European Central Bank

The narrowing of the euro area current account balance in 2025

06/25/2026 European Central Bank Central banks

This box examines the narrowing of the euro area current account surplus from 2.7% of GDP in 2024 to 1.7% in 2025. The decline was driven mainly by services trade and income flows and particularly by developments vis-à-vis the United States and China. For the United States, this reflected the role of US multinational enterprises, whose euro area affiliates supported goods exports but generated larger services and income deficits. Imports from China grew, especially in machinery and manufactured goods.

Tracking euro area labour market developments through restructuring announcements

06/25/2026 European Central Bank Central banks

This box examines whether large-scale restructuring announcements recorded in the European Restructuring Monitor (ERM) compiled by Eurofound contain economically meaningful signals of euro area labour market dynamics. We construct a net job changes indicator, demonstrating that its lagged values contain information on episodes of below-average employment performance ahead of official data releases.

How US financial markets react to geopolitical shocks hitting oil supply

06/25/2026 European Central Bank Central banks

This box assesses how energy supply disruptions associated with geopolitical shocks are transmitted to US financial markets, leveraging on the indicator developed by Iacoviello and Tong (2026). Whereas negative geopolitical events typically reduce output, they are ambiguous with respect to inflation. However, those that also constrain global oil supply are inflationary and lead to deeper recessions. In these cases, stock prices fall more persistently, the dollar appreciates markedly, and risk metrics such as corporate bond spreads increase and remain elevated.

Higher oil prices from the war in the Middle East: assessing the headwinds for euro area growth

06/24/2026 European Central Bank Central banks

Oil supply disruptions related to the war in the Middle East have triggered a sharp rise in oil prices, posing headwinds for euro area economic activity. This box assesses the macroeconomic effects of the shock using a Bayesian vector autoregressive model with identified geopolitical oil supply shocks. The results suggest that supply-driven oil price increases associated with geopolitical events have a persistent negative effect on euro area growth, operating through lower private consumption and investment.

Five years of the ECB Survey of Monetary Analysts: evolution and insights

06/23/2026 European Central Bank Central banks

The Survey of Monetary Analysts (SMA) is a valuable information set for understanding the expectations of financial market participants regarding monetary policy and macroeconomic developments in the euro area. This article reviews the evolution of the SMA over the past five years, highlighting key development milestones, including changes to the panel, questionnaire and analytical use of the survey. It explains how SMA data enhance regular monetary policy assessments and the understanding of expectation formation.

State aid in the EU: an evolving landscape

06/23/2026 European Central Bank Central banks

State aid expenditure in the EU has risen in recent years against the background of economic shocks such as the COVID-19 pandemic, Russia’s unjustified war against Ukraine and, most recently, the crisis in the Middle East, as well as a global resurgence of interventionist industrial policy. While traditionally aimed at addressing market failures and achieving policy objectives like regional cohesion and environmental transition, State aid has increasingly shifted towards supporting industrial competitiveness, decarbonisation and strategic resilience.

Monetary policy under multiple financing constraints

06/23/2026 European Central Bank Central banks

The fact that monetary policy tightening has stronger effects than easing is a longstanding puzzle in monetary economics. This article studies monetary transmission in settings where firms face multiple financing constraints – a common and well-documented feature of corporate financing. Our theory shows that the multiplicity of financing constraints notably dampens the transmission of expansionary policy to firm borrowing and investment, while amplifying the transmission of policy tightening.

AI and the US labour market: effects on employment growth

06/22/2026 European Central Bank Central banks

The adoption of AI is reshaping the US labour market, with its impact on employment growth varying across occupations. AI has led to a job reallocation, particularly disadvantaging occupations with a high risk of AI substitution compared to those with low substitution risk. An econometric analysis confirms that AI has widened the gap in employment growth between employment in high-risk occupations and low-risk occupations between 2019 and 2025. However, this divergence in employment growth has not translated into wage disparities.

Beat the heat, the role of heat waves and droughts in regional EU economies

06/17/2026 European Central Bank Central banks

Europe is increasingly exposed to heat waves and droughts, but their short-term economic effects across sectors remain hard to predict. This study develops climate-augmented models to predict real growth in per capita value added across 1,117 EU regions (2002–2022), by combining economic indicators with high-frequency climate data. When using machine learning (ML, Random Forest and XGBoost), climate variables improve predictions in agriculture, while gains for other sectors are limited and do not outperform economic models.

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