Growth, investment and productivity

1. Why protection underpins savings reform

Speaking in Rome in his first public appearance as head of ESMA, Carlo Comporti ties protecting small investors to Europe's drive to turn household deposits into productive investment. Shifting money out of deposits brings new risks, so savers need knowledge and confidence to compare returns with the damage inflation does to purchasing power. The three European supervisors split roles but cooperate: they are about to publish a shared catalogue of financial education projects, and ESMA works with its insurance counterpart on the retail investment strategy.

2. Substance over paperwork

Protection should be judged by what investors actually grasp and do, not by whether a form was supplied. Screen design on digital platforms, such as rankings, alerts and speed, can steer choices, and piling on disclosure may backfire. Firms stay accountable for how they design, target and distribute products. Simplification must make safeguards clearer and proportionate rather than weaker, covering design, sales information, and complaint handling after purchase. Digital tools and AI can help, provided systems stay resilient and data is shielded from cyber, quantum and AI-failure risks.

3. Measuring real outcomes

Supervisors should still audit controls, yet also test results through data analysis, consumer research, behavioural studies and mystery shopping. National authorities bring local insight, while the three European bodies must look at the customer who mixes banking, investment, insurance and crypto services. Consumer groups' evidence helps show whether rules work, and success would raise trust and participation in European capital markets.

1. A shock-laden outlook

Speaking in Rome on World Savings Day, Fabio Panetta describes saving as a pact with the future that holds only if savings fund growth and keep their value. Both are being tested by geopolitics, energy and artificial intelligence. The Gulf conflict and the shutdown of the Hormuz shipping lane pushed fuel and gas to record levels and revived inflation, yet output held up, mainly thanks to the AI boost to trade, investment and share prices. That engine is also a risk, because expectations for AI profits can change quickly, as recent tech share corrections and wider credit spreads show. Long-term government yields are climbing in major economies on inflation expectations, delayed fiscal adjustment and heavy borrowing by big tech firms, with possible pressure from Japanese investors repatriating funds. High debt countries suffer most; Italy's deficit has fallen from 9% of output in 2020 to about 3%, bringing rating upgrades, and he urges it to stay the course.

2. Euro-area monetary policy

Consumer price growth has risen from about half that level in February to 3.8%, almost entirely from energy, with limited spillover so far: renewable power has cushioned gas costs, core inflation is near pre-conflict levels, and wages and expectations are contained. Growth of about 1.2% is projected for this year and next, with unemployment at lows and digital services supplying a third of value-added growth. Risks, however, point to higher prices and weaker activity as the conflict drags on and European gas stocks must be rebuilt. The ECB raised rates by half a point between June and September and held them this week. Policy cannot stop energy-driven price rises but must prevent them from embedding in expectations and a wage-price spiral, which would hurt savers and poorer households; further increases may be needed, tempered by tighter market conditions, with decisions taken meeting by meeting and clearly explained.

3. The European paradox

Europe is squeezed between Chinese competition in advanced sectors and a lag behind the United States in AI. US value added grew twice as fast between 2019 and 2025, with productivity, partly from technology, explaining the difference, and the most innovative American software firms spend many times more on research than European rivals. Europe still performs well in publications but lags in patents. Money is not the shortage: the euro area saves a quarter of its income and sends roughly 300 billion euros a year abroad, with about 785 billion flowing to the United States in 2024-25. What lacks are specialised intermediaries, deep capital markets and attractive projects. Households hold only 5% of gross wealth in listed equities against 25% in America, though counting unlisted business stakes lifts the figures to 20% and 35%, and venture capital and private equity are hampered by fragmentation.

4. What Europe should do

He backs the Savings and Investments Union, with larger institutional investors, easier cross-border activity and stronger European market supervision modelled on the banking supervisory mechanism, which blends central leadership with national knowledge. He also wants the banking union completed, with deposit insurance covering all depositors and a design that avoids splitting large and small banks, plus a safe, liquid European asset to attract foreign capital and strengthen the euro. Finance must be matched with a true single market, harmonised rules, competitively priced energy and joint research and infrastructure spending.

5. Saving in Italy

Italian household saving has declined since 2000 because real income per head slipped while it rose more than a quarter in France and Germany, wages stagnated with weak productivity, real interest rates fell, credit became easier, and households aged and shrank. Longer lives now add a reason to save. Supplementary pension schemes have over ten million members, about 40% of the labour force, with assets above 11.5% of output, but young people join less and struggle with insecure, low-paid work, particularly young women. His answers are growth that stabilises careers, wider automatic enrolment, savings tools opened from birth, simple and cheap accounts like those the Commission proposes, financial education in schools, consolidation of small, costly pension funds, and life-cycle plans with a modest allocation to diversified, higher-return assets, always guided by members' interests.

6. Conclusion

Europe and Italy are wealthy but fail to turn that wealth into innovation and productivity. Price stability and prudent public finances protect savings but are not enough; protecting them requires an economy that grows, supports welfare in ageing societies, and gives young people work, independence and a future.

1. Policy decisions and inflation

Governor Michele Bullock tells a Senate committee that the board has raised the cash rate target by a further quarter point since June, bringing this year's total tightening to a full percentage point. Inflation, which had fallen from its 7.9% peak back into the 2 to 3% target band during 2024 and 2025, rose again in the second half of 2025 and now runs around 3.5 to 4%. Her warning is that prolonged deviation from target can embed itself in expectations, prices and wages. August forecasts saw a return to the target midpoint only in late 2027, and several upside risks have since materialised.

2. Global and domestic pressures

The Middle East conflict has re-escalated and energy prices are far above the August assumptions, feeding directly into prices and indirectly through transport costs. Short-term expectations are high, and the AI boom and extreme weather push up farm and technology prices. Still, much of the problem is homegrown: underlying measures excluding volatile items show demand-driven pressure, the labour market looks tighter than thought, and weak productivity means stronger growth would quickly add price pressure. A further period of subdued demand growth is therefore needed. Policy works with a lag, so recent increases have not fully acted.

3. Activity, housing and households

Effects of the conflict on activity have been modest, household spending is cooling gradually, and business investment is strong because of data centres and renewable projects. Housing has softened, with prices lower in most capitals, though still about half above early 2020, and risks from household borrowing remain contained because few borrowers face severe difficulty. She stresses the bank does not target house prices. She acknowledges the pain of higher repayments but argues persistent inflation hurts everyone, especially people with low incomes and few savings.

4. Payments, innovation and cash

A reform package ended card surcharging from 1 October and cuts interchange caps, and large providers have lowered fees for small businesses. A wider review of payment regulation covers mobile wallets, account-to-account transfers and agent-driven commerce, with priorities due by end-2026. Following Project Acacia, the bank is consulting on letting its settlement services support tokenised markets. On cash, new legislation gives it crisis-readiness and resolution powers, and the armoured-cash firm Linfox Armaguard has been designated, which only signals the ability to act if needed.

1. Why integration matters now

Joachim Nagel looks back on forty years of European integration and notes that financial markets remain only partly joined. Europe must fund large investment in artificial intelligence, energy and decarbonisation, put at 750 to 800 billion euros a year to 2030, plus defence. Public money cannot cover it, so the financial system must mobilise private funds more effectively.

2. Strong but structurally handicapped banks

European banks are robust, with solid capital and liquidity that limited the 2023 turmoil, and this should not be put at risk by reforms. Yet US lenders do better on margins and valuations. He rejects overcapitalisation as the cause, citing ECB and Bundesbank research that higher capital lowers funding costs and earnings swings. Direct rivalry between German and American banks in lending is actually rare; it is mostly in investment banking and trading. The real handicap is fragmented banking and capital markets and a patchwork of complex, sometimes contradictory national rules, which block efficient capital allocation and economies of scale.

3. The Savings and Investments Union

The goal is to link savings to productive investment through many building blocks: securitisation, less fragmented trading and settlement, tokenisation, venture capital, harmonised supervision, simpler banking supervision, pensions and financial literacy. Proposals are advancing: a securitisation overhaul, a market integration package agreed by ministers last week, an EU-wide company regime for start-ups, and a roadmap with dates. Banks gain too, since securitisation lets them shift risk to investors and free capital for lending; markets and banks are partners, not rivals. A true banking market also needs safer cross-border liquidity management with parent support for subsidiaries in crises, common deposit insurance and lower sovereign debt concentration.

4. Simpler rules

Diversity among big, savings and cooperative banks calls for proportionate rules, as fixed compliance costs weigh on small lenders. A task force set up by the ECB in 2025 proposes fewer risk-weighted elements and a lighter regime for small, low-risk banks paired with a higher leverage ratio, an idea German supervisors have sketched. The Eurosystem fed this into the Commission consultation, and the Commission is expected to table banking legislation in early 2027. Simplification, he stresses, must not weaken the stability already achieved.

1. Beyond scale: what growth should achieve

Addressing the twenty-first edition of Malaysia's flagship Islamic finance forum, Bank Negara Malaysia Governor Abdul Rasheed Ghaffour argued that after decades spent building credibility, sophistication and size, Islamic finance should now be judged by what its growth makes possible. Climate pressures, ageing populations, broader development needs and a fragmented geopolitical order are changing what economies ask of finance.

2. A historical yardstick

He pointed to the Ottoman külliye complexes, where endowments funded schools, hospitals, libraries, welfare and trade around a mosque, and said such ecosystems were valued for the education, health, mobility and community wellbeing they sustained across generations. Resources mattered, but results mattered more. Success should therefore move from assets to outcomes, from compliance to the purpose behind the rules, and from the growth of finance to growth that finance enables.

3. Finance that empowers

Small firms generate almost 40% of Malaysian output and nearly half of jobs, yet face obstacles beyond credit. The social finance scheme iTEKAD combines funding with protection, skills and market access and has reached close to sixteen thousand participants; a home-based food entrepreneur who grew online and began exporting illustrates the intended result. Because every lending decision shapes the economy, capital allocation is an act of stewardship, and risk-sharing products, promoted through the i-CITA platform, should target food security and climate resilience.

4. What the central bank will do

The bank will enable responsible innovation, notably through its digital asset hub, review the Shariah contract framework with a strategy paper and exposure draft due this year, and carry the outcomes focus into the next financial sector blueprint. Three priorities follow: align capital with purpose, design products around the needs of underserved households and halal small firms, and keep fairness, integrity and empathy at the centre, with the higher objectives of Shariah as the compass.

1. A harder world for poorer countries

In a written statement to the World Bank and IMF Development Committee, Bank of Italy Governor Fabio Panetta, speaking for Italy's constituency, said geopolitical conflict and fragmentation disrupted energy, fertiliser and shipping in 2026, raising prices and denting confidence. Emerging and developing economies, with thin budgets and narrow energy supplies, suffer most, and development has stalled in several of them.

2. Priorities for the World Bank

The constituency backs the Bank's reforms, provided they deliver measurable results. It supports job-related training and labour-mobility skills partnerships, citing Italy's programmes with Tunisia and Ethiopia; health plans, African medicine manufacturing and rapid funding for epidemics such as Ebola; digital and energy investment so that AI, which the Bank's 2026 report says could add 0.8 points a year to developing countries' potential growth, spreads widely; and the extended climate plan, including a cautious return to financing nuclear power with the IAEA.

3. Money and governance

It welcomes the push to mobilise private capital through equity, local-currency loans and common standards that would make development projects an investable asset class, while keeping flexibility and countercyclical lending for the poorest and most fragile. It also backs longer share-subscription periods, a fair 2030 shareholding review, a strong IDA22 replenishment focused on Africa, and close monitoring of new procurement rules against subsidised bids. Italy highlights its own Mattei Plan, mining and coffee initiatives and support for Ukraine's reconstruction.

1. The occasion and the central argument

Mathias Cormann, OECD Secretary-General and a former Australian finance minister, gave this lecture for the fiftieth anniversary of the Centre for Independent Studies, a Sydney think tank known for promoting market reforms. His thesis is that Australia in 2026 looks a lot like Australia in 1976: living standards are stalling, the reform appetite has faded, and the popular remedies on offer would make things worse. He frames the whole talk around the issue voters rank first, the cost of living. In his view, most measures sold as cost-of-living relief only treat symptoms. The one durable way to make households better off, now and for the next generation, is to raise output per hour worked. Anything else either shifts the burden onto someone else or onto future taxpayers.

2. What the reform decades delivered

Cormann recalls that Australia ranked in the world's top five by income per head around 1950, then slid down the OECD rankings by the early 1980s while inflation and unemployment rose together. Over roughly two decades, governments of both sides then reversed course: tariff cuts starting in 1973; a floating dollar, financial deregulation, foreign banks, tariffs brought down to roughly 5%, enterprise bargaining and a national competition policy in the Hawke–Keating years; and, under Howard, an independent central bank with an inflation target, budget surpluses and debt repayment, the GST, lower company and capital gains taxes, financial-system reforms and further labour-market liberalisation. The payoff, he says, was labour productivity growth above two per cent a year in the 1990s, a competition-policy gain the Productivity Commission put at no less than 2.5 per cent of GDP, close to 29 years without recession, and real pay rises in most years. Later prosperity, he insists, was not just luck from Chinese demand: only a flexible economy could shift workers and capital into mining so fast and spread the windfall nationwide.

3. How the momentum was lost

From the mid-2000s, he argues, reform stopped across the whole political spectrum, in business and unions as well as in parliament, while the mining boom hid the cost. Reform is hard because its costs are immediate while its gains are delayed and diffuse; in good times voters see no need for it, and in bad times they reach for easy answers. The numbers he cites: since 2015, labour productivity has grown by less than 0.3% annually, compared with 1.6% on average over three decades and 2.2% at the height of the reforms; an OECD survey finding weaker competition, more concentrated markets, higher margins and construction productivity below its level of twenty years ago; real wages that dropped between late 2021 and mid-2024 and remained over 2% under their 2021 level at the start of 2026, something only six OECD members share; output per person falling for seven quarters in a row in 2023–24; and a combined federal-state shortfall close to 3.4% of national output in 2025, with outlays outpacing growth and bracket creep quietly raising revenue. The Productivity Commission estimates that returning productivity growth to its long-run average would make each Australian at least A$14 000 richer per year by 2035.

4. Why quick fixes do not lower living costs

Cormann ties expensive goods and stagnant pay to weak competition: under less pressure, firms raise prices and profits without improving efficiency. Productivity lowers production costs, competition limits margins, and handing out money without addressing either does not solve the problem. He goes through the usual alternatives. Cash payments and energy rebates add demand without adding output, so prices rise and the budget pays. Price caps reduce supply and turn the shortage into queues or outages. Tariffs raise costs for every farmer, miner and household. Mandated wage rises without more output lift prices rather than real pay, as Australia found in the 1970s.

5. The populist offer and his objections

He accepts that the complaints feeding populism are real: falling real incomes, young people unable to buy homes, higher energy bills, infrastructure lagging population growth and a sense of being ignored. But he argues that the solutions now gaining support were tried before and made Australia poorer. On manufacturing protection, he sees a tax on consumers and exporters that hits regional Australia hardest. On migration caps, he acknowledges that the public worry is mainly about housing, since for three years the population expanded about twice as fast as the housing stock, but says the remedy is more homes, infrastructure and services and a better skills mix. He cites OECD regional research showing that higher migration went with faster job growth for Australian-born workers and no measurable wage effect, notes that Australia's migrants are the best educated in the OECD, and stresses that without new arrivals the number of people of working age would already be falling, whereas projections show the OECD labour force declining by 13% and the EU's by 23%. He also defends foreign investment, which Australia has always relied on, and says a minerals exporter gains security by being a reliable, competitive supplier rather than by withdrawing. Politically, he observes that mainstream parties that copied populist economics lost support, while governments that delivered results, such as Greece under Kyriakos Mitsotakis and the coalition that won in Poland in 2023, weakened the populists. Lasting reform, he adds, requires public consent won through open debate.

6. Two factors that did not exist in 1976

The first is ageing. The median age has risen from about 28 to 38, and the number of working-age people for each person over 65 has fallen from more than seven to fewer than four, heading below three by the 2060s. With the working-age share set to decline, higher living standards must come mainly from higher output per hour, supported by a skills-based migration program matched by housing and services. The second is artificial intelligence, which he sees as the first innovation in decades capable of a large productivity jump. The Productivity Commission expects Australia, on present settings, to capture only about half the gain of the leading adopters, because the benefit depends on diffusion to small firms, hospitals, schools and councils. Shielding the country from it, he warns, would only leave Australia further behind.

7. His reform agenda

He proposes one measurable goal, lifting productivity growth to 1.6% annually within ten years, with federal payments to the states tied to reforms that are verified as delivered. Tax: shift the mix away from company and income taxes, which supply about 62 per cent of Australian revenue against roughly 35 per cent on average elsewhere in the OECD; widen the GST, charged at about half the typical OECD rate and on roughly half the usual base; replace stamp duty with land tax; index income-tax thresholds; and cut company tax, broadly as the 2010 Henry Review recommended. Competition and regulation: apply the renewed national competition policy with payments for results, adopt single national licences and approval processes with deadlines, and accept trusted foreign standards; restoring early-2000s competition could raise GDP by 1–3%, about 2 000 to 6 000 dollars per household a year. Housing: treat it as a supply problem, allow medium-density building near major public transport with approval within thirty days, use one national construction code and pay for homes completed, citing Auckland's 2016 zoning reform. Energy: a technology-neutral path to reliable clean power, no legal bans on any technology, a single national auction for firm capacity and faster approvals for transmission, storage and gas. Labour: quicker agreement approvals, much shorter awards and worker choice between casual and permanent work, with every change tested against jobs, real wages and productivity. Budget: a binding rule keeping real spending growth below economic growth until a structural surplus returns, policed by the Parliamentary Budget Office, including reform of care and disability-scheme costs. Trade: build on the new EU agreement and remove remaining small tariffs unilaterally. Schools: reverse two decades of falling PISA results, which declined despite about 40 per cent more real funding per student, through early phonics checks, explicit teaching and funding linked to course completion. Technology and migration: regulate AI through existing laws and regulators, approve data centres within twelve months, make public data open as the rule, and keep the migrant intake in line with home building.

8. The closing message

Cormann concludes that 2026 resembles 1976 in its drift but differs in two ways: Australia now has evidence of what works from its own reform era, and a new technology able to raise productivity. The real test, in his view, is whether today's leaders will accept short-term political costs for gains that arrive after the next election, as earlier leaders from both major parties did; each generation, he says, must win the argument again.

1. The setting and the main idea

OECD Secretary-General Mathias Cormann opened the Future-Ready Economy 2026 forum in Bangkok in the week Thailand hosted the IMF and World Bank annual meetings, the first time in 35 years. His central claim is that no government can forecast what comes next, so the real test of an economy is how fast it can adjust. That capacity, he argues, is not luck: it results from policy choices, well-functioning markets, people's skills and solid institutions.

2. The global picture

He lists the run of shocks since 2020: the pandemic, the war in Ukraine and the energy spike, the fastest synchronised rate rises in decades, wider tariffs and, in 2026, conflict in the Middle East. By late August, the disruption in the Strait of Hormuz had cost some 2.8 billion barrels of exports, close to a month of world demand. World growth slowed from an annualised 3.5% in late 2025 to 2.7% in early 2026, yet that was better than the 2.4% the OECD had expected in June. Two things explained the resilience. Energy markets adjusted, with extra supply, new routes, stock releases and lower demand offsetting just over half of the lost oil; China accounted for almost a third of the fall in consumption. And spending linked to artificial intelligence boomed: output of computers and electronics rose between 11% and 19% across the US, the EU, China and other large Asian economies, far faster than industry overall, and AI-related products made up 70% of the growth in world goods trade between January and May.

3. Outlook and risks

The OECD expects world growth of 2.9% in 2026 and 3% in 2027, with India at 7.1%, Indonesia at 5.2% and China at 4.5%, and Thailand at about 2.1% next year. Inflation is above target in more than half of the G20 and is projected at 4.1% this year for the group. He sees mainly downside risks: another cut in Middle East energy supply with thinner buffers (oil stocks 507 million barrels lower than in February, the US strategic reserve at its lowest since 1982), food price pressure from drought, Black Sea disruption and a strong El Niño, and higher borrowing costs, with long-term bond yields at multi-year highs in most G7 economies and public debt above its 2007 level in nearly every G20 country. A combined energy, food and financial shock could cut world growth by 0.7 points and add 1.1 points to inflation next year. His short-term advice to governments: keep inflation expectations anchored, make energy aid temporary and targeted, and rebuild fiscal room.

4. The deeper problem: weaker growth potential

Beyond the shocks, he warns that growth is slowing structurally: about 3% today against 3.7% on average before COVID, with potential growth heading from 2.9% to 1.7% by 2050 on current policies. One cause is ageing: the OECD's working-age population is set to shrink by 8% between 2023 and 2060, and Thailand's by 29%. The other is weaker productivity, down in the median OECD country from 2% a year in 2001–2007 to 0.8% recently. Thailand illustrates both sides: income per person rose from 30% to 40% of the OECD average between 2000 and 2013, then stopped converging as productivity growth fell from 4.8% to 1.7% a year. He presents that gap as room for catch-up.

5. The five forms of capital

Using the forum's framework, he gives the OECD view on each. Growth: more competition and better, simpler rules, since Thailand, Indonesia and Malaysia regulate markets more tightly than the OECD average and the Thai state remains heavy in power, transport and telecoms; deeper capital markets through better boards, minority-shareholder rights and transparency on controlling owners, given that half of listed firms in six Southeast Asian markets trade below their book value and Asia holds only 20% of private-equity assets for 31% of world output; and broad AI adoption, which could lift productivity by 0.8 points a year instead of 0.2 if spread quickly, helped by better rural broadband. People: PISA 2025 showed 41% of Thai 15-year-olds below basic level in science against 26% in the OECD, so learning, lifelong training, more women and older workers in jobs and less informality are top priorities. Transition: secure, diverse and affordable energy is now a competitiveness issue, along with adaptation to climate risk and targeted rather than general support. Resilience: independent central banks and low debt reduce capital flight, as seen when emerging markets lost USD 86 billion of portfolio money in March; he backs the OECD code on capital movements and gradual opening of outward investment. Security: reduce dependence on concentrated suppliers, as export curbs on critical raw materials have multiplied more than fivefold since 2009, through diversified partners, foreign direct investment and trade integration, including a digital economy agreement within ASEAN that could raise Thailand's regional trade by 24%.

6. Thailand's OECD accession and conclusion

He praises Thailand's accession effort: talks opened in June 2024, the initial memorandum was submitted in December 2025, the Prime Minister now chairs the national committee and 25 OECD committees are reviewing Thai policies. In his view, accession anchors reforms on productivity, competition and skills, builds investor confidence and gives the region a voice where standards are set. He closes by describing readiness for the future as a capability built through competition, capital for productive firms, secure energy, sound public finances, diverse partnerships and, above all, skilled people.

1. Why price stability

Speaking informally to a Philippine finance executives' conference, Bangko Sentral Governor Eli Remolona said the central bank's main job is stable prices, which research shows supports lasting growth and which the poorest households rank as their top concern.

2. Two inflation shocks

He compared the 2022 Ukraine shock with the March 2026 Hormuz closure: each first lifted fuel and transport costs, then food, because fertiliser depends on oil, and later core prices. In March, unusually, the dollar strengthened as oil rose, so the peso fell at the same time, a double blow for inflation.

3. How the central bank responds

Policy now works through the overnight rate and guidance on its future path, rather than money-supply targets as before the 1990s. The bank has raised its rate three times this year, by 75 basis points in total, while studying scenarios such as a severe El Niño. Surveys show expected inflation easing from 5.3% in a year to 3.3% in three years, approaching the 3% target, but he would worry if expectations stopped converging. He explained that rate decisions draw on a large model of the economy and on surveys of analysts, households and firms, noted that the 3% target suits a fast-growing economy unlike the 2% used in rich countries, and ended by stressing that independence lets the bank take unpopular decisions rather than please a crowd wanting low rates, a strong peso and low inflation all at once.

1. Resilient so far

Bank of England Governor Andrew Bailey said the financial system has held up despite the Middle East conflict, high bond yields and new AI-related exposures, crediting post-2008 reforms often criticised as burdensome: banks are well capitalised and markets have kept functioning. Yet slower growth, one supply shock after another and a different make-up of markets leave no room for complacency.

2. A policy dilemma

Slower productivity and a rapid series of shocks (Covid, Ukraine, the Middle East) may be the new normal in a more geopolitical world. Supply shocks raise inflation while cutting output; central banks can look through them only if expectations stay anchored, which is harder after years of high inflation. Rate rises can then coincide with falling incomes and asset prices, and repeated shocks push public debt up, so governments find it harder to cushion downturns.

3. Fragile bond markets and the response

Government bonds are now held more by leveraged, price-sensitive investors than by long-term holders, so forced selling can spread across countries and assets. He proposes faster sustainable growth, including safely deployed AI, whose financing also carries risk; credible frameworks, with a firm inflation commitment, clear explanation of policy under different scenarios and credible fiscal rules; and sturdier core markets through more central clearing, minimum haircuts and better risk management.

1. Why growth matters

At a Brussels forum of bankers and employers on 7 October 2026, Eurogroup President Kyriakos Pierrakakis argued that Europe, despite its wealth, skills, single market and large savings, is growing too slowly. Faster growth means better jobs, wages and public services, and lets firms invest in machines, digital tools and AI. It has also become a matter of geopolitical strength, as Europe must fund defence, energy security, critical technologies and infrastructure.

2. The financing gap

With an ageing workforce, growth must come from productivity and therefore investment, estimated by Mario Draghi at around EUR 800 billion more each year. Public budgets cannot cover it. The paradox, he says, is that Europe has ample savings but a financial system still split along national lines, so many firms cannot raise capital to grow. The Savings and Investments Union aims to link those savings to productive firms across the single market.

3. Banks and the unfinished Banking Union

Because banks still provide about 70% of business finance and are vital for small firms, he says the savings union cannot succeed without completing the Banking Union. European banks are now sound and helped absorb recent crises, but the market remains national: barely 16% of loans to euro-area companies are made across borders, and rules still trap capital and liquidity inside countries. He describes this fragmentation as a hidden levy on scale, investment and innovation, made more costly by technology: large US banks spend more than twice as much on IT relative to assets.

4. Three priorities and the political challenge

He calls for integration (fewer barriers to cross-border mergers and to moving capital within groups), trust (crisis management, funding for banks being wound down and a step forward on a common deposit guarantee) and competitiveness (simpler, more proportionate and consistent supervision rather than looser rules), while keeping room for strong regional banks serving small firms. The economics are well understood, he says; the obstacle is political, as each country guards its own safeguards. He sees the Eurogroup's role as building trust and compromise, and stresses urgency because investment and AI decisions are being made now.

1. The question

In the SUERF annual lecture in Vienna, BIS General Manager Pablo Hernández de Cos asked how changes in public finances, market structure and technology will alter what central banks can and should do when the next financial crisis hits.

2. What recent crises taught

From the global financial crisis, the euro debt crisis and the pandemic, he draws three lessons. Central banks were decisive: standing and emergency liquidity, emergency loans and bond buying stopped fire sales and restored key funding markets. Credibility mattered as much as money: in several cases simply announcing purchases, or offering lending that banks barely used, was enough to calm markets. But each success exposed limits. Bond-buying programmes were hard to size and explain when nobody knew how long a shock would last, and some meant to fix temporary dysfunction turned into lasting stimulus, making exit harder. And lending directly to firms, markets or non-banks during the pandemic, beyond the usual banking circle, exposed central banks to credit risk and blurred the line with government support.

3. Three forces that complicate the next crisis

High public debt: with debt near post-war peaks and large deficits, sovereign bond markets react more to fiscal doubts, and it becomes harder to tell whether rising yields reflect fiscal concerns or a market malfunction; even a well-designed intervention may then look like help for governments. Non-banks: funds and other non-bank institutions now own the largest share of rich countries' government bonds, and highly leveraged traders like hedge funds have become central go-betweens in those markets. Their short-term funding and leverage can turn fiscal news into sudden sales, as in the dash for cash of March 2020 and the British pension-fund episode of 2022, creating what the BIS calls a fiscal-financial stability nexus. Since they usually cannot borrow from the central bank, support has to take the form of asset purchases, and widening access without comparable regulation would invite moral hazard. Digital innovation: online banking and social media made the 2023 deposit runs unusually fast and let rumours spread before official messages; stablecoins could transmit stress to money markets if they had to dump reserve assets; and widespread use of similar AI models may make market reactions more synchronised.

4. Responses he proposes

He calls for a layered answer. Governments should put debt on a credible path and build buffers in good times, which reduces both the need for central bank action and the suspicion that it serves fiscal ends. Regulators should keep refining bank rules, for example by assuming faster deposit outflows and making sure banks are operationally ready to use central bank facilities, and should apply similar rules to institutions posing similar risks, whatever their legal form; options include more central clearing of government bond and repo trades, with its own risks, and well-targeted minimum haircuts to curb leverage. Central banks should design backstops that are cheap enough in stress to avoid stigma but unattractive in normal times, keep market-repair purchases clearly separate from monetary stimulus, as the Bank of England did with its time-limited 2022 operation, and set exit conditions in advance for quantitative easing. Finally, he stresses international cooperation on standards and data for non-banks, central bank swap lines for dollar funding stress, and coordinated communication, with the BIS acting as a hub.

1. A changing growth model

Bank Negara Malaysia Governor Abdul Rasheed Ghaffour told an Islamic finance gathering that Malaysia's economy, now worth over RM2 trillion after growing almost seventeenfold since 1990, must now rely on quality rather than volume. He expects growth of about 4–5% in 2026 and points to four shifts: more complex, higher-value industries; productivity from technology, capital and talent; stronger domestic capabilities; and an energy transition requiring large investment. National plans for industry, semiconductors, energy and the halal sector set the direction, and investment incentives now reward value created rather than amounts invested.

2. Finance is not yet following

Banks, he says, will largely decide whether capital reaches those priorities, yet lending still goes mostly to services and remains small for manufacturing relative to needs. He attributes this not to reluctance but to information gaps, complex deal structures and unfamiliarity with new sectors, and asks whether lenders are still funding the old economy instead of the next one.

3. Islamic finance's opportunity

Islamic banks now provide nearly half of all financing, up from about a quarter in 2015, and the Islamic capital market from RM420 billion to RM670 billion, holding over 60% of the market. With established skills in structuring, Shariah governance and risk management, he argues the sector should use its strengths, risk-sharing and flexible structures, for long-term, specialised or underserved needs. That calls for sector and technology expertise, more sophisticated structuring, patient risk capital and better data, systems and talent.

4. Roles and national goals

He assigns tasks: boards should choose where they can make the biggest difference and reflect it in risk appetite and capital allocation; management should execute through new skills and partnerships; Shariah committees should engage early to support innovation within principles. Regulators too must shift from supervising what exists to enabling what should exist, without lowering standards. Institutions should draw on the wider ecosystem rather than build everything alone. Linking to the central bank's 2027–2030 blueprint, he says Islamic finance should be judged by how far it improves welfare, from longer, more secure lives to better jobs and a greener economy, by combining credit, equity and philanthropic capital.

1. Why talk about stability now

Reserve Bank of India Governor Sanjay Malhotra defined financial stability as the system's ability to keep serving households and firms through stress, and explained why he raises it in calm times: long quiet periods encourage leverage and complacency, as Hyman Minsky warned, and India took about a decade to clean up the bad loans of the 2000s. He also sees the post-Washington Consensus order under strain from fragmentation, trade curbs, supply shocks, technology and climate, which makes risks harder to model.

2. India's framework and tools

Although the 1934 central bank law does not name financial stability explicitly, he says it follows from the RBI's mandates on monetary stability and system regulation, and price stability depends on it. Because it supervises banks, non-bank lenders and payments, provides emergency liquidity and runs deposit insurance, the RBI has the tools, while a council of regulators and government coordinates. Its approach is to make the system absorb shocks rather than try to prevent them: sound capital, liquidity and governance balanced against growth; data-driven supervision and stress tests published twice a year; countercyclical measures such as higher risk weights on commercial property in 2007 and on unsecured consumer credit and bank lending to non-banks in 2023; and temporary, targeted liquidity, as during COVID, for genuine liquidity rather than solvency problems. Monetary policy is kept for prices, with stability handled by specific tools.

3. Global risks

He lists five: higher global debt with shorter maturities and rising yields, which squeezes governments, firms and banks and can trigger outflows from emerging markets; stretched valuations tied to AI, where slower investment or earnings could cause a sharp repricing; growing leverage among hedge funds and other non-banks, increasingly intertwined with banks; private credit, where some large defaults suggest loose standards; and cyber threats amplified by AI. Any one may be manageable, but several at once could strain the system.

4. India's position and priorities

India faces the Middle East shock through commodity prices but from strength, and is diversifying imports, building oil reserves, speeding up the energy transition, signing trade deals and promoting local-currency settlement. Domestic bond yields rose only partly, thanks to fiscal consolidation and credible monetary policy; equities corrected in an orderly way. New rules tighten banks' cyber governance and model risk; private credit is small and non-bank lenders are well capitalised, at 24.6% against a 15% requirement, while June stress tests showed comfortable bank capital. He ends with five priorities: build resilience to shocks that will come; map new, cross-border risks that may start outside finance through scenario analysis; collect better data on non-banks and links between institutions; extend resilience beyond banks to markets, payments and technology providers; and make sure innovation such as AI and tokenisation preserves trust, settlement finality and the singleness of money.

1. A setting tied to reunification

Bundesbank President Joachim Nagel spoke at the annual banquet of Rostock's merchants' association, a centuries-old tradition revived after reunification, on the eve of German Unity Day. He recalled the 1990 introduction of the Deutsche Mark in the East, noted that output per person there is still about 28% below the West, and stressed that strong and weak regions exist in both parts, with Rostock having grown into a science and technology hub.

2. A recovery with weak foundations

Germany did better than expected in the first half of 2026 despite tariffs and the Middle East conflict, and may grow by about 1% this year after three flat years, helped by debt-financed spending on defence, infrastructure and climate and by solid foreign demand. But Bundesbank experts put potential growth at only 0.4%, a third or a quarter of its pace ten years ago, because of labour shortages as baby boomers retire, low business investment and almost no productivity gains. To get back to regular growth of 1% or more he suggests more full-time work by women, removing incentives for early retirement, managed immigration in a welcoming climate, and faster, digital, simpler administration. He credits the government with tackling many issues but says it could move faster.

3. Pension reform

With about 800 000 young people entering working age each year against 1.2 million reaching retirement age, pension finances are under strain. He supports the pension commission's proposals: tying the pension age to longevity, raising it by two-thirds of any gain, as the Bundesbank had urged; ending penalty-free retirement after 45 years of contributions except in hardship cases, since it mainly benefits healthy people with high entitlements; and adding a mandatory funded pillar on the Swedish model, which raises contributions for a time but pays off over the long run. He warns that failure on these points would cast doubt on Germany's ability to reform.

4. The digital euro

Stressing that Germany alone is too small to weigh internationally, he backs a savings and investment union, a digital single market and greater digital independence. The digital euro would cut reliance on non-European payment firms, work across the euro area on phones, collect minimal data, allow almost cash-like offline payments and lower merchants' fees. He rejects claims that it would enable surveillance, be programmable, crowd out private solutions such as Wero or replace cash, and expects a decision in Brussels this year and an introduction from 2029. He concludes that change must be accepted if burdens are shared fairly.

1. Argentina's assets in a changing world

Welcoming Argentina's President and government to the OECD during Argentina Week, Secretary-General Mathias Cormann argued that global trends now favour what the country has: farmland that makes it a top grain and soybean exporter, roughly a fifth of known lithium resources, strong wind and sun, and a software, engineering and biotech sector that exports. Supply-chain rethinking, food and energy security, the energy transition and AI all raise the value of those assets, but only stable macroeconomics, predictable rules, contract enforcement, competition and openness turn them into prosperity.

2. The turnaround so far

From 2011 to 2025 Argentina grew by only about 0.8% a year, labour productivity shrank and inflation hit 220% in 2024. Since then, a large fiscal adjustment restored a primary surplus, currency controls were largely lifted, competition barriers fell and trade opened; growth resumed in 2025 and the OECD expects 2.6% in 2026 and 3% in 2027. Its regulation index shows Argentina moving from one of the most restrictive of 48 economies in 2018 to one of the biggest improvers by 2025.

3. Four priorities and the role of accession

He recommends further deregulation, which could raise potential output by 6.8% and jobs by 2.2% by 2050; better schooling, since only a quarter of students reach basic maths level against nearly two-thirds in the OECD; deeper capital markets through governance reform; and more trade integration, intellectual property protection and responsible mining and energy. Accession, reviewed by 25 committees, would show investors that reforms can survive changes of government.

1. Sound banks

Speaking at the Saddlers' Hall in London, home of a craft guild founded in 1395, Bundesbank President Joachim Nagel used the guild's motto about riding securely to discuss how firmly European banks sit, how they fare against foreign rivals and what would help them. Unlike in 2008, they weathered the pandemic and the 2023 turmoil, which he credits to post-crisis capital rules: studies by Basel, ECB and Bundesbank experts show stronger capital improves stability, lending and growth over the cycle.

2. How they compare

Direct competition with US banks is limited to investment banking and trading; corporate lending in Germany is contested mainly among European lenders. US and UK banks still earn higher margins and trade at higher valuations, although European bad loans and cost ratios keep falling. Research finds more capital does not hurt efficiency but cuts funding costs; the real drag is Europe's fragmented banking and capital markets and divergent national rules.

3. Three remedies

He wants more integrated, deeper capital markets through venture capital, securitisation, more retail investment, cross-border services and joint supervision of market infrastructure, which would also give banks scale. He backs simpler EU rules, expected in proposals early in 2027, but insists that integration measures favouring big cross-border banks be matched by lighter, proportionate requirements for small banks. And he warns that non-banks, now holding half of financial assets, are closely tied to banks (14% of German banks' assets are claims on them), so lenders must manage private-credit exposures carefully.

1. The economy and inflation

Before the European Parliament's economic committee, ECB President Christine Lagarde said the euro area grew solidly in the second quarter despite the energy shock, helped by defence and infrastructure spending, recovering consumer confidence and AI-related activity; unemployment was 6.4% in July. Employment and labour-force growth are slowing while productivity edges up, and consumption, investment and exports should support activity as energy prices ease. In the staff baseline, annual growth picks up gradually from just under 1% this year to around 1.5% by 2028. Inflation rose to 3.2% in August as energy prices jumped 14.3%, driven by refining margins, while core inflation eased to 2.4% and wage growth slowed to 3.3%. Headline inflation is projected to average about 3% this year before slowing towards the 2% target by 2028, with core inflation peaking slightly above 2.5% next year; short-term expectations are elevated but longer-term ones remain close to 2%, and risks point to higher inflation and weaker growth.

2. Why the ECB raised rates

She explained the September increase of 25 basis points. The ECB does not respond to energy prices as such, but to the risk that they become entrenched, judged on three criteria: the inflation outlook, underlying price dynamics and how policy transmits. Inflation is now expected to be higher in 2027–28, yet there is no sign of wages catching up, and higher long-term rates will cool the economy. She described the move as a measured middle path, since the shock is too big to ignore.

3. AI and the economy

Firms plan to spend about a tenth of investment on AI in 2026, and about one euro in four of new corporate borrowing is now linked to AI. Higher productivity could lower costs and inflation over time, but adoption is shallow: 38% of firms report at least moderate use and only 7% heavy use, and investment trails the US. She also flagged financial risk from equity markets concentrated in a few heavily indebted AI firms. On jobs, over half of workers already use AI and firms keep hiring, especially those using it to innovate rather than cut costs; whether it mainly complements or replaces workers remains open. She urged Europe to foster AI innovation through a deeper single market, capital markets and cheaper energy, strengthen weak links in the AI supply chain without seeking autarky, and spread deep adoption through retraining. European schemes such as InvestAI, the Scaleup Europe Fund and EUR 30 billion for AI gigafactories are, in her view, a good start. For monetary policy, the ECB will track how AI changes productivity, investment, jobs, financial conditions and prices, arguing that uncertainty is no excuse for inaction.

1. Credibility tested in two ways

In Kyiv, at a research conference jointly organised by the Ukrainian and Polish central banks, the Governor of the Bank of Italy expressed solidarity with Ukraine and argued that central bank credibility sometimes requires standing firm and sometimes adapting. Geopolitical conflict tests the first quality; artificial intelligence and digitalisation test the second.

2. Lessons from the hryvnia

Ukraine's currency turned thirty in 2026. After the 2014-15 crisis, when it lost over half its value and banks were restructured, the National Bank of Ukraine adopted inflation targeting, a more flexible exchange rate and risk-based supervision. These reforms allowed it to keep monetary and financial stability after the 2022 invasion: inflation passed 26%, the policy rate went to 25%, banks kept working and inflation later fell. A new four-year IMF programme approved in February 2026 recognised this record, while alignment with EU banking rules progressed. The lesson is that credibility is accumulated in calm times and proven in extreme ones.

3. AI and the economy

Generative AI is spreading faster than personal computers or the internet did. Central banks must understand it, both as an analytical tool and as a force changing the economy. In the short run, AI investment lifts demand and prices for computing power, energy and specialised staff. In the long run, productivity gains could be large; Bank of Italy research suggests more than one extra point of annual labour productivity growth for Italy. Such a supply gain would normally mean more growth and lower inflation, but its timing and size are uncertain and it also affects incomes and spending.

4. Demand, inequality and gaps between countries

Should AI chiefly generate new kinds of work and lift expected wages, households may spend more and inflation could last longer; if it mainly replaces workers, precautionary saving could bring disinflation sooner. The outcome will be uneven across workers and firms, possibly favouring large companies. Central banks will therefore need to know who gains, not only how much. Between countries, the United States leads in AI investment, which widens its trade deficit and draws foreign money into its stock market, while Europe lags but could still catch up through adoption. Faster adopters may win lasting productivity and market share, with possible swings in exchange rates whose direction is hard to predict.

5. Consequences for policy

The effect of AI on the neutral interest rate is ambiguous: faster productivity pushes it up, while inequality, extra saving or a larger capital share pull it down. Stock valuations built on optimistic AI profits leave room for abrupt corrections. He therefore recommended pragmatism, giving observed demand, activity and inflation more weight than estimates of unobservable variables, and investing in skills and models.

6. Supervision and payments

AI can improve credit scoring, fraud detection and risk control, but common models or a few technology suppliers could spread errors across the system, so supervisors need deeper technical knowledge. New payment providers raise efficiency but also complexity and cyber risk. The two-tier system, in which public money issued by the central bank anchors the private services built on it, should be adapted rather than abandoned. Stable prices, a sound financial system and public confidence in money stay the foundations.

1. Britain and the EU, closer again

At the annual dinner of a British society of economists in London, the Bundesbank President noted that, ten years after the referendum, the United Kingdom has drifted less from EU rules than many expected and now seeks closer ties, from youth mobility to defence. He explained this rapprochement by a shared exposure to geoeconomic fragmentation, which the IMF describes as a deliberate unwinding of integration for strategic reasons.

2. The new geoeconomic landscape

The rivalry between Washington and Beijing now defines the world economy, and each side uses chokepoints. China dominates rare earths and produces around 30% of world manufacturing, threatening Europe's mid-technology industry. The United States controls most global financial services, leads in technology and anchors NATO, and it now uses tariffs as leverage. Bundesbank work shows tariffs hurt trade and the US economy itself, although the AI investment boom kept world trade strong last year. Trade restrictions reached record numbers in 2023-25 and trade policy uncertainty in this decade is about five times the level of the 2000s. German exporters were squeezed by both US tariffs and Chinese competition, France worries about Chinese export pressure and British analysts see these forces aggravating domestic weaknesses.

3. Europe's assets

He answered his own question with confidence: Europe can cope. Britain brings world-class finance and professional services, advanced manufacturing and an educated workforce; the EU brings the largest trading bloc and network of trade deals, strong industry and a market of 27 countries and 450 million consumers. The friendship treaty signed between Britain and Germany last year expresses the shared values on which both can build.

4. Competitiveness and digital money

The EU still has to exploit its single market fully. The savings and investments union aims to channel European savings into European investment, with further plans to close the funding gap for growing start-ups and to let a new company be created online in two days for at most €100. In payments, a digital euro would bring central bank money into the digital era and reduce reliance on non-European card schemes; legislation is expected by the end of 2026 and a launch in 2029. A wholesale settlement service linking tokenised markets to the Eurosystem's payment platforms began operating the day before the speech.

5. Artificial intelligence and security

AI promises large efficiency gains, already visible in early uses including at central banks, but frontier models also raise cyber risks for financial stability, as the Financial Stability Board has warned. Britain and the EU cooperate on these issues through regular dialogues. He concluded that, by combining their strengths and common values, both will absorb the shock and become more resilient.

1. From shock to adaptation

In Halifax, Bank of Canada Governor Tiff Macklem returned to the structural forces he described in February: trade conflict with the United States, artificial intelligence and ageing. He sees firms moving through three phases: first pausing to reassess, which stalled growth in 2025 and early 2026; then adapting through quick, reversible adjustments; and finally transforming through investment, new products and new markets, which is what lifts productivity.

2. Signs that firms are adjusting

Non-energy exports jumped 14.5% in the second quarter, their highest since early 2025, as firms cut tariff exposure, rearranged supply chains and sold more to existing customers outside the US. Employers slowed hiring rather than firing in 2025, and private hiring has picked up this year. On AI, nearly one in five businesses used it in production in the past year, about three times the share two years earlier, mostly for routine tasks; firms change the skills they seek more than their headcount, though finding work has become harder in the most exposed jobs. Labour-force growth will be close to zero because of ageing. Business investment rose at an 8.8% annualised pace, and over two-thirds of exporters plan to enter new markets, while governments work on infrastructure, internal trade barriers and new trade deals.

3. Two new threats

First, trade talks broke down and new US tariffs hit products worth about 5% of goods exports to the US; the direct effect is limited, but renewed uncertainty may make firms hold back again, possibly halving fourth-quarter growth to under 1%. Second, the Middle East conflict has lasted longer than expected. Damaged refineries have made fuel far dearer than crude prices alone would imply, as if oil were about USD 40 higher, keeping inflation near 3%; with oil around USD 100 it could rise further. Canadian counter-tariffs should add little to prices. Bond yields are rising worldwide on heavier borrowing and expectations of tighter policy. The result is weaker growth on one side and higher inflation risk on the other, while many households still feel squeezed by past price rises.

4. The Bank's approach

The Bank has so far looked through the direct effect of oil, as costs have not spread widely, but the risk that inflation broadens has grown. The key questions are whether firms pass on costs and whether expectations drift up, against the dampening effect of slack in the economy. Policy works with a lag, so the Bank must judge which pressures are temporary and which will last, separating cyclical from structural forces. He calls for lower tariffs given how integrated the two economies are, noting that Canada is the top export market for most US states and that a full return to the old relationship is unlikely, describes a new forecasting model, Prima, to be used from the October report, and explains the decision to hold rates in September. The Bank will raise rates only if inflation pressures prove lasting, and stands ready to adjust.

1. Resilient growth, rising pressure

After the Eurogroup meeting in Dublin, President Kyriakos Pierrakakis said the euro area did better than expected in the second quarter and should keep expanding through the end of 2026. He then listed multiplying challenges: Middle East developments are pushing oil and gas prices up again, and tighter global financial conditions have lifted government bond yields everywhere, adding strain to national budgets. Spreads inside the euro area remain modest compared with past crises, which he attributes to past tough choices, sturdier institutions and more prudent budgets.

2. Energy independence and fiscal discipline

His answer is to reduce dependence on events abroad by speeding up energy independence, and to stay on the agreed fiscal path because credibility has become an economic asset. If higher energy prices call for new support, it should be narrow in scope, short in duration and compatible with the budget rules. Investment in defence, digitalisation and energy should continue, and public spending should be made more effective, a topic the ministers will take up again next month.

3. Productivity and Europe's savings

Ministers also heard OECD Secretary-General Mathias Cormann on productivity, two years after the Draghi report. Pierrakakis said progress is real but the world is moving faster. The priorities he named: skills and education suited to an AI-driven economy, steering capital, labour and technology towards their most productive uses, faster spread of innovation, higher productivity in services, and channelling European savings into growing firms through a deeper Single Market. Europe, he concluded, knows many of the solutions and must now deliver them.

1. A lesson from the 1870s

Speaking in Vienna, Christine Lagarde recalled the Gründerzeit before 1873, when European savers financed the technologies of the day, the Suez Canal and, in far larger sums, American railways, in what Hobsbawm called the age of capital. After the 1873 crash, the assets and the growth stayed on American soil, and America overtook Europe while Europe stagnated for two decades. Today European savers are again funding the defining technology, AI, mostly in the US: about 440 billion euros of American tech equity sits in euro area household portfolios. She asks whether Europe will capture a fair part of the gains this time.

2. Why Europe must adopt fast

Europe is doing better than its reputation: euro area firms will put about 10% of investment into AI in 2026, AI-related borrowing explains about a quarter of business credit growth in the first quarter, and worker use has doubled in two years to over half. Yet US digital investment grew twice as fast, and US workers use AI two to three times more. Speed matters because ageing strains the social model, over 100 billion euros a year of public investment needs are unfunded, and the working-age population is set to fall by over a million people annually, so only faster productivity growth can pay for it; ECB estimates say quick adoption could raise productivity by up to 4% within a decade. Europe also bears the cost of the boom regardless of whether it captures any gain: US hyperscalers issued over 100 billion dollars of bonds last year, lifting long-term yields that euro area rates follow.

3. Why importing is not enough

Unlike in 1873, the companies are now built elsewhere: the US produced 59 notable AI models last year and China 35, France and the UK one each, and the US hosts three quarters of AI computing capacity against Europe's 5%. AI dependence differs from earlier technologies for three reasons. Data: a model reads a firm's data, so its supplier could learn what an industry knows and compete with it, and nearly half of firms that rejected AI cited data protection. Access: AI will soon screen goods, audit tax returns, dispatch trains and clear payments, so cutting or changing access would hit every sector at once, a leverage no trade partner has held. Frontier: in pharma, finance and defence a small edge in capability brings outsized gains and winner-takes-all dynamics. Europe thus faces a choice between holding back and forgoing growth, or adopting quickly and losing economic freedom.

4. Building sovereign capacity

Her answer has three steps. Build far more computing capacity, since Europe's data-centre gap could grow more than sixfold in a decade and the new gigafactories will fill only a fraction. Develop good-enough open models running on European infrastructure, building on Mistral and a San Sebastián firm's compressed model, because the best open models today are Chinese and their terms can change. And secure access to the frontier by being indispensable in the supply chain, as ASML is, while innovating to find the next link, since rivals will try to replicate it. She also warned that a correction in the US AI boom would reach Europe through investment funds exposed to US tech, a task for supervisors, though banks are well capitalised.

5. Capital: more of it, and a different kind

All this comes back to capital. Closing the data-centre gap could cost up to 600 billion euros, and the US has drawn on bonds, private credit and securitisation while Europe leans on banks. New models need patient equity; Mistral's record raise last week is one round of the many needed. Europe's households save about 1.4 trillion euros a year, so the savings and investments union is what lets those savings be deployed at home. AI, she argues, can be the project that drives European capital markets forward, as railways did in the US.

1. How Europe helps a region

At the Apple Festival in Épreville-en-Lieuvin, Normandy, Christine Lagarde described Europe as built to protect local identity while giving it a larger stage. Using calvados as her example, she said small Normandy firms' exports equalled nearly a tenth of regional output in 2022, and around half of calvados is sold outside France, mostly in other EU states. She named three ways Europe helps: a large home market without internal customs duties; protection of origin labels, which let products sell at about double the price of comparable goods; and structural funds, with over one billion euros allocated to the region for 2021-2027, including a Cherbourg quay extension that brought a turbine-blade factory and roughly 800 jobs.

2. New pressures

Yet an open region feels shocks first. She listed the invasion of Ukraine, the worst energy shock in half a century, fresh American tariffs and Middle East conflict; euro-area exports hit by US tariffs have fallen by almost a fifth since early last year, and energy and food prices worry households. Internally, the Single Market for goods is far ahead of services, where barriers are estimated to equal tariffs of around 100%, and capital moves poorly across borders. Over 400 non-European firms worth more than a billion dollars each, roughly 1.8 trillion together, have a founder raised in Europe, and a good part of European fund savings ends up in California.

3. Two priorities

First, combine local and European strengths to be less vulnerable. Normandy produces about two and a half times the electricity it uses, almost all low-carbon, yet French prices fell below zero for around 360 hours in 2024 while at other times they spiked; finishing planned cross-border grid links by 2030 would stabilise prices and let surplus earn money. Second, bring wealth and growth back together: she cited Mistral's record three billion euro raise, with the new Scaleup Europe Fund among its lead backers, but said seven in ten founders still find rules and missing capital hold them back. Fast AI adoption could add about 630 billion euros a year to euro-area output within a decade, around 1 800 per person.

4. The ECB's part

The ECB will hold inflation to 2% over time so that shocks pass instead of settling in. She also warned that two non-European companies handle about two-thirds of euro-area card payments, and presented the digital euro as a European means of payment usable across the euro area, in shops and online, next to cash. She concluded with Tocqueville on the value of acting together.

1. Potential turned into impact

At the Global Fintech Fest, RBI Governor Sanjay Malhotra said that what was once aspiration is now daily reality: roughly 570 million basic bank accounts under the government scheme, hundreds of millions of micro-insurance policies, and about 24 billion UPI payments a month. The real achievement, he said, is that digital finance became ordinary, so even a street flower seller shows a QR code. He credits public-private partnership rather than technology or officials alone. The hardest task remains the last mile: informal-sector savings, micro-insurance, small pensions and small loans for women, farmers and smaller towns, where firms too often chase customers who are already banked. Newer tools, whether AI, quantum computing or tokenisation, are only means to that end.

2. Four ingredients of trust

Trust, he said, is a daily working practice, earned one payment at a time. Recalling hundis, the handwritten merchant notes honoured across great distances on reputation alone, he argued that trust once rested on merchants, now rests on institutions and must extend to intelligent systems. His four ingredients: mitigate AI risks such as opacity and bias; treat customer data as a fiduciary duty, following the consent-based design of the Account Aggregator; accept that responsibility grows with size, so firms become too significant to be careless and must invest in resilience and cyber security; and avoid structuring a business around regulatory gaps or scaling first and seeking forgiveness later, since the sandbox exists for early engagement and rules eventually catch up.

3. A global vision

India's fintech sector ranks third worldwide by funding, with 2.4 billion dollars raised in 2025 and 30 unicorns. After a decade of building for India, he wants the next to build for the world, exporting solutions for inclusion, affordable payments, digital identity and interoperable public infrastructure, and earning leadership by having others adopt its standards.

4. What the RBI is doing

The central bank calls fintech a strategic partner. It runs an on-tap regulatory sandbox, an annual hackathon and a self-regulatory-organisation scheme, recognising United FinTech Forum as the second such body. It is building public infrastructure: the Unified Lending Interface, Account Aggregator, the MuleHunter.ai fraud detector and a proposed Digital Payments Intelligence Platform, plus pilots of programmable CBDC and tokenised certificates of deposit, and it announced tokenised corporate bonds settled in CBDC together with SEBI. Regulation stays activity-based, with the same treatment for the same risk, and light where innovation is young. New AI, model-risk and quantum-resilience work aims to anticipate change.

1. Demand, investment and trade

Speaking at the Global Fintech Fest in Mumbai, BIS General Manager Pablo Hernández de Cos organised his remarks around three questions. AI is already reshaping the global economy. On demand, it has triggered an investment boom in data centres, chips, cloud and hardware, and its optimism keeps financial conditions loose, supporting consumption through wealth effects. The five biggest tech firms alone plan over a trillion dollars of AI spending across 2025-26, and industry expects global AI investment to rise from about 500 billion dollars to 3-4 trillion by 2030, increasingly financed by debt and private credit. Trade is affected too: prices of AI-related goods have risen while other export prices stayed flat, so economies high in the supply chain, such as Taiwan, Korea, Malaysia and Singapore, gain, though narrowly (five Korean firms made 43% of export earnings), while heavy buyers of equipment lose terms of trade.

2. Productivity and jobs

On supply, task-level studies show productivity gains of 10 to 65% from generative AI, strongest for less experienced workers, and published estimates centre on roughly half a point a year added to productivity growth, with early evidence that better-prepared economies grew productivity faster. For work, AI both complements and substitutes. Informal workers in developing economies, with least protection and training, are most exposed; displacement so far is limited but emerging in customer support, programming and administration, and nearly 80% of firms discuss automation plans. His lesson is to prepare people through reskilling, not to resist the technology.

3. Divergence between economies

Advanced economies are likely to gain more in the short run because finance and professional services weigh more there and AI preparedness is higher. But emerging economies differ widely: China and parts of the Middle East are very well prepared, many low-income countries lag, and India, with its digital public infrastructure, has a real chance to close the gap. AI production is a five-layer chain (chips, cloud, data, foundation models, applications) with high fixed costs and scale economies, favouring a few giants in the US, China, Taiwan, Korea and the Netherlands. Smaller economies face a trade-off between building national capacity for resilience and wasteful duplication; many can focus on local applications, models for local languages and domain data.

4. Central banks and financial stability

The mandate is unchanged, but AI makes the economy harder to read, making it harder to pin down how much the economy can produce and where neutral interest rates sit. The BIS sets out three long-run scenarios: a bounded productivity boost, explosive self-improving growth, and a demand bottleneck in which displaced workers, as lost consumers, eventually starve the spending that supports innovation; in the last, the natural rate first rises, then falls below pre-AI levels, with inflation following. Financial-stability worries include cyber risk, which tilts towards attackers, and the investment boom itself: valuations are concentrated, spending exceeds cash flow, and circular financing among chipmakers, cloud firms and AI developers is opaque. An arms race risks over-investment, as in the canal, railway, electrification and dot-com episodes, and households now hold more equity, so a correction could hit consumption harder and spread globally. He does not say a bust is inevitable but urges caution. Benefits will depend on infrastructure, skills, competition, data governance and institutions; for central banks, the premium rises on measurement, judgment and cooperation.

1. Europe is not a museum

Speaking in the Bode Museum in Berlin, Bundesbank President Joachim Nagel rejected the idea that Europe merely preserves past prosperity while innovation happens elsewhere. The world is harsher and less predictable, competition is fiercer and artificial intelligence is reshaping economies, so competitiveness and sovereignty must be considered together. He notes that Europe depends on non-European providers for chips, computing power and cloud services, and that the most capable models come from the United States and China.

2. Europe's assets and what it needs

His view is that Europe can still become a major technological player: it has top universities and AI talent, industrial data and large private savings. But firms cannot race the Americans and Chinese while split across 27 national markets for money, services and workers; Europe must become large in practice. Three things are essential: more venture capital through the Savings and Investments Union, so start-ups need not seek funding abroad; enough computing capacity, meaning data centres, grids and competitively priced power, helped by more cross-border interconnections; and truly integrated markets for digital services and talent so young firms can scale quickly.

3. Act at European level

Where scale is decisive, he says, national action falls short and national interests are often better defended by acting jointly, so initiatives should be judged through a European lens. Central bankers can use the Eurosystem's experience to explain what is at stake, and the digital euro is the Eurosystem's contribution to sovereignty. He ends by calling prosperity a launch pad rather than a relic, comparing Europe with a museum that keeps renewing itself.

1. Europe's history of hard choices

Speaking at the Bode Museum in Berlin, ECB President Christine Lagarde recalled that post-war Germans and Europeans repeatedly had to pick which relationships to put first, from Adenauer's anchoring in the West to East Germans choosing freedom once the Wall fell. After 1989 the choices seemed to vanish: Europe could source its fuel in Russia, its customers in China and its defence in America simultaneously. She says that era is over, because large powers now use their economic and geopolitical weight for their own benefit.

2. Three pathways

Europe, she argues, faces three paths. The first, graceful decline while importing foreign technology to pay for the social model, is a mirage leaving weak growth, an unaffordable welfare state and dependence on suppliers. The second, each country chasing its own interest in trade, industry or energy, is also a mirage: middle powers elsewhere are banding together, and Europe would be throwing away the structures it already has. The third is to choose each other and keep building Europe, accepting slow negotiation and compromise.

3. What that means in practice

Single Market strengths are undermined if defence or fragmented, costly energy markets stay weak; acting together where it makes sense brings more sovereignty and faster growth. She points to the savings and investments union, which would channel Europe's savings into needed investment, and to the digital euro, which would protect monetary sovereignty. She calls the choice difficult but not impossible.

1. Why enlargement still matters

Speaking at a Brussels think tank as the IMF launched a paper on the Western Balkans and Moldova, Kristalina Georgieva called enlargement an engine of convergence. The world is harder than in 2004, with growth near three percent, rising trade barriers and demographic and fiscal strain, yet a wider single market should make Europe more resilient. In earlier rounds, joining regions saw income per head climb by more than thirty percent within ten years, and existing members gained too. A new capacity development centre in Rome will support the candidates.

2. What the new paper finds

Candidates could lift income per person by thirty to thirty-five percent in a decade. About two-thirds of the gain is productivity, which has to be earned through investment, innovation and competition, and which also keeps talent at home. Three engines each supply roughly a third: reforms anchored in EU law, access to the single market and effective use of EU money, all resting on strong governance.

3. A shared responsibility

Candidates must apply the rules faithfully, avoiding gaps and needless customisation, while the EU must make its market deeper and more seamless. A larger Europe is stronger if it is also more integrated, and she closed on optimism that Europe should believe in itself.

1. A hinge moment and the AI questions

Speaking at Jackson Hole on his hundredth day as Fed Chairman, Kevin Warsh said the landscape has shifted from the era of secular stagnation and saving glut to a possible growth surge driven by AI, with capital pouring into AI infrastructure and token sales at the two leading labs reportedly above 100 billion dollars annualised, up over 500% in a year. He framed AI as possibly a new factor of production and listed open questions: whether productivity will rise durably and when; whether AI complements or competes with labour; whether future models will need more or less capital; who captures the surplus (labs, chipmakers, energy and cloud firms, or later businesses and consumers); and how tokens will be priced. A dedicated internal group on productivity and employment will examine this, but its findings will come later and will not shape current decisions. He believes the public and markets understand that changes in how the Fed conducts policy will serve both stable prices and a strong job market.

2. Rethinking forward guidance

He argued that forward guidance, adopted during the 2008 crisis, has outstayed its welcome: in normal times it should be limited, because oversharing and overcommitting create ambiguity and constrain the Fed's own freedom to decide. The Fed should read markets' unfiltered signals (asset prices, Treasuries, the dollar, credit costs, commodities), while market participants should form their own views rather than relying chiefly on the Fed to decide what to buy or sell next. If markets lean on the Fed and the Fed leans on market prices, a hall of mirrors results, and the heaviest cost falls on people without financial assets, who bear the effects of wrong inflation or jobs calls. Publishing a mechanical reaction function is not the answer either, because economic knowledge is not precise enough; he noted that guidance in 2021 may have delayed the response to inflation, and promised more reliable models and rules, with humility about forecasting.

3. Seven principles

Trends, not isolated data points, matter most, since the Fed must choose amid uncertainty using information that is relevant, current and actionable. Seven principles guide him: separate today's reality from stale data and focus on trends; recognise that supply can only be inferred, so judging its balance with demand is imprecise; treat the 2% PCE target as firm, noting that stable prices do not arrive on their own and inflation does not necessarily revert by itself; see the dual mandate as complementary, since high inflation harms prosperity; rely mainly on short-term interest rates and use unconventional tools sparingly outside genuine crises; remember that money, including bank-created money, still matters; and prefer a quieter, more purposeful Fed judged on results.

4. A stronger economy

He sees an economy that has strengthened. Business investment in equipment and intangibles is up around 9% over four quarters, with more than half of the capital-spending growth tied to the AI buildout; S&P 500 profits are up over 20%; credit spreads are tight and bank lending standards easy, so financial conditions are hardly restrictive, though housing and agriculture show strain. Real consumer spending rose over 2% and private domestic final purchases nearly 3%. Unemployment is 4.1% and jobless claims are near multi-decade lows, consistent with full employment. He added that expectations for capital spending and earnings growth are high, so he will watch the change in those growth rates, and that bank surveys show easier standards for commercial loans.

5. Inflation is the concern

Inflation is the worry: PCE is up 3.7% over twelve months and 4.1% over six, and 54% of PCE components rose above 3% against 32% in the two pre-pandemic decades. Wages are not a reliable guide, medium-term expectations look anchored, and he stressed that responsibility for 65 months of elevated inflation lies with the central bank. The Fed should be confident that underlying inflation is heading to target clearly and quickly; otherwise there is work to do. To gauge the underlying trend he splits the PCE index into its 199 components; summer readings were better than expected but do not prove a lasting improvement, and market measures of expectations, he warned, look durable until the moment they are not. He closed by pledging adherence to principles rather than to any particular rate move.

1. A growth model under strain

Speaking at a panel in Geneva, Christine Lagarde said the model that powered Europe's growth after the war relied on expanding trade, mid-tech manufacturing helped by cheap energy, and a stable rules-based order under a US security umbrella, and that all three are weakening. Europe has roughly double America's trade openness, yet over 2 500 trade restrictions were imposed worldwide last year. China now competes in about 40% of the sectors where the euro area holds an advantage, up from about 25% in the early 2000s, and electricity for energy-intensive industry costs more than double US prices. Geopolitical dependencies and security threats now enter investment decisions directly.

2. Strengths and domestic demand

Europe still holds more trade agreements than anyone else, leading precision manufacturing, a highly skilled workforce and a market of 450 million consumers. The euro area grew 1.5% last year entirely on domestic demand, and demand again carried a 0.4% quarterly gain in spring 2026.

3. Two barriers to scaling

To make that resilience durable, she says, Europe must use the size of its home market, especially for AI, so as not to repeat missing the first digital revolution; euro-area firms expect to put about 9% of investment into AI this year. Two barriers stand out. Single Market fragmentation means competitive pressure from AI-investing rivals largely stops at national borders. Capital-market fragmentation means EU scale-ups raise roughly half as much as San Francisco peers by their tenth year, and 12% have moved outside the EU. Responses include EU Inc, an optional EU-wide company form, and leaders' call for lawmakers to settle the capital-market integration plan before 2027.

1. A fragmented world needs private capital

Speaking at a BRICS finance side event in India on mobilising private capital, New Development Bank President Dilma Rousseff described a world of imbalances, tariffs, sanctions, high rich-country debt and climate urgency, with development needs in digital, energy, cities and infrastructure too large for any single actor. The aim is to create conditions for long-term institutional and private capital to flow into development; the NDB, a bank of and for the Global South without conditionalities, builds that bridge through better bankability, longer maturities and local-currency and swap solutions.

2. Funding, financing and preparation

On funding, the bank is a large issuer in China's Panda bond market, is growing in South Africa, and plans a rupee bond programme of about 250 billion rupees (2.5 billion dollars) over five years, taking planned India investment to 7.5 billion. On financing, it targets 30% non-sovereign lending now and 35% in 2027-31, with 40-50% in local currency, 45% for climate and 10% for innovation and digital projects, co-financing 20-30% of projects and adding guarantees, risk-sharing, project bonds and equity, backed by stronger credit appraisal. On preparation, it will help build bankable projects and act as a knowledge hub.

3. India and closing

India has about 10.5 billion dollars approved across 35 projects, including anchor investment in the National Investment and Infrastructure Fund and a hybrid renewable energy project. She closed by saying that mobilising private capital is about trust, partnership and delivery.

1. The Gelam tree and renewal

Speaking at the Sasana Symposium on the theme of reforms for resilience, Governor Abdul Rasheed Ghaffour likened structural reform to the Gelam tree, which thrives in harsh conditions by shedding bark and renewing itself. Monetary policy is an important defence and the current stance fits the growth and inflation outlook, but as a demand tool it cannot fix underlying weaknesses; reforms invest in the economy's future, raising productivity, competitiveness and staying power. Malaysia reformed after the Asian crisis, again when investment slowed in the mid-2010s, and after the pandemic; the central bank's part is preserving macroeconomic stability so reforms can take hold, through steady prices, a healthy banking system and well-functioning markets, and it will keep doing so. The medium-term outlook stays favourable, with firm growth and manageable inflation.

2. Productive capacity and public finances

The latest reform phase has two pillars. On investment, the aim is not simply more but the right kind, bringing technology, better jobs and greater value; Malaysia approved 815 billion ringgit over two years, almost half of GDP, mostly in advanced manufacturing, semiconductors and digital technology. On fiscal capacity, phased-in targeted diesel subsidies, subsidy reforms, tax adjustments and a fiscal responsibility law cut the deficit from 6.2% of GDP in 2020 to 3.7% in 2025. Growth was 5.2% last year, the ringgit led regional currencies, and 4-5% growth, toward the upper end, is expected this year despite the energy shock. None of this happened by chance, he stressed: difficult choices were made early and in sequence. A 1.5 billion dollar global sukuk drew nearly five times the amount offered, at record-low spreads.

3. Where to go: jobs, skills and wages

He set out anchors for the next stage. First, make growth felt at home through better jobs: high-skilled employment rose from 27.5% to 30.1% of the total between 2019 and 2025, and the investment pipeline could create about 245 000 jobs, many of them higher skilled, yet over two thirds of workers hold low or mid-skilled roles. That calls for continuous upskilling, digital fluency, vocational training and STEM and AI education under the 13th Malaysia Plan, plus wages that reward productivity, minimum wage increases as a floor, and a more coherent social protection system that tackles the roots of vulnerability.

4. Value creation and a better financial sector

Second, move from extracting value to creating and retaining it: investment should leave behind stronger local firms, skills and technology diffusion, through research, design, engineering and programmes such as SemiconStart, and growth must stay sustainable given the country's rich biodiversity. Third, everyone has a role: the upcoming Financial Sector Blueprint 2027-2030 aims for finance that builds resilience to climate shocks, supports prosperity by channelling capital to productive firms, with Islamic finance as a force for change, and is future-proofed through proportionate regulation that does not curb innovation.

5. Co-creation and closing

The central bank is moving towards co-creation with banks, businesses and technology players, through platforms such as the climate change joint committee, the regulatory sandbox and iTEKAD, which will launch an employment initiative. Countries should stay ahead of the curve instead of solving yesterday's problems. Closing on Gelam bark that let Malay ships flex with the waves, he said resilience means adapting without losing one's bearings, and the task now is to turn stronger foundations into stronger incomes, investment into opportunity and resilience into progress that many people share.

1. The savings and investments union

Speaking in Frankfurt for the EU's Irish Presidency, Bundesbank President Joachim Nagel urged action on two files. First, the savings and investments union: Europe relies on outside venture capital, especially in later-stage rounds, though its high savings could finance its own scale-ups. He backs the One Europe, One Market Roadmap, with a single EU-wide company form, updated securitisation rules and a market integration and supervision package to be adopted this year; he welcomes more centralised supervision of securities and non-banks, with proportionate design and a role for central banks, and suggests a 28th regime for digital securities to reduce national fragmentation and strengthen the euro's international role.

2. Sovereignty in payments

The euro is the world's second most important currency, and holding that position takes broad capital markets, stability-oriented monetary policy and modern payment infrastructure that keeps working even in an emergency. Yet non-European firms such as Mastercard, Visa and PayPal dominate, a dependence as risky as in defence or AI. Europe needs its own digital ecosystem anchored by central-bank digital currency for both wholesale and public use. The digital euro would work in stores, online and person to person and give private innovators a European base. Trilogue talks began last week, a pilot starts in mid-2027 and launch is still planned for 2029. Europe, he concluded, works only when it works together, not just through a national lens.

1. Rates on hold, growth resuming

Presenting the Monetary Policy Report, Bank of Canada Governor Tiff Macklem said Governing Council held the policy rate at 2.25%. Growth, flat over the past year amid tariffs and uncertainty, appears to be resuming: second-quarter GDP is estimated at 2.5% annualised, consumers are resilient, housing is steadying, exports are recovering and business investment is rising, led by oil and gas. Unemployment sits between 6.5% and 7%, and growth is projected at 0.7% in 2026 and 1.8% a year in 2027 and 2028.

2. Inflation and risks

Consumer price inflation reached 3.2% in May on gasoline prices tied to the Middle East conflict, but excluding gasoline it was 2.2% and core measures stay near 2%, with no broad spillover so far. Inflation should come back to its 2% goal early next year if oil settles around 70-75 dollars, though futures have risen since the forecast was finalised. The main risks are the Middle East conflict, US trade relations, inflation getting stuck above target, or a stalled recovery; the bank will not let oil become persistent inflation and stays ready to adjust.

1. The euro's place in the ranking

Using the World Cup as a metaphor, Bundesbank President Joachim Nagel said the euro is the world's second most important currency but far behind the dollar: the dollar made up 57% of foreign reserves at the end of 2025 against about a fifth for the euro, and about 60% of foreign-currency debt against around 30% for the euro; US exporters invoice almost entirely in dollars while EU exporters take dollars for about a third of their sales. The dollar is unlikely to lose its role soon but is not invulnerable: Bundesbank research found that political pressure on the Fed was read by markets as a loss of confidence, with equities down and uncertainty and gold up, and gold's dollar price jumped nearly seventy percent from the April 2025 tariff announcement until the strikes on Iran, then gave back about half. The euro gained little, and stablecoins, almost all dollar-based, could further help the dollar.

2. Why a stronger euro matters and how to get it

A stronger international euro would bring strategic autonomy, less exposure to exchange-rate swings and lower funding costs. The basics are trust in price stability backed by central bank independence, a rule-of-law framework, defence capability and stable growth. Channelling savings to productive uses through the savings and investments union, including partly centralised supervision at ESMA, cheap access for small investors and better financial literacy, would help finance innovative firms. He added that institutions in Europe need to be able to rely on a stable legal order and that those qualities are worth more today because they are no longer guaranteed. Reliable euro liquidity abroad matters too: the ECB made its EUREP repo facility permanent for central banks worldwide, alongside swap lines.

3. The digital euro and wholesale central bank money

Payment sovereignty also underpins the euro's role. The digital euro would give one payment solution across the euro area, reduce dependence on non-European infrastructure and allow conditional payments triggered automatically on delivery or usage, though it will not be programmable money and users stay in control. A wholesale version, a project called Pontes, will deliver central bank money on distributed ledgers from this autumn. Together with better cross-border payments, public money as a base and private firms as innovators, these would make the euro more attractive. He closed by saying the euro must remain a strong player on team Europe, with the Eurosystem doing its share, and that Europe has a great future in the international monetary system.

1. Two opposing forces

Addressing the annual meeting of the Italian Banking Association in Rome, the Governor of the Bank of Italy described a world economy pulled between the Middle East conflict, which raises energy prices and revives fears of bottlenecks, and the spread of artificial intelligence, which lifts investment, high-tech trade, share prices and, through wealth, consumption. The United States gains from low energy exposure and technological strength; China relies on manufacturing and tech exports but imports much of its energy. The euro area, already growing slowly, suffers from costlier energy despite more diverse suppliers, and benefits less from AI investment. Household confidence and services expectations have weakened, inflation is close to 3% and should stay above that until early 2027, and renewed hostilities have pushed oil and gas up again. The ECB's quarter-point rate rise in June was a first, measured answer to upside inflation risks; next steps will depend on energy, activity, wages and prices, with the goal of keeping expectations anchored.

2. Markets: a fast rebound, perhaps too fast

The US-Iran conflict that began in late February first caused volatility, falling shares, wider risk premiums, capital flight from emerging markets and higher rates. Hopes of a ceasefire then brought a rapid recovery, with some sectors at record highs and junk bond spreads back down, while government yields stayed above pre-war levels, especially where public finances are weak. He read this partly as an underestimation of risk: shares rose together with interest rates, earnings expectations are very high and equity risk premiums are at twenty-year lows, recalling how crypto-assets long ignored risk before falling. The dollar regained its role as a refuge, helped by oil invoicing in dollars and the US status as a net oil exporter.

3. The AI trade

Demand for AI services has pushed big technology firms to spend heavily on data centres, creating shortages of advanced chips, exceptional margins and soaring chipmaker shares. The boost has been largest in the United States and in Asian markets dominated by semiconductors, smaller in Europe, where gains came mostly from banks and energy firms. Prices of some chipmakers assume that today's margins will last, which new capacity, new competitors, including Chinese efforts, or alternative technologies could disprove. AI service providers face cheaper rival models while borrowing heavily to fund investment, which makes them more fragile if conditions tighten. Korean stocks, heavily exposed to data centre parts, recently dropped about 25%. Investors should manage exposures carefully where optimism is greatest.

4. Italian banks

Bank credit still matters more for Italian firms than elsewhere in large European economies, representing 46% of their financial debt. Energy costs raised firms' cash needs, and banks responded: annualised loan growth to firms rose from 2.3% in February to 6.2% in May, though a long war could make lenders more cautious. Profitability, capital and asset quality are strong, as confirmed by the IMF's recent assessment of Italy's financial sector. Net bad loans have fallen from over 8% of loans a decade ago to about 1%, helped by EU rules on full provisioning that are demanding given slow Italian courts; the Bank of Italy plans to extend this approach gradually to smaller banks' older loans. A few small banks have failed, some because of unlawful conduct, which shows that integrity and governance remain the first defence, since supervisors cannot replace boards or judges. Mergers among banks, insurers and asset managers can strengthen the system if capital, business plans and integration are sound and competition is preserved; the market and shareholders decide once legal conditions are met.

5. Financing innovation

Since 2008, firms in advanced economies have borrowed less from banks and relied more on equity, because rules made lending more selective, services need less credit and intangible assets such as software and patents are hard to value or pledge. Private equity and venture capital funds, whose global assets tripled to $10 trillion between 2014 and 2025, bring both money and expertise. In Italy these funds remain small, focused on restructuring deals and start-ups, so promising firms often go abroad when they need to scale up. Insurers and pension funds, natural long-term investors, place only 0.5% and 0.7% of their assets in private equity. Rules are not the main obstacle; the market is simply too small, creating a trap where scarce investors and small funds reinforce each other. Funds of funds with public support, simpler tax incentives, better financial education and a truly integrated European capital market could break it.

6. Conclusion

Risks cannot be removed, but resilience can be built. Stability is a condition for investment; banks will stay central, but deeper capital markets and more risk capital must complement them. Italy has strong banks, high savings and adaptable firms to build on.

1. Policy and the economy

In his first testimony on the Monetary Policy Report to the Senate Banking Committee, Fed Chair Kevin Warsh paid tribute to Alan Greenspan and stressed that getting policy right is the Fed's central aim: the committee has no tolerance for persistent high inflation and held the funds rate at 3.5-3.75% in June. Activity is solid, with business investment the standout, driven by data centres and AI equipment (equipment spending up about 8% and high-tech about 25% over four quarters); he expects AI investment soon to be called simply investment. Productivity has been strong even before AI gains, and the labour market is stable, with few layoffs and solid wage growth.

2. Five task forces

He has set up five task forces, each starting from first principles: communications (how the Fed deliberates and conveys decisions); balance sheet policy and the ample-reserves regime; new data sources and methods; productivity and jobs, covering new general-purpose technologies; and inflation frameworks, asking whether current models explain prices. The aim is to put the years of high inflation behind the Fed and make it ready for its task and forward-looking. He added that reporting to Congress is an obligation that keeps the Fed accountable alongside its independence in conducting policy.

1. Slow growth and why it matters

Speaking at a Mansion House-style dinner, Bank of England Governor Andrew Bailey admitted that his February hope for calmer times was upset by the Middle East conflict: energy prices jumped, inflation has not yet returned to 2% although it otherwise would have, the economy is soft, and the return to target will simply take longer. He then stepped back to the long run. The UK has grown more slowly for about fifteen years, and was hit by a string of negative supply shocks such as Covid, the Ukraine war and Brexit. The sustainable speed limit, potential supply growth, fell from about 2.8% a year before the financial crisis (2.4 points from productivity, 0.4 from labour) to about 1.3% since (0.4 from productivity, 0.8 from labour). Income per head grew 2.0% a year between 1990 and the crisis but only 0.6% afterwards, so lifting growth must be a priority. Stable monetary and fiscal policy is the backdrop, and he believes the frameworks provide it, but lasting growth comes from the supply side: capital, technology, skills, trade, finance, competition, infrastructure and institutions.

2. Regulation framed by purpose

Focusing on regulation, he agreed that critics deserve a hearing, since well-designed rules can correct market failures, lower the cost of dealing, make it easier for newcomers to enter and encourage rivalry and innovation, and financial regulation lowers the odds and severity of crises, protecting the supply of finance. But the debate should not be an abstract argument about too much or too little: each rule should be defined by a positive purpose, designed to reach it quickly and effectively with minimal side effects, and judged on whether it does. Financial stability is a prerequisite for growth, yet not every rule is perfect, and simply arguing for less is unhelpfully reductive.

3. Bank capital

On capital, he went back to basics: banks are regulated to protect deposits, the main stock of money people hold, while still lending through the cycle; capital absorbs losses and backs the assured value of money. Capital providers must earn more than the loss they expect to bear, otherwise they will not supply it. UK bank returns sat below 10% for much of the post-crisis period, rose above it in 2023 and reached 15.4% this year, with price-to-book ratios near 1.7, signalling expected returns above the cost of capital. Regulators should not cap returns, but stability needs returns above the cost of capital. Last week's changes removed some anomalies, and the Bank is open to simplification that keeps the system healthy. He rejected a lump-of-capital view, where a fixed pool of capital means looser rules free more lending: capital is not fixed, healthy returns let banks retain earnings and build capital, and proportionate, effective regulation lowers its cost.

4. Payments and tokenisation

For payments, the two objectives are the singleness of money, meaning the same nominal value across all forms, and settlement finality, so that payments once made stay made. The Bank wants to modernise systems, improve resilience against fraud and cyber attacks and gain the benefits of programmable payments: conditional payments could cut late payments and fraud by moving checks from after the fact to before. The renewed RTGS system underpins this; a Digital Securities Sandbox approved its first live participant yesterday, paving the way for a UK digital gilt, DIGIT; work is under way with banks on tokenised deposits; proposed rules for systemic sterling stablecoins apply the same principles; and a Retail Payments Infrastructure Board published a consultation on 25 June, with feedback due by 11 September, ahead of a blueprint for an industry-owned delivery company. He also noted that atomic settlement could improve efficiency and cut risk in wholesale markets.

5. AI, growth and law

He argued that general-purpose technologies, from steam to electricity to the internet, drive long-run growth in long cycles with gaps between them, and that the last fifteen years, with falling productivity growth, look like such a gap before the next technology, most likely AI, which will support advances in diagnostics, research and robotics. Benefits take time to appear, as Solow's remark about computers showed, and the Governor himself is still experimenting. AI will raise big policy questions that should be tackled promptly and positively. One is resource allocation: if clean power for data centres is short, who decides whether medicine, drones, finance or entertainment get priority, and markets may not reflect the public interest. Another is law: agentic AI that buys or trades on our behalf can learn bad habits such as lying to please, and without a legal personality it is unclear whether the principal is liable for everything, which may force constraints that cut against AI's direction and test firms' governance.

6. Frontier AI and cyber risk

Frontier models' growing ability to find and exploit weaknesses in systems is a major threat to security and hence financial stability. He called for much stronger international coordination of testing before models are widely released, starting with public authorities, where the UK's AI Security Institute and National Cyber Security Centre are well placed, and then testing across critical infrastructure; the Bank is working with regulated firms on forums for patching. He also stressed the need for robust ability to recover from scratch, so-called bare metal recovery. His conclusion: growth comes from supply-side innovation, AI is the likeliest next contributor, regulation done well helps, and it should be approached positively by defining what to achieve, by when, and how, while questioning existing rules in that spirit.

1. A broader Eurogroup

After the 9 July meeting, Eurogroup President Kyriakos Pierrakakis said budgets, debt and fiscal rules remain core, but the economy is changing so fast that competitiveness, technology, AI, energy security and geopolitics form one reality, so the Eurogroup must evolve. The new twelve-month work programme has four priorities: fiscal coordination, the savings and investments union, Europe's competitiveness together with its economic security, and a stronger global, digital and strategic role for the euro, and it will widen to cover military funding, energy supply security and tech autonomy.

2. AI and digital finance

Ministers heard from Mistral's chief executive Arthur Mensch. AI can lift productivity and strengthen finance through better risk management and cyber defence, but the same capabilities create new systemic risks, which the ESRB and ECB supervisors highlighted for frontier models; Europe must mobilise capital so its AI champions can scale at home. A common statement on digital finance calls for speed, legal clarity and public-private cooperation, and he welcomed the European Parliament's vote on the digital euro.

3. Fiscal stance and the euro

On the fiscal stance, uncertainty is high given the Middle East, and defence, energy and public investment needs must be met without losing the credibility of the agreed fiscal framework. The ECB showed that the euro's international role is strengthening; stability remains the foundation, but competitiveness decides where Europe stands.

1. Innovation without trust

Speaking at the first AICB Nexus conference, which joined banking and bank-audit communities, Governor Abdul Rasheed Ghaffour said AI is reshaping finance, helping detect fraud, assess risk and serve customers, but that finance rests on trust, so innovation without trust is not progress. He set three priorities.

2. Purposeful and responsible innovation

First, purpose: over 70% of Malaysian financial providers have deployed at least one AI application, mostly for internal gains, and the next frontier is using AI on problems no institution can solve alone, such as scams and cyber threats, where BNM, police, banks and PayNet already share intelligence; institutions should compete where markets demand and collaborate where the public interest does. Second, responsibility: trust in AI is a governance challenge, raising questions of accountability when decisions are hard to explain, fairness as models keep learning, and control frameworks that lag capabilities. AI belongs on the board agenda with clear outcomes and a defined risk appetite, assurance functions must be able to explain and challenge outcomes, and accountability cannot be handed to software.

3. Progress for all and BNM's approach

Third, progress must reach everyone: invest in people, with upskilling and reskilling and the AICB's Future Skills Framework. BNM's stance rests on proportionality, parity and technology neutrality, with early engagement, clearer expectations and shared infrastructure; the Open Finance framework starts phased implementation from 2027, tokenisation moves into pilots, and the Financial Sector Blueprint 2027-2030 follows.

1. Praise for Côte d'Ivoire and the national plan

Speaking in Abidjan as a group of advisers on raising money for Côte d'Ivoire's 2026-2030 national plan was launched, African Development Bank President Sidi Ould Tah thanked the host country for housing the bank and praised President Ouattara's transformation of the economy: average growth above 6% over a decade, controlled inflation, fiscal consolidation, a better business climate and major infrastructure. The 2021-2025 plan delivered gains in infrastructure, access to electricity and water, agriculture and inclusive growth despite shocks. The new plan has six pillars covering peace, agriculture, private investment, people and jobs, infrastructure and climate resilience, and governance, with priorities of industrialisation, jobs for young people and women, and a green transition.

2. The bank's commitment

Guided by its four cornerstones and the New African Financial Architecture, the bank pledged to help mobilise resources across public projects, private initiatives and public-private partnerships, using lending, guarantees, private capital instruments and technical support.

1. AI as a lever for productivity

Opening a conference with the European Investment Bank, Bank of Italy Governor Fabio Panetta said AI has already entered production, services, research and daily life, with new agent models and portable devices lowering costs and speeding adoption. Broad and timely diffusion could revive Italian productivity, especially in manufacturing, where it can prevent equipment failures, cut waste, optimise energy and materials, speed design and improve quality, and also in medicine through faster diagnosis and new treatments.

2. Managing the transition and financing it

Because the pace of change is high, the transition must be prepared: invest in skills, support the most exposed workers and avoid concentrating benefits in a few firms, sectors or regions, in the spirit of calls by Pope Leo XIV and President Mattarella that AI serve people and the dignity of work. The investments it needs are largely intangible, such as research, software, data, skills and organisation, which are risky and slow to pay, so long-term lenders, venture funding and broader capital markets are essential. Italy and Europe have savings, research and firms but too rarely bring them together at the scale required.

1. Honouring Mundell

Opening a Rome workshop held with CEPR and LUISS in memory of the Nobel laureate Robert Mundell, the Governor of the Bank of Italy recalled that Mundell's work covered optimal currency areas, the global monetary system and its geopolitics. His 1961 analysis saw low labour mobility as Europe's main obstacle to a shared currency, while others stressed the lack of common fiscal stabilisation.

2. A political project

In a 1969 plan, Mundell argued that Europe's money should rest above all on political reasons. Panetta agreed: monetary union grew from the post-war drive for reconciliation that produced the Coal and Steel Community in 1951, and three decades after Mundell's plan the euro was born.

3. Two waves of crises

The 2008 financial crisis and the 2010-11 debt crisis split the area into core and periphery, with uncoordinated budgets leaving monetary policy alone until Draghi's pledge restored calm. The pandemic and energy shock, though larger, met a joint response through Next Generation EU and national support.

4. What remains to be done

Europe should revive growth with reforms and joint investment in research, energy, digital networks and AI; build a true savings and investments union with simpler rules and a common safe bond; and digitalise payments, including a digital euro, to protect monetary sovereignty, a risk Mundell already linked to the dollar. Quoting Monnet's idea that Europe is built through crises, he argued that such slow, crisis-led progress no longer fits a fast-changing world: Europe must act before crises force it to, and the euro stands for unity, sovereignty and shared values.

1. The Annual Economic Report

Presenting the BIS flagship report at the yearly shareholders' meeting of the BIS in Basel, its General Manager framed the past year as a mix of progress, from rapid advances in artificial intelligence, and peril, from renewed inflation, financial fragilities linked partly to AI enthusiasm and heavy public debt. A second chapter studies how high debt and changing bond markets complicate central banking, and a third, presented by a colleague, argues that new digital forms of money only work if built on proven institutional foundations. The common message is that each policy area gains room to act when the others are disciplined.

2. Why the world absorbed the tariffs

A year earlier, many expected US tariffs to hit growth and trade hard. Three things limited the damage. Effective US tariff rates ended close to 10% on average rather than the more than 25% announced, thanks to deals and exemptions, which explains about a third of the later upgrades to 2025 growth. Firms adapted by shipping early, rerouting goods and absorbing part of the cost in their margins. And enthusiasm for AI triggered a wave of spending on data centres and related equipment, lifting US investment and Asian exports and keeping financial conditions easy despite uncertainty. By the end of 2025, world growth was almost back to its pre-tariff forecast.

3. A historic oil shock

The year began strongly until the Middle East conflict. Shutting the Hormuz strait removed a larger share of world oil supply than the crises of the 1970s, and growth forecasts were cut across countries. Markets stayed calm, betting on a quick settlement, and signs of a lasting reopening brought relief. He warned against complacency: production halted across the region will take time to restart, damaged facilities and shipping routes need repair, and rebuilding depleted oil stocks could keep demand and prices high.

4. Four pressure points

The report identifies four sources of strain. First, inflation: global inflation has risen by about one point since the conflict began, and higher prices for inputs such as plastics and fertilisers can keep pushing consumer prices up after oil calms down, while recent memories of high inflation could unsettle expectations faster than before; more slack in labour markets and higher starting interest rates than in 2021 help. Second, AI: task-level studies show big efficiency gains but economy-wide effects are still small, and sectors more exposed to AI in the United States already show weaker job growth. If AI lifts productivity durably, the neutral interest rate rises; if automation squeezes wages and spending, a shortage of demand could reverse that, with matching consequences for inflation if policy misjudges it. Investment may also overshoot as firms race for market share, and past technology booms, from canals and railways to the dotcom era, often ended abruptly. Third, financial vulnerabilities: risk premiums are compressed, households hold more shares than in the past, AI firms and their suppliers increasingly borrow, some financing is circular and opaque, and private credit is growing, so a disappointment or a rate rise could tighten conditions sharply. Fourth, public finances: debt in many economies is near its highest since 1945, conflicts add spending demands, and interest costs and refinancing needs are rising.

5. Debt and new bond market players

Debt grew through repeated crises, but also because governments loosen policy strongly in bad times and tighten too little in good times, and since 2008 they have reacted even less to rising debt. Without consolidation, ageing, infrastructure and defence costs will push debt higher still, and it would be unwise to test the limits. Bond markets have also changed: pension funds and insurers remain steady buyers, but leveraged hedge funds financed by short-term repo, often with little or no margin, now play a much larger role in US and European government bonds. Liquidity that looks abundant can disappear under stress. The old link between weak sovereigns and weak banks has faded as banks are stronger, but turmoil can now spread more quickly via repo funding, from one country to another and from hedge funds to the banks tied to them. BIS estimates suggest that the chance of severe Treasury market stress is roughly ten times higher when debt is in its top tenth than in its bottom tenth, and also much higher when non-banks hold a large share of government bonds.

6. Three challenges for central banks

First, when investors reprice fiscal risk, bond yields jump and currencies fall; activity weakens, and prices first rise through expectations and import costs before falling later, a pattern long familiar in emerging markets that may spread to advanced ones. Second, calibrating policy gets harder: with high debt, rate rises hurt output more through debt costs, wider spreads, bondholder losses and forced deleveraging, but may cut inflation less because interest income supports spending and expectations react less; euro area evidence shows smaller price declines after tightening in high-debt countries. Third, market dysfunction can force central banks to intervene, yet repeated rescues encourage leverage, blur the policy stance, weaken fiscal discipline and raise doubts about independence.

7. What policymakers should do

Central banks should watch for second-round effects, keep expectations anchored and choose strategies that hold up across many AI scenarios, putting medium-term price stability first even when this burdens public finances, since credibility lowers long-term rates. Independence is vital but not sufficient. Governments should consolidate in good times within credible medium-term frameworks, protect growth-enhancing investment and pursue reforms that spread AI's gains. Regulators should apply equal rules to equal risks whatever the type of institution, curb leverage, liquidity mismatches and fragile funding, and keep up with AI and cyber risks. Liquidity backstops should be temporary, targeted and reversible, like the Bank of England's 2022 intervention; lending directly to non-banks could replace asset purchases if well regulated. Acting now costs less than acting later.

1. A new Hungarian direction

After meeting Hungary's new Prime Minister Magyar and Finance Minister Kármán in Budapest, Eurogroup President Kyriakos Pierrakakis welcomed a government only weeks old for words and actions committing Hungary to Europe, recalling that Hungary's accession treaty was signed in Athens in 2003. He said Hungary, he said, is shifting from the sidelines to the centre of European decisions, and talks covered competitiveness, energy security, deeper integration of financial markets and investment.

2. The road to the euro

He welcomed Hungary's ambition to join the euro area eventually and its commitment to meeting the conditions: a demanding but transformative journey that needs economic criteria met and institutional credibility, and offers stability and strategic security, as the recent entries of Bulgaria and Croatia show. In answer to a question, he listed the convergence criteria (interest rates, exchange rate, inflation and public finances, plus two years in the exchange-rate mechanism), said the Eurogroup's help is know-how and a symbolic signal of support, declined to comment on timing, and stressed that the decision is sovereign.

3. Recovery funds and reform

Unfreezing Recovery and Resilience Facility money is a political priority for Hungary: the national plan went in a week ago and is due for Council approval on 10 July. He praised steps to strengthen anti-corruption rules, public procurement transparency and the role of social partners, said reforms make a country attractive to investors, and supported delivery of the agreed milestones so that full disbursement can follow once all conditions are met.

1. Gdańsk and Ukraine's European path

Speaking in Gdańsk at the Ukraine Recovery Conference, Commission President Ursula von der Leyen praised the city's solidarity, from hosting 5 000 families to teaching in Ukrainian, and drew a parallel between Gdańsk's role in Poland's freedom and Ukraine's courage today. Ukraine's forces have shifted battlefield momentum and its drone production now matches or exceeds Russia's. Accession talks opened this month with the first cluster, on rule of law, democratic institutions and public administration; accession remains merit-based, and Ukraine is already joining roaming and payment schemes, so that investing in Ukraine means investing in a single market worth about 20 trillion euros.

2. Money and investment

The EU and member states have provided over 200 billion euros in support, and a new support loan adds 90 billion over two years; the first tranche of 3.2 billion in macro-financial aid is being paid today, and payments start soon from 6 billion for drone production. A new flagship fund, billed as the biggest equity vehicle for Ukraine's reconstruction, is ready, backed by the EU, Poland, France, Germany and Italy, able to mobilise up to half a billion this year and 1 billion over time, with public capital taking first losses to draw private investors.

3. A security partnership

Ukraine is also a security provider, whose battlefield experience and innovative defence firms, from interceptor drones to jamming systems, benefit Europe; examples include Ukrainian-designed drones built in Germany and missile fuel soon made in Denmark. The mix of Ukrainian ingenuity and European industrial scale is the recipe, and the lesson of Gdańsk is that solidarity leads to freedom.

1. Central bank money in the digital age

Speaking by video to a European payments conference, Bundesbank President Joachim Nagel argued that the digital euro answers three developments. First, payments are digitalising: cash fell from almost half to two fifths of point-of-sale payment value between 2019 and 2024, online purchases doubled in value share to 36%, and shops not accepting cash tripled to 12%. The digital euro would complement cash, keeping central bank money, the anchor of the monetary system, available to everyone in digital form as legal tender. The Eurosystem would provide basic public infrastructure and common standards while banks and payment firms remain the interface with customers and build services on top, such as conditional payments like an automatic insurance payout. To protect financial stability and bank lending, there will be holding limits and no interest, with larger payments covered by a waterfall from a linked bank account; it is a means of payment, not an investment.

2. Sovereignty and privacy

Second, payments are critical infrastructure and Europe depends on non-European providers: more than two thirds of euro-area card payments run on non-European systems, and 13 of 21 euro countries lack a national solution. Convenience must not come at the expense of the ability to act in a crisis. The digital euro would be an autonomous European base infrastructure, not isolation. Privacy is a design requirement: the Eurosystem sees only pseudonymised holdings and cannot build individual profiles, and the offline mode, phone to phone, gives privacy almost like cash.

3. Europe's place in digital finance

Third, the euro's role, as second international currency with inflation averaging about 2% since launch, depends on modern infrastructure. The digital euro is one block in a broader payments strategy, which also includes the wholesale Pontes project for settlement in central bank money on distributed ledgers, and Europe should help shape standards and rules for tokenised markets and stablecoins. He stressed that central bank money and private solutions have long coexisted and complement each other, that the digital euro must not be built against the financial sector, and that its design is meant to fit the existing financial system. He ended with an appeal to turn the digital euro into a shared undertaking with banks and payment firms, whose critical objections will help refine it.

1. Imbalances and capital flows

Speaking in Paris, Bank of Canada Governor Tiff Macklem welcomed the US-Iran agreement and the easing of energy prices, then turned to the widening of global imbalances discussed by G7 finance chiefs. Trade deficits and surpluses are normal, but when too large and one-sided for too long they spill over through trade, exchange rates and asset prices, and strain relations between countries. China's reliance on investment and exports has created overcapacity and deflationary hyper-competition and sparked tariffs. His message: look at imbalances through capital flows and international investment, and avoid overextending the monetary and financial system, adapting before a crisis forces change.

2. Lessons from history

The gold standard forced adjustment through wages and prices and could not survive the strains of war; interwar tariffs and retaliation deepened the 1930s collapse; Bretton Woods ended in 1971 when domestic priorities overwhelmed the external anchor. The lessons are that excessive imbalances create tension, that when domestic goals override international rules the rules give way, and that shifting costs onto others with tariffs or devaluation fails. The 2008-09 crisis showed how fast stress travels through interlinked finance. Adjustment delayed eventually becomes adjustment imposed.

3. Today's landscape

Imbalances reflect domestic ones: Chinese and European savings exceed investment, so capital flows to the US, whose strong consumption and fiscal deficits leave a historically large negative net investment position. The dollar's reserve role may have let imbalances persist and one-way flows fuel bubbles, possibly now in the AI boom. Meanwhile risk has migrated from better-regulated banks to non-bank intermediaries: hedge funds now buy much sovereign debt using leverage and short-term funding, and dollar stablecoins let flows reverse faster, beyond authorities' sight. The two risks are misallocated inflows stretching valuations, and a sudden reversal.

4. Three priorities

Reducing imbalances means China consuming more, the US saving more and Europe investing more, ideally in a coordinated way, with signs of progress in China's plan, Europe's integration and US deficit ambitions. He urged openness, with Canada and the EU deepening trade ties; investability, creating more safe assets, fast payments infrastructure and attractive investment outside the US through strong institutions, open capital accounts and removal of barriers such as Canada's interprovincial ones; and transparency, with better data on non-banks, foreign exchange and cross-border flows, stress tests reflecting today's speed, and closer work by the IMF, FSB and BIS. Support for openness weakens when imbalances grow or openness is seen as a weakness, but history shows protectionism costs efficiency and fragments markets. Markets cannot price what they cannot see, and while firms manage their own risks, systemic risks can build beyond any single firm's view. Resilience, he concluded, is a choice that does not happen by good intentions alone but by reinforcing systems so they do not break under stress, with responsibility shared between public and private, domestic and international actors.

1. A museum to explain the central bank

At the opening of the renovated Reserve Bank campus and its new museum, in the presence of President Ramaphosa, Governor Lesetja Kganyago said the aim is to open the institution to the public as it nears its 105th anniversary. Central banks can seem distant, and trust grows when people understand how institutions work, so the museum should explain the bank's role and dispel myths: that prisoners counted the money, that notes are printed abroad, that gold bars are hidden in the building. It is also a keeper of memory, with exhibits tracing the region's economic history from barter through colonialism and apartheid to democracy, objects dating back 75 000 years, three centuries of coins and a working 134-year-old minting press. School visits and the monetary policy schools challenge aim to inspire future central bankers, and a game lets visitors set the rate.

2. Art, location and renovation

The museum shows the bank's art collection of more than 1 200 works to the public for the first time, in rotating shows including one on everyday workers and one on women artists. He thanked staff and partner museums. The bank chose to stay in Tshwane, within sight of the Union Buildings and close to the Treasury, as a practical and symbolic commitment to renewing the inner city. It is the first major renovation of the head office in over forty years.

3. Commemorative coins

He announced a series of circulating commemorative R2 coins on education: one for the 1976 youth uprising, one for the 125th anniversary of Charlotte Maxeke's degree, due in August, and one for the thirtieth anniversary of the Constitution, due in December with an R5 coin combining the three themes. Through the museum the bank hopes to strengthen accountability so that even unpopular decisions are debated within its constitutional mandate.

1. Football and growth

Opening the Frankfurt Euro Finance Summit, the Bundesbank President joked that in the four years Germany won the World Cup, growth averaged about 4% against 3% normally, while admitting there is no causal link. A year after saying Germany could be a success story, he saw some progress but an even greater need for reforms.

2. Energy shock and rates

The trade dispute with Washington is unresolved, and the closing of the Hormuz shipping route has pushed energy costs up, with lasting effects on world trade in fuel. Euro area inflation climbed from slightly below 2% in January to 3.2% in May, with other prices now rising too; public measures to cut energy bills lowered it by about 0.4 point and will fade. Even after a reopening, oil supply needs months to recover. Market-based and household inflation expectations have risen, and staff projections show 3.0% this year and a return to 2% only in 2028. The ECB therefore raised rates by a quarter point, a move fully anticipated, leaving policy roughly neutral, with all options open for July.

3. Germany's outlook

The Bundesbank expects calendar-adjusted growth of 0.5% in 2026, 0.8% in 2027 and 1.4% in 2028, helped by cheaper energy, a firmer world economy and above all fiscal stimulus worth about 1.3 points of GDP in total, mainly defence and infrastructure.

4. Priority to investment

He called for giving investment the right of way: using the infrastructure and climate fund for truly additional projects, shortening planning and procurement through simpler rules and digital administration, and making Germany an attractive place to innovate. He singled out venture capital: deals equal 0.16% of GDP, about half the French ratio and a fraction of British and American levels. Only 5% of global venture funds are raised in the EU, so growing firms rely on foreign money and sometimes relocate. Cautious pension funds and insurers and thin exit markets explain the gap. National steps help, but Europe needs a single capital market, and a joint paper by the six largest EU finance ministers is an encouraging sign. Quoting a Dortmund football legend, he concluded that results are decided on the pitch: analyses must now turn into action, and if investment keeps priority, the German engine will speed up again, World Cup or not.

1. Simplifying reporting

Speaking at the asset managers' association meeting in Brussels, ESMA Chair Verena Ross set four priorities: simpler reporting, digital innovation, market resilience and retail participation. On reporting, ESMA's May reports found more than 100 European and national obligations on funds and managers, so it proposes a common single template in a modular system, with managers reporting once and authorities, including the ECB and central banks, sharing and reusing the data through a central hub while national authorities still collect it. Implementation starts with AIFMD and UCITS reporting, with draft technical standards consulted by year-end and finalised in the first half of 2027. For transaction reporting, ESMA has short-term relief ideas such as revising two-sided reporting duties and an end-state integrated model across EMIR, MiFIR and SFTR, being tested through cost-benefit analysis, with attention to timelines to avoid repeated system rebuilds.

2. Tokenisation of funds

Tokenisation is often better seen as a shift in the plumbing surrounding funds than a break with the fund model; it may automate functions, speed subscriptions and redemptions, improve registers and cut reconciliations, and give investors accessibility and longer trading hours. Tokenised Treasury and money-market products total several billion dollars, small but growing. ESMA takes an evidence-based view: key questions are whether the ledger is the official register, whether transfers are final on-chain, and whether investors hold units directly, and it is working with national authorities on real cases and possible regulatory barriers. Investors must understand their rights and risks, including cyber and operational dependencies, and legal certainty and interoperability are needed so that national differences in registers, title, custody, settlement finality and insolvency do not recreate fragmentation.

3. Market resilience and vulnerabilities

The Middle East war added to tensions, bringing signs of stagflation, higher bond yields and tighter conditions, with corporate credit risk and debt sustainability concerns re-emerging. Markets and infrastructure proved resilient, including orderly clearing of energy contracts despite sharp margin calls, but valuations in some segments are stretched and markets seem optimistic about the war's duration, while performance is concentrated in technology. In an AI-driven correction, EU equity funds would be hit hard because 45% of their assets are in US equities, and tech is a third of the S&P 500 against 18% of the Euro Stoxx 50. Other watch points: hedge-fund leverage and its role in government bond turmoil, fund liquidity tools now reported systematically, and private credit of about 0.1 trillion euros, opaque, illiquid and increasingly connected to banks and insurers.

4. Retail investors

The savings and investments union puts ordinary investors at the centre, but the investor journey feels burdensome, information is complex, costs unclear and trust uneven. The Retail Investment Strategy should refocus rules on outcomes: valuable products, clear disclosures and advice aligned with investors' interests. ESMA will balance simplification with safeguards, especially disclosures and suitability, adapting information to digital channels; for the PRIIPs key document it expects changes to a product-at-a-glance section and performance, replacing scenarios with past performance for funds, and simpler cost calculations, with consumer testing. Rules alone are not enough: trust, fair costs and financial literacy matter, and success is measured by whether markets work for the people they serve.

1. Strong growth, rising inflation

Marking the central bank's 76th year, the Governor of Korea's central bank, in office for two months, thanked his predecessors and staff and told them that AI-driven chip exports lifted first-quarter growth to 1.8% on the quarter and nominal growth to 10.5%, with real incomes rising near double digits. Growth should stay solid as incomes and investment support domestic demand, though it relies heavily on IT. Inflation reached about 3% in May and core inflation the mid-2% range, while living costs rise faster than the headline index, risking higher household expectations; inflation should stay above target for some time.

2. Financial risks and the won

Seoul home prices, deposits and rents are climbing, borrowing to buy shares has jumped and household loans grew sharply in May. The won stays around 1 500 per dollar as foreigners sell Korean shares, although the current account surplus may support it.

3. Policy direction

With little trade-off between objectives, the bank should focus on prices and lift its policy rate without waiting until it is late, which also protects poorer households; fiscal policy is better placed to help indebted borrowers. Longer-term tasks include household debt, reducing the concentration in Seoul, internationalising the won with 24-hour trading and offshore settlement, using strong public and corporate finances to invest, and studying demographic effects on growth and the neutral rate. He promised open debate and better internal management, urging preparation while times are good, in the spirit of repairing the roof while the sun shines. He added that the current boom owes much to a favourable external environment and should not breed complacency, and that the best decisions come from departments sharing information and working together.

1. Present challenges

After the 11 June Eurogroup meeting, President Kyriakos Pierrakakis said ministers looked at both urgent problems and the choices that decide how competitive Europe will be. The Middle East crisis is already felt, energy markets are still strained and the dangers for growth and prices need close watching. The Commission and the ECB presented assessments, and ministers took stock of national fiscal plans: uncertainty has a cost, so fiscal coordination, stability, credibility and consistency matter even more. IMF Managing Director Kristalina Georgieva joined the annual exchange on euro area policies and broadly shares the European assessment.

2. Energy, technology and financing

Energy supply, cost competitiveness, the climate transition and industrial strategy form a single problem, so Europe needs a strategy that cuts both costs and dependencies, through better interconnections, network investment and domestic sources. On technology, Europe has universities, research and talent; its only deficit is scale, because it often fails to turn innovations into global champions. Technological sovereignty means having the capabilities, skills and industrial base to make its own decisions, not isolation. All of this is financed by channelling European savings into productive investment through the savings and investments union. He welcomed new colleagues from Latvia and Slovenia and concluded that Europe must manage today's crisis and prepare for tomorrow at once.

1. Riga and the Baltic lesson

Opening the EBRD's 2026 annual meeting at the Dailes Theatre in Riga, its President praised Latvia, Estonia and Lithuania as standout examples of the move to market economies and EU membership, with lively start-ups and heavy use of digital finance. Long dependent on Russian gas and power, the three states joined the EU electricity grid after the invasion of Ukraine and invested in renewables, turning a weakness into resilience.

2. A turbulent world

A new shock that began in energy now disrupts trade, lifts commodity prices, threatens food supply, pushes up inflation and interest rates and shrinks fiscal room, on top of the arrival of artificial intelligence. She described the world as moving from volatile to turbulent and set out three challenges for the bank.

3. Responding to conflict

Multilateral lenders step up when others retreat. In Iraq, Jordan, Lebanon, the West Bank and Gaza and nearby economies, the bank will provide liquidity to private and state firms, stabilise finance and prepare recovery. Ukraine remains central: the EBRD is its largest institutional investor, with €10 billion invested since 2022, close to 50 000 firms supported and over 22 million people reached through energy and infrastructure projects, and it intends to lead reconstruction.

4. Defending cooperation

On her seventh wartime visit to Ukraine she saw the Chornobyl shelter, built through the largest joint nuclear safety effort the bank ever led, which now needs repairs after a Russian drone strike. With aid falling and sovereign debt rising, partnering with private investors matters more; the bank's first large risk transfer lets pension funds and insurers share its exposures, and revised procurement rules address concerns over supply chains, cyber risk and fair competition.

5. Keeping the long view

Turbulence also brings openings: the Middle Corridor linking Asia and Europe through Central Asia and the Caucasus, supply diversification that helps countries climb value chains, and abundant sun and wind. The five-year plan approved in London now guides green investment, human capital and gender equality, private capital mobilisation and digitalisation. The bank has begun investing in Iraq and in five African members, from Senegal and Côte d'Ivoire to Nigeria, Benin and Kenya, while the bank watches its budget and efficiency.

1. A pressured economy and the return of industrial policy

Opening the OECD's 2026 ministerial council on getting industrial policy right, Secretary-General Mathias Cormann said the day's Economic Outlook shows global growth falling and inflation rising because the Middle East conflict disrupted energy and commodities, with fertiliser prices up and supply chains tested again, on top of low productivity growth, a fraying trading order, inequality, ageing and the investment needs of digital and climate transitions. Industrial policy has returned strongly, so the issue is how to act wisely, since it may boost growth, innovation and resilience, yet it may also warp markets, displace private capital, strain budgets and trigger costly trade disputes. Good policy works with markets and open, rules-based trade.

2. Imbalances and subsidies

Widening global imbalances need coordinated adjustment: deficit economies need to lift saving and cut spending, while surplus economies need to raise consumption and curb exports, and they should move from distorting subsidies to market-based approaches. The OECD's new MAGIC database tracks firm-level industrial subsidies in 15 sectors and 525 companies: support is widespread, mostly modest relative to revenue but significant for profit margins, and Chinese firms get substantially more, mainly through below-market borrowing from state-controlled banks, which has contributed to imbalances and strong positions in critical supply chains, a systemic risk.

3. Good policy and a second term

Good industrial policy starts with productivity: less red tape, skills, research, infrastructure and the digital and energy transitions. It also needs partners, because supply chains, AI, critical minerals and clean energy cannot be secured alone, while preserving developing economies' access to open markets. He urged pragmatism and compromise and, marking the start of his second term, listed priorities: productivity, fairer and more resilient trade, AI governance, climate best practice, enlargement and modernisation, calling the issue a trial of the open, market-driven model's ability to win out.

1. The Middle East oil shock

Addressing a Tokyo business gathering, Bank of Japan Governor Kazuo Ueda said tension in the Middle East since late February has pushed crude oil sharply higher, drawing attention to inflation worldwide and making it more important to read current conditions correctly before setting policy; he planned to set out the bank's view on activity and prices and then its policy thinking, including responses to supply shocks like this one. The rise is smaller than in the first 1970s oil crisis but comparable with the other big surges, including the mid-2000s and the commodity spike that followed the Ukraine invasion. For an importing economy it worsens the terms of trade: Japan gets over 90% of its crude from the Middle East, and imports of mineral fuels equal about 3% of GDP, so more income flows abroad, squeezing corporate profits and household real incomes.

2. Faster pass-through and the baseline outlook

Crude is a raw material across industries, so higher prices spread: first from petroleum products to intermediate goods such as resins and fibres, within months to plastics, power charges and logistics, then in roughly twelve months to final goods and services including cars, construction, hotels and restaurants. This time passage is likely faster and wider than in 2022, because the deflationary mindset has gone, firms set wages and prices more actively, and changes to trade practices, electricity pricing formulas and a law against late payments to subcontractors have altered the environment. In the baseline scenario growth slows temporarily in fiscal 2026 but continues, supported by high corporate profits, government measures and easy financial conditions, then picks up from 2027; consumer inflation rises sharply in 2026, and underlying inflation reaches a level broadly consistent with the 2% target between late fiscal 2026 and fiscal 2027, assuming oil follows futures lower and no large supply-chain disruption occurs. Risks: prolonged turmoil would lower growth and raise inflation, severe supply-chain disruption would slow the economy sharply and skew price risks further up, while a quick ceasefire would do the opposite.

3. How resilient is the economy?

The first point to watch is whether the economy avoids serious deterioration. Corporate profits are at historic highs, a buffer for wages and investment; global AI demand supports shipments to America and Asia and output of production machinery and electronic parts, even though total exports and production are flat; releases of petroleum reserves and new supply sources for raw materials help, and Ueda calls these efforts to ease constraints crucial to avoid the severe scenario. Households have grown cautious since March, but consumption, including credit card spending, has held up, helped by stabilising food prices, wage rises and government support for energy bills. The spring wage round gave about 5% increases even at smaller firms, the third year in a row. The size of any slowdown depends on the course of the conflict, but profits, wages and supply efforts can limit downside risks.

4. Price pressure and expectations

The second point is how oil-driven pressure turns into broader prices and underlying inflation. Consumer inflation excluding fresh food has recently been below 2% but should rise; the median of the nine board members' forecasts is 2.8% for this fiscal year, with inflation above 3% for a time. Corporate prices are already moving: producer prices rose 4.9% in April, the fastest in nearly three years, upstream in petroleum, coal and chemicals and now midstream in plastics. Expectations are rising: the Tankan shows firms lifting price forecasts, their inflation outlook has risen, and market-based long-term expectations from inflation-linked bonds are above 2%. Weak activity could push underlying inflation down, but the data so far suggest upside price risks are larger and will appear sooner, so the bank watches whether actual prices lift expectations and push underlying inflation above 2%.

5. Monetary policy and supply shocks

Since ending large-scale easing in March 2024 the bank has raised its rate to 0.75%, but real interest rates remain negative, especially at short and medium maturities. Funding costs remain low relative to profitability, bank lending and corporate bond issuance have grown strongly, lenders' attitudes remain accommodative, and most bankruptcies stem from rising prices and labour shortages rather than interest burdens; firms cite labour shortages and material costs as the main brake on investment, so accommodative conditions have supported activity. On supply shocks, the basic principle is that policy should not respond to temporary inflation from such a shock, but if it spreads to many items and raises expectations, a response is needed, as Europe and the US learned in 2022-23. Spillovers are likelier when shocks are large and persistent, when firms' price-setting is active and when financial conditions are easy, and all three apply now: the shock is comparable with past big ones, wages and prices rise in interaction again, and real rates are low, unlike the neutral policy rates in the US and Europe. When growth risks and price risks both rise, there is no single answer, but the bank should be more vigilant about a significant upward inflation deviation, since a delay could force a large later hike that burdens the economy and markets, and a perception of inaction can lift long-term yields, which already reflect higher inflation expectations.

6. Future policy, bond purchases and conclusion

If the baseline looks more likely, the bank will keep raising its rate at an appropriate pace; even if the situation is unclear, should price risks outweigh growth risks it must discuss thoroughly the pros and cons of a hike. On government bond purchases, monthly buying is being cut by about 200 billion yen each quarter through March 2027 to 2.1 trillion yen, a third of the pre-reduction level, with holdings down about 16-17%, and flexibility to step in if yields jump. An interim assessment is due at the June meeting. Market functioning has improved: cash bond volumes are rising and the dip in 7-10 year yields has largely vanished. But investors are still absorbing more bonds, which takes time, and market participants, met in late May with minutes released, showed few calls to change the plan to March 2027 but various views on purchases from April 2027, and Ueda said further reductions will be taken up at the next meeting, weighing market functioning against the stability of the bond market. He also reminded the audience that the government is securing alternative supplies and easing household energy costs, and that the bank's job is price stability, which protects both activity and financial markets. Ueda concluded that Japan, long deflationary, faces a supply shock in an inflationary period for the first time in decades, so the remedies differ; with the government's supply and household support, the bank's policy, firms and lenders, Japan can withstand the shock.

1. Brazzaville and a listening tour

Opening the African Development Bank Group's 2026 annual meetings in Brazzaville, its President thanked the Congolese head of state, praised his decision to lift visa requirements for all Africans from 2027 and highlighted the Congo Basin as one of the planet's major carbon sinks. A year after his election, he said he had spent his first months consulting governments, staff, investors and young entrepreneurs, and heard one message: Africa's ambitions now exceed the financial system meant to support them.

2. Three paradoxes

Africa has about 18% of the world's people, over 30% of its mineral reserves and over 60% of unused farmland, yet only about 3% of world trade and 3-4% of output. It needs more than $400 billion a year for structural change while holding over $4 trillion in domestic savings. Infrastructure alone requires $130-170 billion a year, with a gap of $68-108 billion, despite major openings in energy, logistics, digital networks, food and critical minerals. The issue is converting assets into investment, jobs and influence.

3. A changed world

The pandemic, wars, imported inflation, falling aid and higher interest rates have strained African economies, but the continent has become central to trade routes, energy and minerals. IMF projections show African growth comparable to Asia's, digital tools and the continental free trade area are widening markets, and young entrepreneurs use AI in farming, health and education. Their innovations still struggle to scale because finance has not kept pace.

4. A new financial architecture

Fragmentation means African savings rarely fund African projects; investors buy instruments, not projects. The NAFAD framework backed by the Abidjan Consensus aims to align existing institutions to mobilise savings, reduce perceived risk and deepen capital markets, without adding bureaucracy. He insisted that financial sovereignty is built through stronger markets and coordination rather than declared, and that the bank, created for an era of sovereign loans and aid, must adapt to a world shaped by private capital, technology and regional integration. The bank's strategy follows four priorities: cheaper and larger capital flows, stronger connected financial systems, turning a young population into an economic advantage, especially for youth and women, and building infrastructure and value chains so Africa stops exporting raw materials and importing prosperity.

5. From lender to catalyst

The African Development Fund's 17th replenishment raised a record $11 billion, up 23%, with 24 African countries contributing about $183 million, twenty for the first time. Only one project in ten reaches financial close, so guarantees and risk sharing are key; the bank became the largest shareholder of the regional trade and investment insurance agency ATIDI with 14%. Twelve to fifteen million young people join the labour market each year, and small firms in the missing middle need patient finance, energy and skills. All African financial institutions must work together.

6. Reforming the bank

Seven reform pillars should make the bank faster and simpler, moving from single projects to integrated platforms, and a Portuguese-speaking service hub will be created. He argued that Africa's risks are overestimated and its value underestimated, joking that Africans recycled and shared taxis long before these became fashionable business models.

1. A resilient year, then a new shock

In his concluding remarks on the Bank of Italy's annual report for 2025, the Governor noted that world output grew 3.4% in 2025, half a point above forecasts, despite wars and US tariffs. The United States grew over 2%, pushed by AI investment in data centres and by stock market gains that lifted consumption. China grew 5% by cutting export prices and finding new markets, a strategy that fails to address domestic deflation and invites protectionism. Easier monetary policy also helped. Markets showed signs of excess: high valuations, thin risk premiums, a search for yield in opaque segments, and rallies in gold, bitcoin and private credit, some of which reversed in 2025-26. The Gulf conflict then changed everything. Hormuz normally carries a fifth of global oil and LNG; its blockade lifted oil prices everywhere and gas prices in Europe and Asia but not in the United States. Fertiliser prices jumped, which will raise food prices early next year and could push tens of millions into extreme poverty. Inflation and short-term expectations are rising, and markets expect central banks to react, lifting rates at all maturities.

2. A fragile outlook

Energy costs cut household incomes and company margins, higher yields tighten financing and public debt limits support. Assuming a quick end to the conflict, the IMF expects world growth of 3.1% in 2026 and inflation of 4.4%; a longer war would be worse. Damage to energy infrastructure, high shipping and insurance costs and persistent uncertainty will weigh on spending. He stressed that today's risks are more numerous, more interconnected and harder to govern than before. Investors first fled to safety, lifting the dollar and pulling money from emerging markets; shares have since recovered, perhaps underestimating the damage, while rising long-term yields signal continuing tension. With heavy public debt and growing non-bank fragilities, small shocks can spread widely.

3. Trade and fragmentation

World trade grew 5% in 2025 as flows were rerouted and tariffs ended lower than announced; roughly half of the extra goods traffic was linked to AI equipment. Tariffs did not shrink the US goods deficit, as about 90% of their cost fell on American consumers and firms, while China's surpluses grew. The IMF warns that lasting barriers could slow trade growth below 3% in 2026. Governments rightly seek economic security, but indiscriminate fragmentation would raise costs, weaken supply chains and undermine cooperation, harming the citizens it aims to protect. The post-war rules-based system governed tensions for eighty years; its erosion through uneven rule enforcement, distorting industrial policies, imbalances and unequal gains must be addressed, and ties with countries that respect shared rules strengthened.

4. Global imbalances

Current account imbalances in 2025 reached their widest since the 2008 crisis. About two-thirds of all deficits are American, the result of large public deficits and low household saving; roughly a third of all surpluses are Chinese, since its model holds back consumption and favours exports; Europe's surplus reflects its difficulty in turning savings into innovative investment. America's net external debt equals about 90% of GDP. Large surpluses push global real rates down, encouraging risk-taking and borrowing, while deficit countries face sudden jumps in risk premiums. The energy shock may narrow imbalances temporarily but not their causes. A lasting fix requires a smaller US budget deficit, stronger Chinese consumption with less distorting industrial policy and more currency flexibility, and much more investment and a fully integrated single market in Europe; coordinated, the IMF estimates these steps would lift world GDP by 1%. Unmanaged imbalances tend to end in trade conflict, as before the 1985 Plaza Accord, or in financial crises, as before 2008.

5. Artificial intelligence and work

AI is spreading faster than earlier technologies. Five large US firms control about three-quarters of global computing power, most frontier models are American, China is catching up and Europe lags; yet the biggest gains usually go to those who adopt a technology, not those who invent it. AI is improving factory design, maintenance and logistics and speeding up drug discovery. For the first time it can perform highly cognitive tasks, but past innovations also created new occupations: six in ten US workers today do jobs that did not exist eighty years ago, and cheaper products can expand demand. The transition will hurt workers unable to switch and may widen inequality, so adoption by small firms, skills training and protection for exposed workers are essential. Work itself will change: in some jobs AI will assist people and free them for higher-value tasks, in others the human role will centre on interpreting results, exercising judgement and ensuring reliability, the parts automation cannot replace.

6. Europe: slower growth and the policy response

Euro area growth was 1.4% in 2025, about 1% excluding Ireland, held back in Germany and Italy by manufacturing hit by Chinese competition, while households kept saving. Inflation returned to 2%, allowing a 100 basis point cut in rates. Since March, confidence has dropped to 2022 levels, services weakened and banks tightened lending. ECB March projections showed growth of 0.9% in 2026 and inflation of 2.6% in the baseline, but a prolonged conflict could subtract a point of growth over two years and push inflation above 6%. Conditions are better than in 2021-22: rates are near neutral, demand is weaker, expectations are anchored and wages calm. Still, firms plan price rises and consumers expect more inflation, so the stance may need recalibrating to prevent a wage-price spiral; the June decision would depend on new projections, with no predetermined path. Acting in a timely and measured way, he said, protects household purchasing power, business confidence and the basis for durable growth, and the calibration would depend on how far energy costs filter into the wider basket and how strongly they depress spending and investment.

7. European policy gaps

Europe enters this unstable period with unresolved weaknesses that limit its growth and global weight. It faces dependence in defence, energy and technology and an incomplete single market in finance, energy and telecoms. Initiatives under the Competitiveness Compass, such as the Industrial Accelerator Act, a common European company form and the grids package, could help, but fewer than half of the planned proposals have been presented and under a quarter adopted. AI plans are delayed too, although the EU has rules, a strategy, investment programmes, rich industrial data and strong research; no call for tenders for AI gigafactories had been published by mid-May. Long negotiations, diluted compromises, uneven national application and unspent resources must be overcome, as credibility depends on delivery. Europe's savings flow abroad because capital markets remain national; beyond the savings and investments union, he called for a common European bond backed by shared fiscal capacity to provide a safe asset, fund common projects and strengthen the euro.

8. Italy: resilience but weak productivity

Since 2019 Italian GDP has risen over 6%, better than the euro area per person, driven by investment and exports, employment has risen strongly, and the country's net foreign position, deeply negative a decade ago, has turned positive at 15% of GDP, helped by prudent public finances. Growth slowed to 0.5% in 2025 as real wages lagged and Germany struggled, and the Gulf war may bring stagnation. Output per hour in the private sector has grown only 6% since 2000, against 13-34% in other large euro economies, while the working-age population is shrinking. Recovery plan spending exceeded €100 billion over 2021-25, about 30% of investment, adding nearly a point to annual growth and speeding up public tenders; private firms, which hold ample own funds, must now invest more in innovation and intangible assets.

9. AI adoption, skills and energy in Italy

About 30% of Italian firms use AI but only 5% intensively, below EU averages; adoption could add 0.2 to over 1 point a year to labour productivity, enough in the best case to offset demographic decline. He warned against repeating the 1990s, when slow adoption of information technology held back productivity for decades. Small firms face upfront costs, skill shortages, legal uncertainty and data protection concerns, and individual firms ignore the benefits that spread along supply chains, so he proposed stronger technology transfer, support for start-ups and venture capital, public procurement of innovation, AI in public administration and clear EU rules. Only 30% of people in their thirties hold a degree, 20% of young adults without a degree are out of both work and education, twice the rate elsewhere, more than 100 000 graduates emigrated in 2020-24 and education spending is a point of GDP below the EU average, a vicious circle of weak demand for skills and weak supply. Energy imports transfer wealth abroad; efficiency has improved, renewables reached 41% of electricity, grids are being expanded and new nuclear technologies deserve study, while support measures should stay temporary and targeted.

10. Banks and conclusion

Italian banks are profitable and well capitalised; smaller lenders are weaker, and recent problems at a few stemmed from poor governance, handled without contagion, and the exit of the weakest lenders has strengthened the sector. Large banks are spending on technology at levels comparable to European peers, while digital services attract younger customers; the Bank of Italy is attentive to less digitally skilled customers exposed to exclusion and scams. Mergers can help if competition, especially locally, is preserved, bringing Italy's banking structure closer to that of other large European countries and diversifying revenues; the five largest groups hold 68% of assets, less than in most peers. Lending has recovered but publicly guaranteed loans, over a fifth of business credit, should return to their targeted role, and equity finance must grow. IT incidents at banks rose 80% in 2023-25 and cyber incidents doubled; AI tools able to find system flaws quickly require stronger governance and DORA implementation. Recalling the 1946 choice of the Republic and of an open, rules-based world, he urged Europe to act together, Italy to invest in technology, skills and debt reduction, and governments to steer AI so that it serves people and gives young generations opportunities. Rules agreed at global level should protect competition, pluralism and the dignity of work, and success will be measured by the chances offered to young people to use their skills, be rewarded on merit and stay in the country.

1. Africa as the next growth engine

At the Africa Forward Summit in Kenya, Georgieva called Africa the place where the world will find its next growth engine, but in a world of widening imbalances: export-led economies squeeze room in supply chains, big deficit countries absorb a large share of capital, and the sharpest gap is demographic, with capital in ageing societies and growth potential in young ones.

2. What countries should do

Africa should use its own savings better and attract the vast global pools of equity and bond savings that now avoid the fastest-growing regions, through credible policy, action against corruption and less red tape. Removing trade barriers under the continental free trade area could raise income per head by over ten percent. Unsustainable debt should be restructured or reprofiled, unproductive borrowing avoided and financing moved from debt towards equity through deeper capital markets.

3. What the IMF does

Concessional lending to Africa has risen from eight to thirty-six billion dollars, helped by channelling reserve assets, and programmes are run as partnerships. The Fund is reforming the debt architecture, has added a third African seat on its board and is pushing for fairer representation. Good policies pay: closing half the gap with emerging markets in regulation and governance could raise sub-Saharan output by up to twenty percent within a decade.