financial support, to address this borderless phenomenon. Moreover, awareness of the connection between development and stability, as well as between internal and external security, has come to shape EU action beyond Union borders. EU spending on counter-terrorism has increased over the years, to allow for better cooperation between national law enforcement authorities and enhanced support by the EU bodies in charge of security and justice, such as Europol, eu-LISA and Eurojust. The many new rules and instruments that have been adopted in recent years focus, among other things, on harmonising definitions of terrorist offences and sanctions, sharing information and data, protecting borders, countering terrorist financing and regulating firearms. However, implementing and evaluating the various measures is a challenging task. The European Parliament has played an active role not only in shaping legislation, but also in evaluating existing tools and gaps through the work accomplished by its Special Committee on Terrorism (TERR) in 2018. In line with the Parliament’s recommendations, as well as the priorities set by the European Commission and its counter-terrorism agenda presented in December 2020, EU counter-terrorism action has focused on doing more to anticipate threats, counter radicalisation, and reduce vulnerabilities by making critical infrastructures more resilient and improving the protection of public spaces. The EU will also continue to address the online dimension of various forms of extremism, in line with the regulations on dissemination of terrorist content online and on the provision of digital services in the EU. This briefing updates an earlier one, entitled Understanding EU counter-terrorism policy, published in 2023.

    MIL OSI Europe News –

  • MIL-OSI Europe: Written question – Improving energy integration: a path to competitiveness for EU companies – E-000299/2025

    Source: European Parliament

    Question for written answer  E-000299/2025
    to the Commission
    Rule 144
    Dan-Ştefan Motreanu (PPE)

    EU companies could become more competitive in comparison with their United States and Chinese counterparts by reducing energy costs, according to a report from the International Monetary Fund (IMF). Achieving this goal requires governments to cooperate in investing in and integrating the EU’s fragmented energy market.

    The report estimates that integrating energy markets across the 27 EU Member States could save approximately EUR 40 billion annually, while attracting investors to the region. However, energy policy decisions remain largely within the jurisdiction of national governments rather than being part of a unified EU strategy. The IMF warns that this fragmented approach increases the risk of uncoordinated and more expensive solutions.

    What short- and medium-term measures does the Commission plan to implement to enhance energy interconnection among the Member States, and facilitate the integration of their energy markets?

    Submitted: 23.1.2025

    Last updated: 5 February 2025

    MIL OSI Europe News –

  • MIL-OSI Europe: Highlights – Reports on links between Biodiversity, Climate change and Transformative Action – Committee on the Environment, Climate and Food Safety

    Source: European Parliament

    On 6 February, ENVI members will hold an exchange of views with the Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES) and the European Research Council (ERC) on their recent assessment reports.

    The Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES) performs regular assessments of knowledge on biodiversity and ecosystem services. During the meeting, IPBES will present its two latest reports. The “Nexus Assessment” brings about a thematic assessment of the interlinkages among biodiversity, water, food and health in the context of climate change. The “Transformative Change Assessment” focus on the underlying causes of biodiversity loss and the determinants of transformative change and options for achieving the 2050 Vision for Biodiversity.

    The European Research Council (ERC), founded in 2007, is the leading European funding organisation for frontier research. The ERC will present its report on “Transformative Change for a Sustainable Future”, which analysed over 300 ERC funded projects to address the concept of transformative change and how to meet the pressing challenges of climate change, biodiversity loss, and sustainable development.

    MIL OSI Europe News –

  • MIL-OSI Europe: Written question – ‘Demographic change in Europe: a toolbox for action’ – question on assistance to national authorities in addressing demographic change – E-000216/2025

    Source: European Parliament

    Question for written answer  E-000216/2025/rev.1
    to the Commission
    Rule 144
    Idoia Mendia (S&D)

    In October 2023, the Commission presented ‘Demographic change in Europe: a toolbox for action’, outlining policy tools available to the Member States in addressing demographic challenges and their impacts on the EU’s society, economy and competitiveness.

    The Commission committed to supporting the review and upgrading of demography-related policies by encouraging regular dialogue and exchanges with the Member States, dedicating specific structures and resources, and assisting national authorities in developing national strategies to address demographic change.

    • 1.Concretely, what specific structures and resources have been allocated or planned to support dialogue and exchanges on demographic change in Spain?
    • 2.Which countries have received such support, and what national strategies, including their main objectives or measures, have been developed or reinforced as a result?

    Submitted: 20.1.2025

    Last updated: 5 February 2025

    MIL OSI Europe News –

  • MIL-OSI Europe: Oral question – US AI chip export restrictions: a challenge to European AI development and economic resilience – O-000001/2025

    Source: European Parliament

    Question for oral answer  O-000001/2025
    to the Commission
    Rule 142
    Borys Budka
    on behalf of the Committee on Industry, Research and Energy

    The recent US decision to impose export restrictions on advanced AI chips and AI model weights poses a significant challenge for the functioning of the EU’s single market, economic resilience and technological sovereignty. Categorising EU Member States into different tiers undermines the principles of the EU’s common commercial policy and jeopardises the EU’s common approach to AI development and industrial capacity building. Consequently:

    • 1.What is the impact of these measures on the implementation of the Chips Act, specifically for the third pillar (monitoring and crisis response), and on the AI factories initiative? What adaptation measures is the Commission considering?
    • 2.How does the Commission plan to mitigate the potential negative impacts on Member States facing export caps, and on European technological development in general?
    • 3.What concrete steps is the Commission taking to further accelerate the development of EU’s domestic AI chip production capabilities to reduce dependence on external suppliers and strengthen EU economic resilience?
    • 4.The Competitiveness Compass makes only limited references to semiconductors. Is the Commission considering an update to the Chips Act to further support and accelerate investments in Europe’s semiconductor ecosystem?
    • 5.Is the Commission planning to bring forward the recently announced centre for excellence and research for AI? If so, how and when is it due to be implemented?

    Submitted: 31.1.2025

    Lapses: 1.5.2025

    Last updated: 5 February 2025

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  • MIL-OSI Europe: Written question – Addressing barriers in the EU single market for services – E-000302/2025

    Source: European Parliament

    Question for written answer  E-000302/2025
    to the Commission
    Rule 144
    Dan-Ştefan Motreanu (PPE)

    The 2025 annual report on the single market (on which articles have been recently published in the press) highlights a persistent issue affecting the EU’s economic performance: falling productivity and enduring barriers to business. Despite progress in some areas, significant challenges remain, particularly in the services sector, which suffers the most from these barriers.

    While trade in goods within the EU has increased from just over 20 % of GDP to 23.8 % between 2018 and today, trade in services has grown only marginally, from 7 % of GDP to 7.8 % during the same period. This disparity underscores the sluggish progress in creating a truly integrated market for services.

    The report also notes that many of today’s barriers to providing services are similar to those that existed two decades ago, indicating a lack of significant reform in this area. These barriers stifle competition, limit growth opportunities and hinder the EU’s ability to fully realise the potential of its single market.

    What short- and medium-term measures does the Commission plan to implement to address the persistent barriers in the single market for services and to promote a more integrated and competitive market?

    Submitted: 23.1.2025

    Last updated: 5 February 2025

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  • MIL-OSI Europe: Written question – European care deal and EU Care Strategy – E-000390/2025

    Source: European Parliament

    Question for written answer  E-000390/2025
    to the Commission
    Rule 144
    Merja Kyllönen (The Left)

    The EU Care Strategy was welcomed and adopted in 2022, explicitly recognising the huge and indispensable contribution of informal carers and proposing specific support measures to enable the provision of this care. Indeed, as indicated by the Commission, 80 % of long-term care across the EU is provided by informal carers.

    During her recent parliamentary hearing, Commissioner Roxana Mînzatu announced her plan to come forward with a ‘European care deal’, ensuring that professional as well as informal carers are paid and protected.

    Can the Commission clarify:

    How this future care deal will relate to the 2022 EU Care Strategy?

    Submitted: 29.1.2025

    Last updated: 5 February 2025

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  • MIL-OSI Europe: Written question – The rising cost of gas-fired power generation: a threat to affordability in the EU – E-000301/2025

    Source: European Parliament

    Question for written answer  E-000301/2025
    to the Commission
    Rule 144
    Dan-Ştefan Motreanu (PPE)

    Data from the think tank Ember reveals that in the first 10 days of 2025, the average cost of producing electricity from gas in the EU exceeded EUR 125/MWh, marking a 35 % increase compared to the same period in 2024.

    This sharp rise in electricity generation costs is driven by escalating gas prices, which have been on an upward trend since February 2024. The situation poses a significant challenge to maintaining affordable wholesale electricity prices across the EU, particularly for countries heavily reliant on gas in their electricity generation mix. These nations are expected to be the most severely affected by the rising costs.

    The reliance on gas not only threatens energy affordability but also undermines efforts to stabilise energy markets and protect consumers from price volatility. With energy costs playing a pivotal role in economic competitiveness and household expenses, this issue demands urgent attention.

    What immediate and medium-term measures does the Commission plan to implement to mitigate the impact of rising gas prices on electricity production costs?

    Submitted: 23.1.2025

    Last updated: 5 February 2025

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  • MIL-OSI Europe: Written question – Enhancing transparency in transition finance for retail investors – E-000303/2025

    Source: European Parliament

    Question for written answer  E-000303/2025
    to the Commission
    Rule 144
    Dan-Ştefan Motreanu (PPE)

    A report published by Better Finance, the European Federation of Investors and Financial Services Users, highlights concerns among European retail investors regarding the lack of clarity and commitment surrounding financial products dedicated to transitional activities.

    In a survey of retail investors in France, Germany and Italy, respondents emphasised the urgent need for clearer communication about transition finance products. They also called for the creation of dedicated financial product categories for transitional activities and the implementation of harmonised legislation to enhance trust and transparency across the EU.

    These findings underline a growing demand for regulatory and market reforms to ensure that retail investors can confidently invest in products aimed at facilitating the transition to sustainable activities. Without clear guidelines, trust in these financial products may erode, potentially slowing the achievement of the EU’s green transition objectives.

    What measures does the Commission plan to implement to improve transparency, create dedicated product categories for transitional activities and harmonise legislation to meet the needs of European retail investors?

    Submitted: 23.1.2025

    Last updated: 5 February 2025

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  • MIL-OSI Europe: Written question – Compliance of nature trail redevelopment measures on the island of Ustica and protection of Natura 2000 sites – E-000308/2025

    Source: European Parliament

    Question for written answer  E-000308/2025
    to the Commission
    Rule 144
    Giuseppe Antoci (The Left)

    Recent measures to redevelop the nature trails on the island of Ustica have raised concerns among citizens and environmental associations that they may not comply with the corresponding environmental authorisations – including the environmental impact assessment (EIA) – and with the project plan, especially in those areas that are protected as special areas of conservation, special protection areas and nature reserves, and areas adjacent to Natura 2000 site ITA 020010, Ustica Island[1].

    These measures include substantial changes to the existing trails, which could damage the island’s ecosystem and biodiversity.

    In view of the above:

    • 1.Is the Commission aware of the problems that have been highlighted regarding these measures’ failure to comply with the requirements of the EIA[2] and Natura 2000 sites in Ustica?
    • 2.Will it take action to ensure that all the measures comply with EU environmental and landscape legislation?
    • 3.Will any specific checks be carried out on the project financed by the European Regional Development Fund[3] in response to the concerns raised by citizens and associations?

    Submitted: 23.1.2025

    • [1] Article 7 of Directive 92/43/EEC (Habitats Directive): obligations arising from Article 6(2), (3) and (4) are extended to special protection areas under Directive 2009/147/EU (Birds Directive).
    • [2] Article 6 of Directive 92/43/EEC.
    • [3] Totalling EUR 3 378 040.36, from the ERDF ROP SICILIA 2014-2020, Axis 6 – Action 6.6.1, ‘Measures to protect and develop strategic areas of natural beauty (protected land and sea areas, protected landscapes) to consolidate and promote development processes’, for the ‘Project to promote and improve the use of Ustica’s natural land and sea areas’.
    Last updated: 5 February 2025

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  • MIL-OSI Europe: Written question – Protecting ethnic minorities and religious communities in Syria – E-000295/2025

    Source: European Parliament

    Question for written answer  E-000295/2025
    to the Vice-President of the Commission / High Representative of the Union for Foreign Affairs and Security Policy
    Rule 144
    Nikolas Farantouris (The Left)

    Developments in Syria, which have seen the overthrow of the Assad regime and the emergence of a transitional Islamic government, have raised concerns about the future of the country and the wider region. At the same time, the actions of Türkiye and other non-EU countries in the territory of Syria, competition for and tensions over the region[1] and talk of possible larger scale intervention[2] compound the risks and geopolitical instability in the region. Against this backdrop, concerns are growing about the protection of the rule of law and respect for the rights of ethnic minorities and religious communities in Syria. Given the current geopolitical instability in the region and the need to ensure a smooth and inclusive political transition, based on democratic legitimacy and free from foreign interference, in the spirit of UN Security Council Resolution 2254[3], will the Vice-President of the Commission / High Representative of the Union for Foreign Affairs and Security Policy say:

    • 1.Does she intend to carry out an official visit to Syria and engage with the country’s new transitional regime?
    • 2.If so, will she formally raise the issue of fully protecting the rights of ethnic minorities (such as Kurds) and religious communities (such as Christians) in Syria?
    • 3.What assurances has she received or does she intend to seek in relation to the above issue?

    Submitted: 23.1.2025

    • [1] https://www.foxnews.com/world/tensions-between-israel-turkey-escalate-over-syria-its-time-pay-attention
    • [2] https://www.politico.eu/article/turkey-recep-tayyip-erdogan-syria-rebels-kurds-ypg-israel/
    • [3] https://www.securitycouncilreport.org/atf/cf/%7B65BFCF9B-6D27-4E9C-8CD3-CF6E4FF96FF9%7D/s_res_2254.pdf
    Last updated: 5 February 2025

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  • MIL-OSI Europe: Written question – Addressing noise pollution in low-emission zones: challenges and solutions – E-000300/2025

    Source: European Parliament

    Question for written answer  E-000300/2025
    to the Commission
    Rule 144
    Dan-Ştefan Motreanu (PPE)

    A recent report from the European Court of Auditors (ECA) highlights a critical challenge in urban pollution management. While low-emission zones (LEZs) in cities such as Athens, Barcelona or Kraków have successfully reduced air pollution and noise within the designated LEZs, they have inadvertently caused an increase in noise and pollution levels in surrounding streets.

    In Barcelona, for example, traffic restrictions led to a 33 % increase in commercial activities, such as bars and restaurants, in pedestrian zones, which have become significant sources of noise pollution, particularly at night. This unintended consequence underlines the complexity of urban environmental management.

    The report also notes that noise pollution, primarily from motor traffic, is a significant yet often overlooked issue in urban areas. Prolonged exposure to environmental noise is associated with serious health risks, including cardiovascular diseases and chronic stress. Despite the EU’s Green Deal targeting a reduction in the number of citizens chronically exposed to noise by 2030, the ECA found significant gaps in monitoring data among Member States, making it difficult to measure progress effectively.

    What measures does the Commission intend to propose to ensure better monitoring of noise pollution and to address the displacement effects of LEZs on surrounding urban areas?

    Submitted: 23.1.2025

    Last updated: 5 February 2025

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  • MIL-OSI Europe: Written question – What measures does the Commission intend to put in place to overcome the ‘energy transition’ crisis? – E-000311/2025

    Source: European Parliament

    Question for written answer  E-000311/2025
    to the Commission
    Rule 144
    Mathilde Androuët (PfE)

    Both the Commissioner for Climate Change, Carbon Neutrality and Clean Growth[1] and the Draghi Report[2] have drawn attention to the erosion of our industrial sovereignty, particularly in relation to China, in the renewable energy and electric vehicle sectors. The Draghi Report also warns that Europe is losing competitiveness as a result of very high gas and electricity prices in the EU[3].

    A study[4] by the Committee on Constitutional Affairs assessing the conditions for the creation of a Climate and Energy Union identifies legal, regulatory, institutional and political obstacles to its establishment. The study also points to the lack of sufficient financial resources to carry out an energy transition that requires massive investment, far in excess of the EUR 660 billion earmarked for the green transition in the Multiannual Financial Framework 2021-2027.

    As an example, the Bruegel think tank estimates that EU countries would need to invest around EUR 1 300 billion each year until 2030 and then EUR 1 540 billion per year between 2031 and 2050 to complete the energy transition[5].

    • 1.What adjustments does the Commission advocate in such a situation?
    • 2.Does it dispute the figures provided by the Bruegel think tank?

    Submitted: 23.1.2025

    • [1] Europe ‘getting more dependent on China’ for clean tech, EU climate chief warns, Frédéric Simon, Euractiv, 14 February 2024.
    • [2] Mario Draghi’s report on the future of European competitiveness, https://commission.europa.eu/topics/strengthening-european-competitiveness/eu-competitiveness-looking-ahead_en#paragraph_47059
    • [3] La grande panne de l’industrie européenne, Bastien Bonnefous, Le Monde, 23 September 2024.
    • [4] https://www.europarl.europa.eu/RegData/etudes/STUD/2024/764399/IPOL_STU(2024)764399_EN.pdf
    • [5] L’Europe n’a pas les moyens de sa transition énergétique, Transitions & Énergies, 13 December 2024, https://www.transitionsenergies.com/europe-pas-les-moyens-transition-energetique
    Last updated: 5 February 2025

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  • MIL-OSI Europe: Written question – Potential security risks and geopolitical implications of the Iran-Venezuela alliance for the EU – E-000309/2025

    Source: European Parliament

    Question for written answer  E-000309/2025
    to the Vice-President of the Commission / High Representative of the Union for Foreign Affairs and Security Policy
    Rule 144
    Antonio López-Istúriz White (PPE), Dolors Montserrat (PPE), Javier Zarzalejos (PPE), Raúl de la Hoz Quintano (PPE), Nicolás Pascual de la Parte (PPE), Alma Ezcurra Almansa (PPE), Francisco José Millán Mon (PPE), Borja Giménez Larraz (PPE), Adrián Vázquez Lázara (PPE), Esther Herranz García (PPE), Pilar del Castillo Vera (PPE), Fernando Navarrete Rojas (PPE), Pablo Arias Echeverría (PPE), Isabel Benjumea Benjumea (PPE), Maravillas Abadía Jover (PPE), Carmen Crespo Díaz (PPE), Juan Ignacio Zoido Álvarez (PPE), Gabriel Mato (PPE), Susana Solís Pérez (PPE), Rosa Estaràs Ferragut (PPE), Elena Nevado del Campo (PPE), Esteban González Pons (PPE)

    Recent reports indicate that, alongside Russia’s presence in Venezuela, there is an expanding strategic alliance between Iran and Nicolás Maduro’s regime. This alliance encompasses military cooperation, the establishment of a drone production base in Venezuela and economic transactions designed to circumvent international sanctions. These activities include the deployment of advanced unmanned aerial vehicles (UAVs), collaboration between the Iranian Quds Force and Venezuelan authorities, and the exchange of Venezuelan gold for Iranian crude oil through channels that violate international sanctions frameworks.

    Given the EU’s commitment to maintaining regional and global stability, countering terrorism and enforcing international sanctions:

    • 1.Is the VP/HR aware of these developments, and has she assessed their potential impact on the security and geopolitical stability of Latin America and the spillover effects on the EU?
    • 2.What measures is the VP/HR taking to ensure that this partnership does not undermine the possibility of restoring democracy in Venezuela, nor hinder the EU’s efforts to counter terrorism, the proliferation of advanced weaponry and the circumvention of international sanctions?
    • 3.How does the VP/HR plan to address the risks this alliance poses to the EU’s interests in Latin America, and what specific actions will she take to uphold the EU’s stance on regional and global security?

    Submitted: 23.1.2025

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  • MIL-OSI Europe: Written question – The European Competitiveness Fund: strengthening EU leadership in strategic technologies – E-000297/2025

    Source: European Parliament

    Question for written answer  E-000297/2025
    to the Commission
    Rule 144
    Dan-Ştefan Motreanu (PPE)

    The European Competitiveness Fund is a key initiative proposed by the Commission to enhance the EU’s global competitiveness. The aim of the fund is to provide investment in critical technologies such as artificial intelligence, clean industry and biotechnology, which are essential for driving innovation and economic growth.

    Commission President Ursula von der Leyen has confirmed that the fund will be integrated into the EU’s budget for the 2028-2034 period. This strategic allocation underscores the EU’s commitment to securing its technological sovereignty and promoting sustainable development.

    A recent study by the Green Economics Institute, conducted in collaboration with Cambridge Econometrics, suggests that the European Competitiveness Fund should align with the US Inflation Reduction Act in terms of GDP percentage – equivalent to 1.38 %. This would amount to EUR 237 billion over seven years, highlighting the scale of investment required to maintain competitiveness in global markets.

    What specific funding allocation does the Commission envision for the European Competitiveness Fund, considering these recommendations and the need to address critical sectors essential for the EU’s long-term economic resilience?

    Submitted: 23.1.2025

    Last updated: 5 February 2025

    MIL OSI Europe News –

  • MIL-OSI Europe: Highlights – AFCO ad hoc delegation to Washington DC – November 2024 – Committee on Constitutional Affairs

    Source: European Parliament

    Washington DC – © European Union © European Union

    The AFCO Committee considered pertinent to visit Washington DC shortly after the presidential elections, held on 5 November 2024, to learn more about the transition between administrations and the electoral procedure. The AFCO delegation was composed of 7 Members and took place from 19 to 22 November 2024.For more information see the Report

    MIL OSI Europe News –

  • MIL-OSI Europe: Latest news – AFCO ad hoc delegation to Washington DC – November 2023 – Committee on Constitutional Affairs

    Source: European Parliament

    Washington DC – © European Union

    The AFCO Committee considered pertinent to visit Washington DC shortly after the presidential elections, held on 5 November 2024, to learn more about the transition between administrations and the electoral procedure. The AFCO delegation was composed of 7 Members and took place from 19 to 22 November 2024.For more information see the Report

    MIL OSI Europe News –

  • MIL-OSI Europe: Luis de Guindos: Interview with Hospodárske Noviny

    Source: European Central Bank

    Interview with Luis de Guindos, Vice-President of the ECB, conducted by Mário Blaščák

    5 February 2025

    The ECB lowered its interest rates by 25 basis points last week. How low can rates go given the current inflation and growth outlook?

    We have been very clear that we are not following any predetermined path and will decide meeting by meeting, based on the incoming economic data. This is because the level of uncertainty is huge. Now that we see inflation approaching our 2% target, we have been reducing the restriction of our monetary policy. How much lower rates will go depends on the data confirming that inflation is converging towards our target in a sustainable manner. We are confident that this will happen this year, but there are still a number of uncertainties, particularly surrounding the geopolitical situation, that we need to take into account. So, even if our current trajectory under the current circumstances is clear, nobody knows the level at which interest rates will end up.

    At the press conference, ECB President Christine Lagarde described the current level of interest rates as being in restrictive territory. Národná banka Slovenska Governor Peter Kažimír recently suggested that rates would decline to a neutral level close to 2%. Do you agree?

    I usually agree with my friend Peter Kažimír on a lot of things [laughs]. The neutral rate is an interesting concept from an academic standpoint. However, using it as a reference for monetary policy decisions is not the right approach, in my view. The range of the neutral rate, based on different models, can be very ample. Our bank lending surveys provide a much better indicator of the restrictiveness of our monetary policy, by showing how banks are easing or tightening financing conditions. For policy decisions we need to consider all relevant incoming data and a vast range of indicators to form our assessment of the inflation outlook, underlying inflation and the strength of monetary policy transmission. So while the neutral rate makes for an interesting academic concept, it is not very useful from a policymaking standpoint.

    Why don’t academic concepts hold up? Are we living through unusual times?

    Academic research is crucial for the conceptual framework of the things we do. But the high level of uncertainty we are now dealing with potentially calls for a more pragmatic approach, placing less weight on unobservable variables or model-based estimates with shortcomings and results expressed in wide ranges.

    Services inflation is double the target level and wage growth is near 5%. How confident are you that the projected moderation in inflation will actually materialise?

    As we can clearly see at the moment, not all the components of inflation evolve in parallel. You are right that while goods inflation stands at 0.5%, services inflation is at 4%. It is important that services inflation starts to decelerate. We believe this will happen because services are very wage-sensitive, and we expect wage growth to start to decelerate. We also see our corporate surveys confirming our belief that wage dynamics will start to slow down, so we expect this to help bring down services inflation.

    How is inflation expected to evolve over the next few months?

    On average, we may see an increase in headline inflation over the next couple of months because of base effects, mostly due to energy prices. Nevertheless, we are convinced that headline inflation will start to decelerate later on in the spring and converge towards our 2% target on a sustainable basis.

    Is there any time lag between the projected moderation in wage growth and services inflation?

    There is always a certain delay in that respect. But looking only at wage growth data is like looking into a rear-view mirror. Looking ahead, we pay attention to expectations about inflation, which are firmly anchored. At the same time, there is the crucial “catch-up” process, which is almost complete. While the purchasing power of workers’ wages in the euro area fell during the period of high inflation, it has now recovered. These two elements lead us to believe that wage increases will start to decelerate.

    Eurostat released data on GDP growth in the euro area, which has been stagnating. Forward-looking indicators point to an economic slowdown, affecting wages and, in turn, consumer demand. Is that the reason why you are expecting weak growth in household consumption?

    You raised a very important issue. In order to understand what will happen to the economy, consumer behaviour is key. Right now, we don’t see consumption picking up even though the moderation in inflation has restored households’ purchasing power. It is likely that this is related to consumer confidence. The impact of past shocks like the pandemic, the post-pandemic period and the energy shock, as well as the current geopolitical situation and the general level of uncertainty worldwide, is moderating consumption. But we believe that confidence will be restored over time, as real wages recover.

    A recovery in consumption will be key for a rebound of euro area economic growth. The lack of consumer confidence is one of the reasons why this has not been the case yet.

    What would happen if the war in Ukraine were to end tomorrow? Would it change everything we think about the economy and the course of monetary policy?

    From a human standpoint, a peace agreement would obviously be very positive. And generally speaking, an end to the war would also benefit the economy. But this would depend on how the war is resolved and whether the terms of the settlement are good for Ukraine and for the rest of Europe.

    In its pursuit of price stability, the ECB targets inflation, but what role did weak economic growth play in your decision to lower interest rates?

    Even though we target inflation, our decision-making of course involves a broader perspective. We consider a wide range of indicators, such as consumer demand, investment, energy prices and exchange rate developments, as well as actual and potential economic growth. We calibrate all of these components on an ongoing basis to produce the most accurate projection of inflation over time in order to support our decisions.

    Slovakia is an automotive power. However, the car sector has been struggling in the wake of the green transition. After your dinner with European Commission President Ursula von der Leyen last week, how do you see the green transition evolving?

    This question would be better put to the European Commission. Ms von der Leyen explained the main features of the Competitiveness Compass, with simplification and flexibility being major drivers. This means looking at decarbonisation targets also through the lens of the competitiveness of European industries.

    Slovakia is one of Europe’s fiscal sinners, but it has implemented consolidation measures, including income tax and VAT hikes and the introduction of a transaction tax. Do you think it will be enough if small euro area countries take action while large countries do not?

    Every country needs to do their part to comply with the new fiscal framework. The new rules need to be implemented fully, faithfully and by all countries, because the credibility of fiscal policy is crucial. This does not apply to Europe alone, but to other countries in the world too. Markets are monitoring each country’s fiscal position very closely, and any doubts about the sustainability of public finances are quickly reflected in increased government bond yields, as we have seen in the United States and the United Kingdom. An increase in government bond yields is detrimental to growth and financial stability. That is why we must maintain the credibility of the new fiscal framework, as this a prerequsite for keeping long-term yields at a low level, which is vital for the economic recovery. The new fiscal rules are flexible to allow sustainable deficit cuts and they will not jeopardise efforts to invest in areas such as climate change or defence.

    Global debt is on track to hit 100% of world GDP this year. Is this alarming? And who is the biggest debt sinner?

    I won’t name any countries, because the figures are already out there. In general, the policy response to the pandemic played a big part in increasing sovereign debt, as there was a combination of very loose fiscal and monetary policy. But this was an exceptional situation – extraordinary times require extraordinary measures.

    That being said, many countries have seen their fiscal positions deteriorate. Public debt ratios are now high, and a number of countries have increased their structural deficits. This is why it is so important to implement the new fiscal governance framework in its entirety. This means not only reducing the fiscal deficit and the public debt-to-GDP ratio, but also implementing structural reforms.

    Do you view the consolidation measures adopted by the Slovak Government as positive?

    It is not for us to assess the fiscal measures of individual countries. Looking at Slovakia’s fiscal profile, we see that its debt is below the euro area average, at around 60% of GDP. The budget deficit is higher, which means that Slovakia is subject to an excessive deficit procedure. In general, it’s important to reduce the deficit in a way that ensures the sustainability of public finances. This can be done through a combination of cutting expenditure and increasing tax revenue. But how to do that, and by how much, is for each country to decide.

    12 years ago, Italy’s fiscal sustainability triggered a crisis. Today, France is under the spotlight of the markets and its government bond yields are on the rise. Does this pose a threat to the stability of the euro area?

    We have seen an increase in yields in several countries. In the case of France, this may have been somewhat stronger, mainly because of the political situation. But the plans submitted to the European Commission are fully compliant with the new fiscal framework. So what I hope for France, and for other euro area countries, is political stability, and for them to be able to implement the plans approved by the European Commission.

    Mortgages are very important for people in Slovakia, as Slovaks prefer to live in their own homes. But interest rates went from levels below 1% all the way up to 5.3% in November 2023. In view of the monetary policy easing cycle, is the ECB a messenger of good news for Slovaks?

    We are trying to do our job. When inflation was high, we increased interest rates, and now that it is falling, we are reducing them. On average, inflation peaked at above 10% in October 2022 and it now stands at 2.5%, which is why we have cut interest rates by 125 basis points since June last year. This has an impact on financing conditions and on mortgage rates, but the structure of the mortgage market is also important in determining how quickly our monetary policy is transmitted. In countries where most of the mortgage market is at variable rates, interest rate cuts are rapidly reflected in household mortgage payments. In countries where there are more fixed-rate mortgages, this process is slower. But the transmission of monetary policy easing will eventually be reflected in mortgages across the board, and people will feel that they are less costly than before we started to reduce rates.

    So monetary policy is a bit of a bittersweet symphony? Bitter in bad times and sweet in good times?

    Yes, bitter when inflation is high and we need to tighten financing conditions, and sweet when it is low. Now that inflation is declining, and if it continues to do so, we will adjust our monetary policy accordingly. If inflation had not declined, we would not have cut rates.

    How big a threat are Donald Trump’s economic policies to the ECB’s inflation target?

    With regard to tariffs, our analyses suggest that the main impact will be on growth. If the world embarks on the path towards a trade war, this will have an extremely negative impact on the growth prospects of the global economy. Increases in tariffs and quotas are a negative supply shock, especially if accompanied by retaliation. This vicious circle should be avoided. Estimating the impact on inflation is more difficult owing to the dampening effect of tariffs on demand and growth, as well as the fact that selective tariffs can lead to trade being redirected and diverted.

    Are you concerned about stagflation, i.e. a stagnation in growth accompanied by rising prices, which the ECB’s monetary policy cannot reach? Could it lead to a reversal of the monetary policy stance?

    If inflation moves according to our projections, the path of our monetary policy is clear. Although there are always some external factors affecting the economy, and potentially shocks, our baseline scenario sees inflation on track to converge towards our target this year, with a slight recovery in economic growth. We expect euro area GDP growth to reach 1.1% this year, following 0.7% last year.

    To support the economic recovery, we will need a growth-oriented fiscal policy that also guarantees the fiscal sustainability of public finances, as well as structural reforms. This is where the European Commission’s Competitiveness Compass will play a key role. To achieve real unity, we need to simplify processes and integrate markets in Europe. That means the Single Market, the capital markets union and the banking union. These will be key elements in improving the growth prospects and growth potential of the euro area.

    MIL OSI Europe News –