IMF Working Papers-Geoeconomic Fragmentation: What's at Stake for the EU

December 1, 2023-- Summary:
Geoeconomic fragmentation (GEF) is becoming entrenched worldwide, and the European Union (EU) is not immune to its effects. This paper takes stock of GEF policies impinging on-and adopted by-the EU and considers how exposed the EU is through trade, financial and technological channels.

Motivated by current policies adopted by other countries, the paper then simulates how various measures-raising costs of trade and technology transfer and fossil fuel prices, and imposition of sectoral subsidies-would affect the EU economy.

Due to its high-degree of openness, the EU is found to be exposed to GEF through multiple channels, with simulated losses that differ significantly across scenarios. From a welfare perspective, this suggests the need for a cautious approach to GEF policies. The EU's best defence against GEF is to strengthen the Single Market while advocating for a multilateral rules-based trading system.

ESAs warn of risks from economic and geopolitical events

September 10, 2024--The three European Supervisory Authorities (EBA, EIOPA and ESMA-ESAs) today issued their Autumn 2024 Joint Committee Report on risks and vulnerabilities in the EU financial system. The Report underlines ongoing high economic and geopolitical uncertainties.