The lesson is that geopolitical fragmentation endogenously creates financial fragmentation, which in turn reduces risk-sharing and fosters further instability

IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

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By Giovanni Rosso

International macroeconomics has traditionally modelled capital flows as driven by economic fundamentals. In a world of increased fragmentation, however, geopolitical forces might matter just as much.

In a new paper, with Javier Bianchi, Sebastian Horn and César Sosa-Padilla, we study this phenomenon systematically over a 115-year sample, through the lens of bilateral official lending – loans from one government to another.

This is a useful setting because governments directly control these flows, and because the creditor and debtor are observed country pair by country pair.

Our dataset covers roughly $9 trillion (in 2015 constant USD) in bilateral lending between 120 creditor governments and 190 debtor governments from 1910 to 2024, allowing us to study not only the recent period but also the world wars, the Cold War, and the post-1990 era of globalisation.

We start by documenting empirically that bilateral lending relationships indeed co-move with geopolitics. We construct an index of “financial fragmentation”, based on bilateral lending flows and alliances. Higher values of the index identify periods in which lending is concentrated within geopolitical blocs.

Conversely, negative values indicate more diversified lending relationships. We find that this index strongly co-moves, both at the global level and at the country level, with geopolitical risk.

Why? In periods of heightened geopolitical risk, one might want to strengthen financial ties with one’s trusted partners.

However, sovereign lending and borrowing is a form of insurance. That is, it allows countries to smooth consumption and economic conditions in the face of shocks. Here comes the problem.

We show that politically aligned countries tend to have much more synchronised business cycles than rivals, measured by bilateral correlations of either realised consumption growth or forward-looking consumption risk.

This holds even after controlling for intuitive common explanatory factors, like geographic proximity, common languages, common history or bilateral trade exposure.

Naturally then, if lending tilts towards friendly countries, this reduces the scope for risk-sharing. In other words, friends are not the most efficient providers of insurance if they tend to be exposed to positively correlated shocks.

Why would countries then do this? To rationalise this phenomenon, we develop a theory that emphasises the borrower’s reasons. We build a two-period model of sovereign borrowing under limited commitment, in which there is a country that can borrow from two blocs, friend and rival.

A “geopolitical externality” parameter captures the extent to which the country dislikes the success of the rival bloc. Suppose that the borrowing country can repay all creditors or default on all creditors but cannot discriminate among them ex post.

The borrower then has a stronger temptation to default when rivals hold a larger share of its debt, as doing so will hurt them, which is rewarded by the geopolitical externality term.

As all agents understand this incentive, they anticipate it, and the feasible lending set shifts towards allies.

As geopolitical tensions rise, the set of sustainable cross-bloc financial relationships shrinks, and risk-sharing declines.

The lesson is that geopolitical fragmentation endogenously creates financial fragmentation, which in turn reduces risk-sharing and fosters further instability.

Recognising this dynamic is a first step toward designing arrangements that preserve risk-sharing even as geopolitical tensions rise.

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On June 10, Bocconi University hosted the Second Junior Workshop in Geoeconomics, organised by IEP Bocconi in collaboration with the Kiel Institute and the PERICLES Research Unit at the BAFFI Centre.

The workshop brought together early-career researchers, senior scholars and discussants for a full day of presentations and debate on the relationship between economics and geopolitics. Giovanni Rosso was among the authors of International Risk-Sharing in a Fragmented World, which received the workshop’s Best Paper Award.

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Giovanni Rosso

Giovanni Rosso is a DPhil candidate in Economics at the University of Oxford. His research focuses on international macroeconomics and macro-finance, with particular interests in cross-border lending, monetary policy spillovers and international risk-sharing. He previously studied at the University of Cambridge and the London School of Economics and has worked as a PhD intern at the Bank of England and the Swiss National Bank.

IEP Bocconi Events

Partners with Limitless Limits? Russia-China axis at war against Ukraine and the West

SDA Bocconi School of Management, ROME

07/09/2026, 18:00 - 07/09/2026, 19:00

• REGISTER HERE

Russia’s full-scale invasion of Ukraine has reinforced the strategic partnership between Moscow and Beijing, raising critical questions about the nature, scope, and future of their alignment.

Is the so-called “no-limits” partnership proving resilient, or are its limits becoming increasingly apparent? This event will explore how the Russia–China relationship is evolving in the context of the war in Ukraine, growing geopolitical competition, and the broader challenge it poses to the West and the international order, with a special focus on the implications for European and global security.

Speakers

Alexander Gabuev Director, Carnegie Russia Eurasia Center
Nathalie Tocci Senior Fellow, IEP Bocconi
Moderator
Stefano Feltri Communication Advisor, IEP Bocconi

IEP@BU Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP@BU Management Council

• Catherine De Vries, IEP@BU President

• Daniel Gros, IEP@BU Director

• Sylvie Goulard, IEP@BU vice-President, Professor of Practice in Global Affairs at SDA Bocconi School of Management

• Silvia Colombo, IEP@BU Deputy Director

• Carlo Altomonte, Associate Professor at Bocconi University and Associate Dean for Stakeholder Engagement Programs at SDA Bocconi School of Management

• Arnstein Aassve, Professor in Demography at Bocconi University

• Valentina Bosetti, professor of Environmental and Climate Change Economics at Bocconi University

• Elena Carletti, Dean for Research and Professor of Finance at Bocconi University

• Eleanor Spaventa, Professor of European Union Law at Bocconi Law School

• Nathalie Tocci, IEP@BU Senior Fellow

At a time of renewed rivalry among great powers, Carney has argued that middle powers are not powerless

IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

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More than a year has passed since the European Commission and the EU High Representative for Foreign Affairs and Security Policy unveiled the Union’s rearmament strategy.

Through ReArmEU, subsequently reframed as the White Paper for European Defence: Readiness 2030, the EU has begun strengthening its deterrence capabilities in response to a rapidly deteriorating international environment: more than four years of war in Ukraine, a high-intensity conflict in the Middle East, repeated unauthorised incursions into EU airspace and widespread hybrid threats.

Donald Trump’s re-election has also made US support for the Atlantic Alliance less certain, weakening confidence in the deterrent power of the mutual-defence clause enshrined in Article 5 of the North Atlantic Treaty.

At Davos, Canadian Prime Minister Mark Carney described the present geopolitical moment as a rupture in the global order rather than a transition. He urged allies to adopt a different approach to the new environment, proposing, in particular, a coalition of “middle powers”.

Invoking Václav Havel’s celebrated essay The Power of the Powerless, Carney called on like-minded countries to join forces. He presented Canada as a reliable and economically resilient partner, aligned with Europe on fundamental rights, the rule of law and respect for democratic values.

One of the first steps towards closer military co-operation between the EU and Canada is Ottawa’s participation in SAFE, the Security Action for Europe programme. SAFE is one of the pillars of the White Paper for European Defence and has a lending capacity of €150bn.

Under the programme, the EU raises funds on financial markets and distributes them as loans to Member States that have requested support.

The EU’s outstanding debt is now approaching €1tn, and the Union enjoys a triple-A credit rating. SAFE’s legal and financial architecture therefore allows some Member States, including Italy, to borrow on more favourable terms than they could obtain independently on capital markets, making public spending more efficient.

As Italian Defence Minister Guido Crosetto acknowledged during a hearing before the joint Foreign Affairs and Defence Committees of the Chamber of Deputies and the Senate, SAFE loans effectively provide an alternative to issuing national government bonds.

However, access to SAFE funding comes with European conditions. Following the model of the Recovery and Resilience Facility, resources are disbursed only after the approval of dedicated defence industrial plans. They may be used only for specified categories of military investment, preferably involving products made in Europe or in countries with which the EU has established security and defence partnerships.

SAFE also seeks to encourage joint procurement of certain military products by aggregating demand. A Member State receiving SAFE loans must co-operate with at least one other Member State, an EEA or EFTA country, or Ukraine.

So far, 20 Member States have submitted requests and the Council has approved 16 SAFE plans. Poland is the largest beneficiary, with €43bn, reflecting its geographical position, its proximity to Ukraine and its role on NATO’s eastern flank. Italy has provisionally secured €14.9bn, although an intense domestic debate continues over how the money should be used. It is also notable that Denmark, despite holding a triple-A credit rating, has requested €46mn in SAFE loans.

Canada’s entry into SAFE therefore carries both strategic and symbolic significance. It reflects a reorganisation of the Atlantic Alliance’s internal geography.

In practical terms, the EU is opening SAFE-funded defence procurement to Canadian companies. In return, Canada will contribute financially to the instrument.

At a time of renewed rivalry among great powers, Carney has argued that middle powers are not powerless. By acting together, they may still avoid the world captured in Thucydides’ famous dictum in the Melian Dialogue: “The strong do what they can and the weak suffer what they must.”

A previous version of this article was published by Il Sole 24 Ore

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Rosalba Famà

PostDoc Fellow

Rosalba Famà is a lawyer and holds a PhD in legal studies from Bocconi University summa cum laude (2025). She is currently a postdoctoral researcher IEP@Bocconi. Her research interests regard the constitutional profiles of the European Union budget, the European Investment Bank, EU sustainable finance, and the Economic and Monetary Union.

She is also a contracted lecturer at Bocconi, where she teaches EU law, and a fellow of the Bocconi GREEN. In 2023, her research on European finances earned the recognition of a grant offered by the European Court of Auditors. Rosalba is also a selected member of the Spinelli Forum German-Italian Young Leader Forum and a recognized expert in geopolitics by ISPI (Institute of International Political Studies).

Her research has recently received a STAREBEI grant offered by the European Investment Bank.

Join us in Rome

Partners with Limitless Limits? Russia-China axis at war against Ukraine and the West

SDA Bocconi School of Management, ROMA

07/09/2026, 18:00 - 07/09/2026, 19:00

• REGISTER HERE

Russia’s full-scale invasion of Ukraine has reinforced the strategic partnership between Moscow and Beijing, raising critical questions about the nature, scope, and future of their alignment.

Is the so-called “no-limits” partnership proving resilient, or are its limits becoming increasingly apparent? This event will explore how the Russia–China relationship is evolving in the context of the war in Ukraine, growing geopolitical competition, and the broader challenge it poses to the West and the international order, with a special focus on the implications for European and global security.

Speakers

Alexander Gabuev Director, Carnegie Russia Eurasia Center
Nathalie Tocci Senior Fellow, IEP Bocconi

Moderator
Stefano Feltri Communication Advisor, IEP Bocconi

IEP@BU Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP@BU Management Council

• Catherine De Vries, IEP@BU President

• Daniel Gros, IEP@BU Director

• Sylvie Goulard, IEP@BU vice-President, Professor of Practice in Global Affairs at SDA Bocconi School of Management

• Silvia Colombo, IEP@BU Deputy Director

• Carlo Altomonte, Associate Professor at Bocconi University and Associate Dean for Stakeholder Engagement Programs at SDA Bocconi School of Management

• Arnstein Aassve, Professor in Demography at Bocconi University

• Valentina Bosetti, professor of Environmental and Climate Change Economics at Bocconi University

• Elena Carletti, Dean for Research and Professor of Finance at Bocconi University

• Eleanor Spaventa, Professor of European Union Law at Bocconi Law School

• Nathalie Tocci, IEP@BU Senior Fellow

Strategic convergence on security is no longer optional—it is the bedrock upon which Europe can salvage its economic and political integration project. It may also prove successful at the ballot box

Marco Buti, and Francesco Nicoli

IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

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by Marco Buti, and Francesco Nicoli

Europe is a continent under siege. To begin with, consider the Ceuta crisis and the subsequent suspension of the Schengen agreement toward Spain by Italy.

Add to this a series of “hybrid warfare” episodes: an explosives-laden drone that miraculously failed to detonate against a Ukrainian plane at Leipzig airport, the explosion of a munitions factory in Colleferro, near Rome, and that of an arms manufacturing plant in Bulgaria—both part of a support program for Ukraine.

Since 2022, more than 200 documented hybrid warfare incidents have targeted the European Union (EU). Compounding these, are the pressures exerted by the Trump administration on NATO, culminating in a document—sent, according to Bloomberg, to alliance nations—aimed at verifying allies’ ideological alignment with the MAGA agenda, as well as their personal loyalty to the president himself.

These episodes, although seemingly distant, share a common cause: European divisions on defense and the resulting absence of genuine collective security tools.

Europe is entangled in a security “fragmentation trap”: perceived short-term national costs of common defense prevail over its real, medium-to-long-term collective benefits.

It is a classic vicious cycle: divisions prevent Europe from adopting effective common institutions and policies, and in their absence, adversaries successfully exploit these very rifts to widen them and divide the continent further.

The resulting lower reform capacity decreases output legitimacy, which in turn reduces the political capital required for reform.

Whoever pushed the masses of migrants toward Ceuta aimed not only at placing the Spanish government in a difficult position, but also at disrupting European unity (a plan that succeeded completely).

Similarly, the continuous expansion of Russian-driven hybrid warfare is only possible because our fragmented security institutions has proven incapable of reacting adequately, not least because the absence of a true European intelligence agency renders counterintelligence operations far more complex.

Finally, the demand for personal loyalty to President Trump and ideological alignment with MAGA has laid bare the increasingly neo-feudal character of the relationship between the US and its allies.

In this administration’s understanding of global power, alliances are not institutional relationships among sovereign states: the state itself is merely an instrument of the supreme leader, and loyalty is owed to him and him alone.

The objective is clear: the collapse of international law—upon which both NATO and the EU are built—and the transformation of European security from a public alliance codified in treaty into a private pact of vassalage.

The situation is unsustainable, yet the EU appears paralyzed. In many countries, it is taken for granted that the political room for a surge of pride (or at least a flicker of dignity) is severely limited.

Next year, seven countries will go to the polls, including France, Italy, Poland, and Spain, which together account for 48% of the EU population. Here, far-right nationalist, anti-European, and often pro-Russian forces are dictating the policy agenda to both governments and oppositions.

To break the impasse preventing a path toward geopolitical emancipation, the “fragmentation trap” must be confronted. How?

Political incentives must change.

First, the “butter vs. guns” narrative must be challenged: without stepping up the investments in security, there will be neither guns (or their modern equivalent) nor butter (welfare transfers).

Second, military spending today mostly consists of investments in technological innovation with significant positive spillovers for growth: a security policy is, for all intents and purposes, an industrial policy.

Third, as threats against European countries reach the heart of the EU, pro-European political forces must convince citizens that we face an imminent threat: it is astonishing how an attack such as the sabotage of the Colleferro factory passed almost unnoticed in Italy.

Only by unifying its security can Europe resist both Trump’s neo-feudal tendencies and Putin’s imperial ambitions, while simultaneously avoiding a damaging and ineffective national arms race. Without a step forward on common defense, Europe will remain condemned to be a hunting ground for major powers—now more than ever engaged in a new global-scale divide et impera.

Moreover, we will face the real threat of a national arms race, conducted by individual countries and potentially driven by ultranationalist forces. This national armaments race would prove far more costly than a shared defense and could even put peace within Europe at risk.

The ramifications of a common EU security policy (or lack thereof) are all-encompassing: either Europe crosses the rubicon on security, or it will also fail to deliver on its economic policy agenda too, and its core competencies will be progressively eroded.

It is wholly illusory to believe Europe can withstand Trump’s trade and digital pressures, or push forward with the Draghi-Letta agenda on competitiveness and the Single Market, without strategic convergence on defense. Integration will be gradually undermined, even in areas of strict EU competence.

Hence, progress on non-EU competencies such as defense is key to shield EU treaty-based powers from the nationalist shockwaves, not the other way around.

The only alternative to common defense is a weakening Europe, progressively carved up among new global empires, and progressively at risk of internal conflict.

Yet, this is not an inevitable outcome.

Actually, there may be in many EU countries a political demand waiting for the an adequate political supply.

Polls show strong public support across national populations for viewing defense as a European public good to be provided centrally and funded jointly, especially when plans are ambitious.

Europeans may just be growing tired of half-baked solutions and expect national leaders to finally deliver the security and prosperity Europe needs. Pursuing this goal is a message that, if delivered with conviction and resolve, can also prove to be a winning strategy at the ballot box.

A previous version of this article was published by Il Sole 24 Ore

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Marco Buti

Since April 2023, Marco Buti has held the Tommaso Padoa-Schioppa Chair at the Robert Schuman Centre. Before joining the EUI, Buti was Chief of Staff of the Commissioner for the economy, Paolo Gentiloni. Between 2008 and 2019, he was Director-General for Economic and Financial Affairs at the European Commission. Moreover, he has been the Commission Finance Deputy at G7 and G20.

He is an IEP@BU fellow.

Francesco Nicoli

Francesco Nicoli is assistant professor of political science at the Politecnico Institute of Turin. He also serves as professor of political economy at Gent University and he is affiliate fellow at the department of economics of the University of Amsterdam as well as visiting fellow at Bruegel.

IEP Bocconi Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

Europe’s policy debate often treats trade policy, digital regulation and democratic resilience as separate issues. They are increasingly connected. A world of tariffs does not only change trade flows. It changes the revenues and political incentives of the platforms that organise commerce, advertising and information

Massimo Morelli

IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

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by Massimo Morelli

Tariffs are usually presented as a fight between domestic producers, foreign exporters and consumers. Domestic firms receive protection. Foreign exporters lose market share. Consumers pay more. This picture is no longer sufficient.

In a platform economy, there is another winner: the digital intermediary.

In a recent paper with Gianmarco Ottaviano and Tommaso Sonno, we show why this matters. Large platforms are not simply sellers of products or advertising space. Their revenues often depend on the value of the transactions they intermediate.

If the price of a tariffed product rises and consumers keep buying it, the platform takes its commission on the higher price. A $100 product subject to a 20 per cent tariff becomes a $120 product. If the platform fee is 15 per cent, its revenue rises from $15 to $18. The platform has not produced the good, paid the tariff or borne the political cost of protectionism. It has simply taken its percentage on a larger transaction.

The key issue is whether consumers stop buying. In many platform-intermediated categories, they do not, or at least not enough to offset the higher price.

Household items, replacement products, personal-care goods and other everyday purchases often have relatively rigid demand in the short run. Consumers may dislike the higher price, but they still buy. In those cases, tariffs can raise the value of transactions more than they reduce the number of transactions. Platform revenues rise as a result.

This changes the political economy of protectionism. The traditional beneficiary of a tariff is the domestic producer. But once commerce is organised through platforms, part of the gain can accrue to firms that were not the declared target of protection. Tariffs inflate the price base on which marketplace fees, platform commissions and advertising bids are calculated.

The rise of this intermediary power has unfolded through three moments of rupture.

The first came in 2011, after the Arab Spring. The revolts in Tunisia and Egypt showed how social media and digital communication could help mobilise mass protest. Governments learned different lessons. China moved towards more direct control of online information. The United States moved towards a closer alignment with private digital platforms.

That alignment soon became visible. The unconditional approval of Facebook’s acquisition of Instagram in 2012 and the closure of the antitrust investigation into Google in 2013 consolidated the largest platforms at the very moment when control over digital information was becoming a political asset.

The second rupture came in 2018, during the first Trump administration. After the Section 301 investigation launched in 2017, the United States imposed tariffs on Chinese imports. But the increases were not uniform. Technology manufacturing was treated more favourably than the rest of manufacturing. Computers, semiconductors, communications equipment and related products were spared some of the tariff pressure faced by other sectors.

This mattered for technology firms. It also mattered for platforms, because much of the digital economy sits on top of the sale, advertising and intermediation of technology-enabled commerce.

The third rupture is the most revealing. From 2017 onwards, the revenues of Alphabet, Amazon, Meta, Apple and Microsoft grew faster than the rest of the S&P 500. They also grew faster than the technology manufacturers that had benefited from lighter tariff treatment. The platforms outpaced not only ordinary firms, but also some of the firms that were more directly protected.

This is where the tariff mechanism becomes politically important. Platforms do not need a tariff written in their favour to benefit from protectionism. They can gain from the tariffed price itself, as long as they intermediate the transaction and charge a proportional fee on the final consumer price.

The same logic applies beyond Amazon Marketplace. Apple’s App Store takes commissions on digital transactions. Google, Meta and Microsoft run advertising systems in which bids are tied to expected commercial value. When transaction values rise, the economic base around which these systems operate can rise too.

Large digital platforms already have reasons to prefer fragmented politics. Fragmentation makes taxation harder, regulation less coordinated and enforcement more dependent on bilateral bargaining. A divided political landscape gives dominant platforms more room to negotiate, delay and arbitrage.

Protectionism adds an economic reason to the same preference. If tariffs can raise platform revenues, economic fragmentation becomes not merely something platforms can survive. In some conditions, it becomes something from which they can profit.

For a long period, much economic research was shaped by the idea that deeper economic integration could make political fragmentation easier to sustain. Smaller political units could survive because open markets gave them scale. The current platform economy points in another direction. Economic and technological power now push for economic fragmentation that reinforces political fragmentation incentives.

Europe’s policy debate often treats trade policy, digital regulation and democratic resilience as separate issues. They are increasingly connected. A world of tariffs does not only change trade flows. It changes the revenues and political incentives of the platforms that organise commerce, advertising and information.

The European question is therefore not simply whether to imitate American protectionism or defend open trade in the abstract. It is whether Europe can reduce its dependence on digital intermediaries whose interests may be increasingly aligned with fragmentation.

Otherwise, Europe will again find itself exposed to decisions made elsewhere. Washington may raise tariffs. Consumers may pay higher prices. Platforms may collect larger revenues. And Europe may discover that the politics is national, the platforms are global and the costs do not stop at America’s borders.

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On June 10, Bocconi University hosted the Second Junior Workshop in Geoeconomics, organized by IEP Bocconi in collaboration with the Kiel Institute and the BAFFI Centre’s PERICLES Research Unit.

The workshop brought together young researchers, senior scholars and discussants for a full day of presentations and debate on the relationship between economics and geopolitics. This article is based on the keynote address delivered by Massimo Morelli.

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Massimo Morelli

IEP Bocconi Fellow

Massimo Morelli is Professor of Political Science and Economics at Bocconi University.

He has has been elected Fellow of the Econometric Society – and Society for the Advancement of Economic Theory – mostly for his contributions to bargaining, political economy and economics of conflict, while his current work also deals with causes and consequences of populism and law and economics in general.

He obtained the Ph.D in economics from Harvard in 1996 and came back to Italy (Bocconi) in 2014, after having taught at multiple American universities including Columbia.

He has been an active member of the Council of the EEA and now chairing the Minorities in Economics (MinE) committee, with growing passion for all diversity and inclusion concerns.

His research interests are in game theory, mechanism design, political economy, governance institutions, development economics, behavioral and public economics, comparative politics and international relations.

IEP@BU Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

Europe has a strategic interest in making industrialization a more explicit pillar of its development and external economic policy. A manufacturing-first agenda would not replace existing objectives on sustainability, digitalization, or social inclusion; rather, it would make them more operational by linking EU support to measurable industrial upgrading, export potential, and private investment

Guglielmo Maccario, and Giorgio Presidente

IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

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Executive Summary

Pb61 Manufactoring First

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Promoting industrialization in the Global South would create new markets for EU producers, help diversify supply chains, reduce migration pressures, and strengthen EU soft power.

The European Commission has allocated €80 billion to development aid, neighbourhood policy, and international cooperation - almost as much as to Horizon Europe, its flagship research and innovation program.

Yet only a small share of these resources is devoted to fostering industrial development. Existing instruments, such as the European Fund for Sustainable Development Plus, could be redirected to incentivize the adoption of productivity-enhancing industrial technologies.

We propose a simple methodology to identify concrete cooperation opportunities that would mutually benefit the EU and partner countries.

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Guglielmo Maccario

Researcher at IEP Bocconi

Giorgio Presidente

Head of Enterprises, Technology and Growth Unit

Giorgio Presidente is the Head of the Enterprises, Technology and Growth Unit at the Institute for European Policymaking at Bocconi University and a Research Associate at the Oxford Martin Programme on the Future of Work at the University of Oxford. His research focuses on policy, productivity, industrial organization, technology, and economic development.

He has previously held positions at the World Bank, the Organisation for Economic Co-operation and Development, the European Central Bank, and the United Nations. He holds a Ph.D. from the Paris School of Economics.

IEP Bocconi Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

With inflation running at almost twice its target, the Fed will have to raise interest rates unless the outlook changes dramatically. If it does not act sooner, it will probably do so after the November midterm elections. By shortening the financial duration of the public debt, the Treasury’s policy is indirectly equivalent to quantitative monetary easing. It therefore runs against the direction of Federal Reserve policy

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IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

As time passes, US Treasury Secretary Scott Bessent increasingly risks becoming a danger to the global economy. It was not always so.

In the closing weeks of 2024, when President-elect Donald Trump was selecting members of his administration with careful attention to their loyalty to the leader and their telegenic appeal, the appointment of Bessent reassured almost everyone. Here, at least, was someone with a proven record in finance.

Stanley Druckenmiller, the legendary hedge fund manager, put it this way: “He worked with me and George [Soros]. He learned everything he needs to know.”

That could hardly be further from what Druckenmiller wrote in The Wall Street Journal last Monday, accusing Bessent of getting everything wrong in his management of the world’s most important financial market, the market for US Treasury securities.

How did poor Bessent go, in such a short time, from being the only “adult in the room” in an improvised administration to becoming a loose cannon in the international financial system?

Let us take things in order.

Over the past five years, since the world emerged from the pandemic, interest rates have begun to rise again, just as prominent economists were publishing books explaining their secular decline.

After returning to the levels seen before the global financial crisis, long-term rates in the US, and in their wake elsewhere in the world, continued to increase (Chart 1).

The rise has not been chaotic. It has been gradual and orderly, suggesting that global financial markets, in which US Treasury securities are traded, have a clear sense of both the direction of travel and the reasons behind it.

There are three main reasons.

The first is the race to develop artificial intelligence. It promises returns over the long term but, for now, requires colossal investment, amounting to as much as 2 per cent of US GDP this year, according to Goldman Sachs estimates.

The second, and most important, is the unprecedented US fiscal deficit, projected at 6 per cent of GDP in 2026, alongside public debt that has exceeded 120 per cent of GDP. Rising debt and rising interest rates are an explosive combination for the public finances, even in a country that prints dollars.

Interest expenditure this year, at 3 per cent of GDP, exceeds the defence budget. All this is happening while the US economy is at full employment and inflation is running at between 3.5 and 4 per cent, compared with the Federal Reserve’s 2 per cent target.

Given these conditions, the rise in long-term rates is both natural and unavoidable. The associated risks must be addressed by tackling the causes rather than the symptoms, above all the fiscal deficit and inflationary pressures.

This is precisely the opposite of what Bessent is doing.

Disappointing those who expected him to exert influence over fiscal policy, the Treasury secretary first intervened in support of the Japanese yen, ostensibly to assist an ally but, more realistically, to prevent Japan, the largest foreign holder of US government debt, from selling Treasury securities.

He then began supporting the Treasury market directly through large-scale buybacks. These operations alter the maturity structure of the debt by retiring long-term securities and increasing the share of short-term issuance.

It is hardly surprising that the effects proved short-lived. Indeed, the strategy risks being counterproductive by exposing the absence of adequate policy responses and the underlying weakness of the Treasury secretary himself.

The risks are considerable, both within the US and beyond its borders.

In its logic, although not in its scale, the buyback programme resembles the so-called Operation Twist pursued by the US in the 1960s to reduce long-term interest rates.

That operation also failed. It aggravated the imbalances it was intended to conceal and helped prepare the ground for the sharp depreciation of the dollar and the inflation, including global inflation, that followed a few years later.

There is a further aggravating factor. On that occasion, the operation was conducted by the central bank. Today it is the Treasury that is intervening, while generating monetary consequences that run counter to what the Federal Reserve, now led by Kevin Warsh, should do and is probably preparing to do.

With inflation running at almost twice its target, the Fed will have to raise interest rates unless the outlook changes dramatically. If it does not act sooner, it will probably do so after the November midterm elections.

By shortening the financial duration of the public debt, the Treasury’s policy is indirectly equivalent to quantitative monetary easing. It therefore runs against the direction of Federal Reserve policy.

This is another problem for Warsh, who may now be wondering whether to address the issue or avoid it in his speech at the Jackson Hole conference today.

The consequences also matter for Europe. The spillover from higher US interest rates is reaching this side of the Atlantic, compounded by the political, economic and financial weakness of Germany and France (Chart 2).

Europe lacks the expansionary impetus provided by technology investment in the US. But, albeit to varying degrees, it shares America’s fiscal weakness.

Through a prudent fiscal stance, the Italian government has managed in recent years to contain the yields on its long-term debt. The spread has narrowed.

However, the spread ceases to provide an unambiguous signal once yields on the debt of other European countries become less stable.

The absolute level of interest rates becomes more important.

Recently, yields have begun to rise again in Italy, tightening the constraints on debt sustainability.

Weak US financial leadership is one factor, although not the only one, making the outlook more difficult. For Italy, it argues for the greatest possible caution on fiscal policy, particularly as the country approaches the coming electoral cycle.

A previous version of this article was published in the Italian daily Milano Finanza

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Ignazio Angeloni

Non-Resident Fellow

Ignazio Angeloni is Senior Policy Fellow at the Leibniz Institute for Financial Research SAFE in Frankfurt e Non Resident Fellow at IEP.

In 2019-2022 he was Senior Research fellow in the Harvard Kennedy School’s Mossavar-Rahmani Center for Business and Government. From 2014 to 2019 he was a member of the ECB Supervisory Board.

In 2012-2013, Ignazio was Director General for Financial Stability at the ECB; in that capacity he coordinated the establishment of the new banking supervision at the ECB. Earlier he was Director for International Financial Relations at Italy’s Ministry of Finance, Deputy Director General Research at the ECB, and Director of monetary research at the Bank of Italy.

Ignazio holds a degree from Bocconi University and a Ph.D. in Economics from the University of Pennsylvania and has published books and articles in leading academic journals.

IEP@BU Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia
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Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
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Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

The West is not losing because Asia is rising. It is losing because it stopped exercising the muscle of statecraft, and is trying instead to muscle its way through what is really a demand for new power-sharing arrangements in a century defined by climate catastrophe, technological disruption, and the redistribution of wealth and relevance across the globe

Sophia Kalantzakos

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by Sophia Kalantzakos

For a decade, the West feared China would win the century. Instead, the West is busy losing it. China is nowhere near the fighting.

Asia is not at war. Europe, the United States, and the waters between them are consumed by conflicts that have little to do with the rival everyone was told to watch.

This is not the global confrontation the West imagined. It is the West exhausting itself while the rest of the century moves on.

The strategic community that has long defined the Atlantic order, referred to here as “the West,” has spent the past decade increasingly anxious about whether it could still shape the future.

China’s rise, its scale, its fusion of state direction and private enterprise, and its sheer economic velocity fed a diagnosis that Western commentators repeated until it became reflexive: Europe and the United States were sclerotic, weighed down by history, colonial baggage, and industrial models that had enriched them at the expense of the developing world. That diagnosis was not necessarily wrong, but it was certainly incomplete.

What’s more, it has been used ever since to avoid a harder truth.

The West is not losing because Asia is rising. It is losing because it stopped exercising the muscle of statecraft, and is trying instead to muscle its way through what is really a demand for new power-sharing arrangements in a century defined by climate catastrophe, technological disruption, and the redistribution of wealth and relevance across the globe.

The United States set the pattern first. Watch closely enough and it starts to resemble an American television drama, the kind where every character carries a weapon and force is mistaken for competence.

The defense industry has been anointed as the West’s substitute for statecraft. This is not being presented as a war footing, because no one will call it that. It is being presented as industrial policy, as an investment in security, as a show of resolve. It is not. It is the reflex of a system that can now only react to exogenous shocks, because it has forgotten how to plan for ordinary ones.

Europe, rather than building the independent alternative it has claimed for years it wanted, is doing the same thing, piecemeal and at high cost, and calls it defense.

NATO’s latest figures put the alliance’s spending trajectory near fifty billion dollars in new commitments, even as its own members know the alliance is fraying at the seams.

This is not strategic autonomy. It is imitation without the resources or coherence to sustain it, and it is being financed by governments that have not been honest with their own voters about what they are actually purchasing.

Compare any of this to China’s posture toward its own chronic and asymmetric challenges.

Whatever one thinks of Beijing’s methods, its policymaking apparatus is built for sustained analysis, not perennial crisis management. It is enough to look at where China took the lead: renewables production, the electrification of transport, and increasingly, artificial intelligence.

Military modernization is one part of its preparation for a more volatile world, not the whole of it. The West, by contrast, lurches from emergency to emergency, treating each new flashpoint as an isolated event requiring an isolated response, and mistaking the frequency of its emergencies for the seriousness of its strategy.

Take a hard look at what is actually happening. Russia launched one of the heaviest missile and drone assaults of the war on Kyiv in early July.

Ukraine answered with a sustained campaign against Russia’s shadow fleet in the Black Sea and the Sea of Azov, striking well over a hundred vessels within days.

The Gulf is back in the headlines, missile exchanges escalating in frequency and intensity. The rest of the Middle East remains as unstable as it has been for a generation.

These are not isolated fires. They are one structural failure wearing different masks, and refusing to see them as connected is itself a form of denial. It is an exercise in hiding behind one’s own finger, pretending that if we do not name the pattern, the pattern does not exist.

The denial does not stop at naming. It extends to what the West quietly hopes will happen next.

Look at how this hope actually operates. Nobody thought Russia’s aggression against Ukraine would last this long, and yet the West has absorbed it as a new reality, a war that burns at a manageable temperature rather than an emergency demanding resolution.

The same “secret” hope is now being extended to the Gulf. The escalation over Hormuz, arriving after weeks of simmering hostilities that were allowed to pass as a pretense of normalcy, is being treated the same way: find the workarounds, reroute the shipping, diversify the energy outlets, and let the conflict continue on low fire with occasional flare-ups, indefinitely. This is a ludicrous bar for what serious policy should be aiming for.

It is not a strategy. It is an abdication dressed as pragmatism, made easier to accept because, in any conflict, every party involved has played some part in making it happen.

None of this is being budgeted honestly, and that is the deeper failure. The forever wars are not budgeted as wars.

The fires and the floods and the heatwaves are not budgeted as the climate catastrophe they are. The water and energy consumed by the AI buildout are not budgeted as the resource strain they represent.

Meanwhile, the problems that actually touch people’s lives, affordability, livelihoods, and the redistribution of work and wealth that technology and financial change are forcing on every economy, go unfunded and largely unnamed.

They are treated as secondary because statecraft has been narrowed to military preparedness, while the forces actually breaking households are left to fester.

The blind leading the blind is not a strategy. It is what happens in the absence of one. Nobody is budgeting for this.

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Sophia Kalantzakos

Fellow

Sophia Kalantzakos is a Global Distinguished Professor of Environmental Studies and Public Policy in the Sheikh Mohamed bin Zayed Scholars Program at NYUAD. Her work examines how climate change, technological transformation, resource competition, and demographic shifts are reshaping global power and why contemporary governance systems are structurally unprepared for the world they have produced. Her research focuses on resources and power, with particular attention to critical minerals, supply chains, and the geopolitical consequences of the green and digital transitions.

IEP@BU Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

Kevin Warsh, the new chair of the Federal Reserve, was not appointed to administer this bitter medicine to the US economy. But like all central bankers, he will not want to be remembered as the man who monetised the public debt and allowed inflation to rise. In the end, he will do what is necessary, whether Donald Trump likes it or not

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IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

The most significant economic statistic released last week is that the US public debt has exceeded $40tn, its highest level on record.

By itself, however, this figure means little unless it is assessed against the country’s capacity to service its debt over time. That depends, in particular, on the trajectory of debt relative to gross domestic product and on the cost of interest payments.

US public debt has already reached 125 per cent of GDP. The year-end figure is expected to be revised upwards by at least a couple of percentage points.

Interest payments now absorb almost 20 per cent of US tax revenues, more than double the share recorded a decade ago.

By international comparison, in Japan, which has the highest public debt among advanced economies, debt servicing accounts for about 15 per cent of tax revenues. In Italy, the figure is below 9 per cent.

The solution to the US problem appears relatively straightforward: increase tax revenues, which are low compared with the average for advanced economies, at about 30 per cent of GDP against 36 per cent across the G7.

In the current political climate, however, few measures appear more difficult to implement, in the US or elsewhere.

This became clear after the Supreme Court ordered the US administration to refund the revenues collected through the illegal tariffs imposed last year. The repayments will be financed through additional borrowing, meaning a higher deficit and more public debt, rather than through new taxes.

With the midterm elections due in early November, the administration has carefully avoided announcing any new taxes, apart from reintroducing import tariffs in a different form. It is apparently hoping that Americans still believe such measures have no direct effect on their purchasing power.

Even after November, it seems unlikely that the administration will attempt to reduce the budget deficit, given that the country will vote again in 2028, this time in a presidential election.

Financial market participants have understood that America’s public debt problem is first and foremost political. The rise in long-term interest rates, driven by a wave of selling in fixed-rate government bonds, reflects concerns that a solution will continue to be postponed and that the issue will not be addressed until serious market tensions emerge.

That view has been reinforced by the unconvincing statements of Treasury Secretary Scott Bessent, who has argued that economic growth will solve the debt problem.

In reality, US public debt has doubled over the past 20 years even though economic growth averaged more than 3 per cent.

Extraordinary interventions in the US Treasury market have further increased uncertainty. The Treasury has purchased long-term securities in the market while issuing new short-term debt.

This highly unusual operation, which would have been regarded as a de facto debt restructuring had it been carried out by an emerging economy, failed to produce the desired results. Long-term rates did not fall as expected.

This failure came shortly after another unsuccessful intervention, conducted jointly with Japan’s finance ministry and intended to strengthen the yen. That operation had only a temporary effect.

These financial operations have reinforced the impression that the administration lacks a credible strategy to address the problem and restore confidence. Its only response has been the familiar attacks on the Federal Reserve for failing to lower interest rates.

As a result, investors increasingly believe that the only solution to America’s increasingly unsustainable debt trajectory will be to monetise the debt through inflation.

Inflation remains elevated in the US, driven not only by commodity prices but also by strong domestic demand supported by the budget deficit.

The more this interpretation is shared in the markets, the more US government bond yields will rise. Given the dollar’s central role in the international monetary system, the effects will spill over to other advanced economies.

History suggests that there is only one way out of this vicious circle of expectations: a sharp increase in interest rates.

Kevin Warsh, the new Federal Reserve Chairman, was not given the task of administering such a bitter medicine to the US economy. But like all central bankers, he certainly doesn’t want to be remembered for having monetised the public debt and allowed inflation to rise.

In the end, he will do what is necessary, whether Donald Trump likes it or not.

A previous version of this article was published in the Italian daily Il Foglio

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Lorenzo Bini Smaghi

Lorenzo Bini Smaghi holds a degree in Economic Sciences from the Université Catholique de Louvain (Belgium) and a Ph.D in Economic Sciences from the University of Chicago. He has been Chairman of the Board of Directors of Société Générale since 2015. He is an IEP@BU non-resident fellow

IEP@BU Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

In short, there is no evidence that the Italian banking sector’s profits result from abnormal behaviour or from distortions that favour it. Singling out banks therefore appears discriminatory and raises serious questions about the measure’s constitutional legitimacy. A tax on banks’ windfall profits is not merely unjustified. It is also a mistake in economic policy, for several reasons

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IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

The central issue in Italy’s next budget law, for 2027, will be how to find the resources needed to finance public spending, which is likely to increase ahead of next year’s general election. The summer heat has helped fuel the debate and revive some old ideas. One of them is the League’s proposal for another tax on banks’ so-called windfall profits.

The proposal is problematic in several respects.

The first concerns the very notion of windfall profits. How can we determine whether the profits earned by a sector such as banking are extraordinary?

One possible benchmark is past performance.

The Italian banking sector recorded an average return on equity of about 14 per cent in 2025. Profitability has improved slightly over the past three years, but there is nothing exceptional about such an increase.

The improvement compared with a decade ago is certainly significant. But it reflects not only more stable macroeconomic conditions. It is also the result of the extensive clean-up and restructuring of the banking system as a whole.

Would taxing bank profits not amount to penalising the very efforts that brought the capital strength of the Italian banking system to levels comparable with, and in some cases higher than, those of banks elsewhere in Europe?

Another possible benchmark is the performance of other industries. Data for the 20 largest companies in Italy’s benchmark stock market index show that profitability in several sectors has in some cases exceeded the average recorded by banks.

Examples range from carmaking, with Ferrari, to energy infrastructure, with Snam, defence, with Leonardo, cable systems, with Prysmian, luxury goods, with Moncler, and services, with Poste Italiane.

It is difficult to understand why bank earnings should be considered “excessive” while profits of a similar magnitude in other sectors are regarded as “normal”.

Moreover, comparing returns on equity without considering the cost of that equity ignores the fact that banking is typically a riskier business. Banks’ core function is, after all, to take and manage risks. This is precisely why they are subject to prudential capital requirements.

Supporters of the tax sometimes make another argument: that banks benefit from public guarantees.

This argument is mistaken. Following the reforms adopted in response to the 2008-09 financial crisis, European governments can no longer rescue troubled banks without first imposing losses on shareholders and, up to a prescribed threshold, creditors.

The Single Resolution Fund, the Banking Union’s mechanism for financing bank resolution, is funded entirely by contributions from the banking industry. These rules are one reason why banks face a higher cost of capital than companies in many other sectors.

The Italian government did provide guarantees for loans extended to households and businesses during the Covid-19 pandemic. But these guarantees are gradually expiring and primarily benefited borrowers, who would otherwise have paid higher interest rates.

A further argument used to justify the tax is that banks have benefited from the improvement in Italy’s public finances and the upgrading of the country’s sovereign credit rating.

In reality, the sovereign rating affects every company operating in a country, for better or worse. Some Italian banks are even better rated than the sovereign itself, suggesting that the direction of causality may run the other way.

In short, there is no evidence that the Italian banking sector’s profits result from abnormal behaviour or from distortions that favour it. Singling out banks therefore appears discriminatory and raises serious questions about the measure’s constitutional legitimacy.

A tax on banks’ windfall profits is not merely unjustified. It is also a mistake in economic policy, for several reasons.

First, it ignores the central role of the financial sector in the economy, which is to channel savings towards the most productive investments. A country’s growth depends on the efficiency and profitability of its financial system. Taxing the intermediation between savings and investment ultimately means taxing economic growth.

Second, contrary to what its advocates claim, the proposed levy can no longer be described as an “extraordinary” or “solidarity” contribution. The banking sector is now being asked to make such a contribution for the third consecutive year, while the revenues are being used to finance permanent public spending.

Finally, as with every tax, a point that Americans have once again discovered through import tariffs, the cost is ultimately passed on to customers. In this case, that means people who keep their savings in banks and households taking out mortgages.

Put simply, the so-called windfall tax on banks is a tax on Italians’ savings and mortgages.

It doesn’t look like a brilliant idea after all.

A previous version of this article was published in the Italian daily Il Foglio

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Lorenzo Bini Smaghi

Lorenzo Bini Smaghi holds a degree in Economic Sciences from the Université Catholique de Louvain (Belgium) and a Ph.D in Economic Sciences from the University of Chicago. He has been Chairman of the Board of Directors of Société Générale since 2015. He is an IEP@BU non-resident fellow

IEP@BU Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

We should give Ukraine everything it needs. That means offensive weapons to strike the military machine Putin uses to wage this war. It also means air defences to protect Ukrainian civilians from the daily terror of Russian missiles and drones, and to shield the power stations, water plants and hospitals that Putin targets on purpose. Half measures do not calm Putin. They embolden him

Bill Browder

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IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors

by Bill Browder

Last weekend, Ukraine sent another wave of attack drones into the heart of Russia’s war economy. The targets were oil refineries, coal depots, military logistics and other critical sites.

Until now, the drones Ukraine sent deep into Russia were almost all home grown. This time was different. Among them were drones built in Britain.

According to The Sunday Times, they included the Nyan, a jet-powered strike drone made by Callen-Lenz, a subsidiary of BAE Systems, used against oil refineries in Volgograd and Yaroslavl. A second British-built drone was used too. Its manufacturer has not been named, for security reasons.

On Tuesday, the Russian embassy in London responded with a warning of “serious consequences” for Britain arming Ukraine with offensive weapons. Within minutes my phone lit up with messages from many people asking what I made of it.

The answer is simple. This is standard Russian bluster. The Kremlin feels it has to say something, so it does. It will lead to no consequences more serious than the ones we already live with.

We have been here many times before. Since the start of this war, Putin has threatened us over every weapon we have sent. First it was tanks. Then it was F-16s. Then it was Storm Shadow missiles. Each time he drew a red line. Each time we crossed it. And each time, nothing material changed. His red lines are drawn in disappearing ink.

That is not to say Russia is leaving us alone. It is already attacking us, and has been for years. Russian operatives have dragged anchors across undersea cables in the Baltic. They have posted incendiary devices to a DHL depot in Birmingham.

In the past fortnight alone, an explosive drone was flown into a Ukrainian cargo plane at Leipzig airport, and a fire tore through an ammunition plant near Rome that makes artillery shells for Ukraine. No one has been charged for the fire. But the pattern speaks for itself. These are not diplomatic protests. They are acts of war on European soil.

The difference is that Putin is more fragile than he has ever been.

Several of Russia’s richest people, including some close to Putin, have moved billions of dollars abroad in the past year after growing concerned about the country’s economy and the government budget.

By the end of May, the federal deficit had hit 6tn roubles ($83bn). That is 2.6 per cent of GDP, twice last year’s level and already past the Rbs3.8tn meant to cover the whole of 2026.

The economy really is in trouble. Emergency powers were granted to the finance ministry last month to spend more and borrow past the legal debt ceiling because, as the ministry put it, it needs to react to a worsening environment “not every month or every quarter, but every day”.

Indeed, this week, the chief economist at Russia’s second-largest bank was fired after a series of critical comments about the state of the economy, including warnings that Moscow would not win a prolonged economic war with Ukraine.

Andrei Klepach, who had served in the role at the state-controlled development bank VEB since 2014, said Russia was “falling behind” China and the US economically, and “in some respects, Ukraine”.

Putin needs a war. He needs it to deflect his own people’s anger away from himself and towards an invented enemy abroad. And in his own words, this is not only a war with Ukraine. It is a war with Nato. We should take him at his word.

So I was heartened to hear Prime Minister Burnham confirm that Britain will not waver in its support for Ukraine. I hope he means it.

I have watched too many leaders pledge solidarity with Ukraine in public while quietly panicking about Putin’s threats in private. That private panic carries a cost. It has slowed the delivery of weapons at every stage of this war. It has handed Putin the initiative. And by dragging the fighting out, it has cost Ukrainian lives that faster, braver decisions would have saved.

Nobody should be under any illusion about whose war this is. It is not only Ukraine’s. It is ours.

If we ever allow Putin to win in Ukraine, he will not stop at the border. His next target will be the Baltics, or Poland. At that point it will be British soldiers in harm’s way, fighting Russia directly, under our own treaty obligations. Right now it is Ukrainians doing the fighting and the dying. They are spilling their blood not only to defend their own homes, but to defend ours. That is the cheapest defence Britain will ever be offered.

If anything, these threats are a reason to do more, not less. We should give Ukraine everything it needs. That means offensive weapons to strike the military machine Putin uses to wage this war.

It also means air defences to protect Ukrainian civilians from the daily terror of Russian missiles and drones, and to shield the power stations, water plants and hospitals that Putin targets on purpose.

Half measures do not calm Putin. They embolden him.

Let me put it as plainly as I can. Every time Putin complains, he is telling us our support is working. The louder he complains, the more we should do.

A previous version of this article was published by the British daily The Independent

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William Browder

IEP Bocconi Non-Resident Fellow

Sir William Browder, KCMG is a financier and political activist. He is the CEO and co-founder of Hermitage Capital Management, the investment adviser to the Hermitage Fund, formerly the largest foreign portfolio investor in Russia until he was declared “a threat to national security” in 2005 for exposing corruption in Russian state-owned companies.

He graduated in Economics from the University of Chicago and earned an MBA from the Stanford Graduate School of Business and received an honorary doctorate from Colgate University. He is also a Visiting Fellow at the Oxford Saïd School of Business (University of Oxford).

Browder began his career in the Eastern European practice of the Boston Consulting Group in London, then worked for Robert Maxwell’s Maxwell Communication Corporation, and subsequently managed the Russian proprietary investments desk at Salomon Brothers.

Browder and Edmond Safra (1932–1999) founded Hermitage Capital Management in 1996, investing an initial seed capital of $25 million in Russia during the mass privatization period following the fall of the Soviet Union.

In 2008, Browder’s lawyer, Sergei Magnitsky, uncovered a massive fraud committed by Russian government officials involving the theft of $230 million in state taxes. Magnitsky was subsequently arrested, imprisoned without trial, and systematically tortured.

Sergei Magnitsky died in prison on November 16, 2009. Ever since, Sir William has led the Global Magnitsky Campaign for governments around the world to impose targeted visa bans and asset freezes on human rights abusers and highly corrupt officials, introducing the passage of the Sergei Magnitsky Accountability Act in 2012 and the Global Magnitsky Human Rights Accountability Act in 2016. This legislation has since been adopted by 35 countries, including the USA, the UK, the EU, Canada and Australia.

For his exceptional service to the UK abroad and internationally, in recognition of his significant and sustained contribution to human rights and anti-corruption, he was appointed a Knight Commander of the Order of St Michael and St George (KCMG) by King Charles III in the 2024 Birthday Honours List.

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IEP Bocconi Recent Publications

The IEP Bocconi Mission

Founded by Bocconi University and the Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities.

The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus-building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States, and its citizens, in a rapidly changing world.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

I have spent the last 17 years at war with Putin. In all those years, I have never once seen Putin back down. I have never seen him compromise. I have never seen him do a single thing that looks like weakness

Bill Browder

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IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors

by Bill Browder

The internet is full of dramatic images right now. Russian oil refineries burning through the night. Long lines of traffic as people flee occupied Crimea. According to different intelligence sources, between 20 and 40 percent of Russia’s oil refining capacity has been disabled, and the country is now facing serious fuel shortages.

In Hungary, Viktor Orbán has lost his election. Peter Magyar is in charge, and he is no longer blocking EU funding or weapons for Ukraine.

And after that shameful meeting in the Oval Office, where Donald Trump told Volodymyr Zelensky that Ukraine “didn’t have any cards,” it now looks like Zelensky is holding a full house.

Vladimir Putin has admitted there are “problems” with his invasion, and warned of fuel shortages due to Ukraine’s growing attacks.

The historian Peter Frankopan notes that the average life expectancy of a new Russian recruit – from arrival at a training ground to death in a combat zone – now lies somewhere between 10 days and three weeks.

Once they are sent onto the battlefield, Russian fighters survive an average of 20 to 35 minutes. For the first time in a long while, Ukraine is on the front foot.

With all of this going on, a lot of clever people are saying the same thing. This is the perfect moment for Ukraine to negotiate. Strike while you have leverage. Even Zelensky is now framing his attacks as the path to a better deal at the table.

I want that to be true. Every friend of Ukraine wants it to be true. But I do not believe it will happen. And the reason has nothing to do with Ukraine. It has everything to do with Putin.

I have spent the last 17 years at war with Putin. It started when my lawyer, Sergei Magnitsky, was tortured and murdered in a Moscow prison for uncovering a massive fraud committed by Putin’s own officials.

I responded by campaigning for the Magnitsky sanctions, which now exist in more than 35 countries and freeze the dirty money of the people around him. In return, Putin has made me his number one foreign enemy.

In all those years, I have never once seen Putin back down. I have never seen him compromise. I have never seen him do a single thing that looks like weakness.

Here is why. Putin runs Russia like a prison yard. To survive in a prison yard, you have to be the most brutal, the most frightening, the most dangerous man in it.

The moment you show weakness, someone stronger takes your place. Putin knows that if that ever happens to him, he ends up in a cell or in a coffin.

So a man like that does not sue for peace because his refineries are on fire. He escalates.

That is what we should expect now. Not peace talks. Full escalation, even though it is a catastrophe for Russia and for ordinary Russians.

It will mean more massive attacks on Ukrainian civilians. It will probably mean a general mobilisation inside Russia, so that even more young men can be fed into the meat grinder.

None of it will change Putin’s position by an inch. It will simply kill more Ukrainians in their homes and more Russians on the battlefield.

So if there is going to be no real negotiation, how does this war actually end? In my view, it ends the way the Korean War ended. Which is to say, it doesn’t.

What I expect instead is an unspoken arrangement. Russia quietly stops bombing Ukrainian cities. In return, Ukraine quietly stops bombing Russian oil refineries and other economic targets.

There will be no summit. No handshake. No signed document. Just a practical decision on both sides, driven by necessity.

After that, the war becomes a war about the front line and nothing else. And here Ukraine has already changed the game. It has built a drone wall, a kill zone so dense that no Russian assault can break through it.

Over time, the fighting will get quieter. The attacks will become less frequent and less deadly. The front line will harden into a heavily fortified, demilitarised zone. The two countries will technically still be at war, but the war will fade into something close to silence.

Eventually it will look like the Korean peninsula. No fighting. No peace treaty either. Just a frozen line that holds for decades.

When will we reach that point? I cannot say. It depends on one thing above all: Ukraine’s ability to keep inflicting real economic pain on Russia. The more it costs Putin to keep this war going, the sooner the bombing stops.

And that is exactly where the West comes in.

We should stop waiting for a grand peace deal that Putin will never sign. We should stop treating a negotiated settlement as the goal.

The goal is simpler and harder than that – it is to make this war unaffordable for the Kremlin.

That means giving Ukraine the weapons to keep hitting Russia’s refineries and its war economy. It means keeping the sanctions in place and tightening them. It means the money and the patience to let Ukraine grind Russia down until the killing simply stops.

Putin will not be talked out of this war. He can only be worn out of it. The sooner we accept that, the sooner it ends.

A previous versions of this article were published by the British daily The Independent

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William Browder

IEP Bocconi Non-Resident Fellow

Sir William Browder, KCMG is a financier and political activist. He is the CEO and co-founder of Hermitage Capital Management, the investment adviser to the Hermitage Fund, formerly the largest foreign portfolio investor in Russia until he was declared “a threat to national security” in 2005 for exposing corruption in Russian state-owned companies.

He graduated in Economics from the University of Chicago and earned an MBA from the Stanford Graduate School of Business and received an honorary doctorate from Colgate University. He is also a Visiting Fellow at the Oxford Saïd School of Business (University of Oxford).

Browder began his career in the Eastern European practice of the Boston Consulting Group in London, then worked for Robert Maxwell’s Maxwell Communication Corporation, and subsequently managed the Russian proprietary investments desk at Salomon Brothers.

Browder and Edmond Safra (1932–1999) founded Hermitage Capital Management in 1996, investing an initial seed capital of $25 million in Russia during the mass privatization period following the fall of the Soviet Union.

In 2008, Browder’s lawyer, Sergei Magnitsky, uncovered a massive fraud committed by Russian government officials involving the theft of $230 million in state taxes. Magnitsky was subsequently arrested, imprisoned without trial, and systematically tortured.

Sergei Magnitsky died in prison on November 16, 2009. Ever since, Sir William has led the Global Magnitsky Campaign for governments around the world to impose targeted visa bans and asset freezes on human rights abusers and highly corrupt officials, introducing the passage of the Sergei Magnitsky Accountability Act in 2012 and the Global Magnitsky Human Rights Accountability Act in 2016. This legislation has since been adopted by 35 countries, including the USA, the UK, the EU, Canada and Australia.

For his exceptional service to the UK abroad and internationally, in recognition of his significant and sustained contribution to human rights and anti-corruption, he was appointed a Knight Commander of the Order of St Michael and St George (KCMG) by King Charles III in the 2024 Birthday Honours List.

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IEP Bocconi Recent Publications

The IEP Bocconi Mission

Founded by Bocconi University and the Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities.

The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus-building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States, and its citizens, in a rapidly changing world.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

The future of Europe’s payment systems is open and the opportunities are significant. What is needed is pragmatism and a firm focus on Europe’s overriding priorities: strengthening competitiveness and upholding monetary sovereignty. Success on both fronts may also increase the attractiveness of the euro internationally

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IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

Download the Working Paper

Executive Summary

Stablecoins have attracted a lot of attention in recent economic debates. Opinions are divided: according to some, they are the frontrunners of a new monetary system, freer, efficient and inclusive.

For others, they are another example of financial madness, unnecessary and dangerous. This somewhat overstates the debate, but not by much.

Framed in these terms, however, the debate misses the point. The issue is not only whether stablecoins or crypto tokens improve the monetary system or not, performing a useful role from a technical viewpoint: it is fundamentally about who controls those instruments. Who sets the rules, governs the supply, controls and uses the information they generate. The matter is political at least as much as it is economic and financial.

As such, it cannot be separated from the broader geopolitical question of the day, namely, what new arrangements will emerge from the crisis of the rule-based international order that we have seen unfolding – gradually, then suddenly, as Hemingway would say – in recent years. Monetary developments are a sideshow to the main act and cannot be understood except in relation to it.

This essay discusses technical and political factors that shape the future of stablecoins as means of payment.

We start (section 2) by looking at the initiatives by the Trump administration which, at the outset, promoted stablecoins as an entirely new private form of money, potentially complementing, or even replacing, traditional payment means.

In section 3 we examine whether stablecoins can be a “good” monetary instrument, in light of monetary theory and practice. We conclude that stablecoins perform this function only imperfectly, and only if properly regulated.

Section 4 compares stablecoin regulation in three jurisdictions: the US, the EU and the UK, highlighting their “regulatory philosophies”, strengths and weaknesses. Section 5 discusses political and economic influences driving current US policymaking in this domain, and their implications.

Section 6 concludes with a focus on Europe. After building advanced payment infrastructures in the early years of the ECB, more recently the EU has largely been a follower in digital payments.

This may now change: new projects such as Pontes and Appia may result in another leap forward. While upholding its principles, the EU’s priorities are to strengthen its competitiveness and defend its monetary sovereignty. In this way it can also enhance the euro’s attractiveness as an international currency.

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Ignazio Angeloni

Ignazio Angeloni is a IEP@BU fellow. In 2019-2022 he was a Senior Research Fellow in the Harvard Kennedy School’s Mossavar-Rahmani Center for Business and Government. From 2014 to 2019, he was a member of the ECB Supervisory Board.

In 2012-2013, Ignazio was Director General for Financial Stability at the ECB; in that capacity, he coordinated the establishment of the new banking supervision at the ECB.

He is the leading author of the IEP Bocconi report Feasible Steps to Finance Innovation in Europe: Six Proposals to Strengthen EU Capital Markets

Report Chair: Ignazio Angeloni

Rapporteur: Andrea Cavallini

IEP Bocconi Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP@BU Management Council

• Catherine De Vries, IEP@BU President

• Daniel Gros, IEP@BU Director

• Sylvie Goulard, IEP@BU vice-President, Professor of Practice in Global affairs at SDA Bocconi School of Management

• Silvia Colombo, IEP@BU Deputy Director

• Carlo Altomonte, Associate Professor at Bocconi University and Associate Dean for Stakeholder Engagement Programs at SDA Bocconi School of Management

• Arnstein Aassve, Professor in Demography at Bocconi University

• Valentina Bosetti, professor of Environmental and Climate Change Economics at Bocconi University

• Elena Carletti, Dean for Research and Professor of Finance at Bocconi University

• Eleanor Spaventa, Professor of European Union Law at Bocconi Law School

The fundamental question is not whether Europe should abandon the protection of privacy or fundamental rights. The real question is whether it can afford to continue treating regulation, by itself, as a strategy for economic and social development

Francesco Decarolis

IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

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For more than a decade, the European Union has tried to shape international markets through regulation. The clearest example has been the General Data Protection Regulation, the GDPR, which entered into force in 2018 and set stringent standards for the collection and use of personal data by companies and public institutions.

The GDPR was an ambitious piece of legislation, rooted in broadly shared values. For several years, it served as an international reference point. Large digital platforms adapted to it, many countries incorporated significant parts of it into their own legislation, and European regulators acquired unprecedented centrality.

This is what scholars have called the Brussels Effect: the EU’s capacity to turn internal rules into global standards by inducing companies and states to adapt in order to operate in the European market.

Today, however, that model shows two clear weaknesses. One is internal to Europe. The other is external.

The first concerns the implementation of the GDPR, which has proved costly, fragmented and often inconsistent, especially for smaller firms. The Draghi report makes this point explicitly, citing studies according to which the regulation has increased the cost for European companies of accessing and using data by around 20 per cent compared with the United States.

Other research has identified negative effects on innovation and venture capital investment, while the benefits for individuals remain uncertain, not least because it is structurally difficult to assign a value to privacy. This is the context in which the so-called privacy paradox emerges: the discrepancy between the importance people say they attach to privacy and their actual behaviour, which is often characterised by a relatively casual sharing of personal data.

The second difficulty concerns the geopolitical and economic environment in which the GDPR was born. That environment no longer exists. Ten years ago, Europe accounted for more than one fifth of global GDP. Today its share is around 14 per cent.

Over the same period, the United States and China have consolidated their dominance in technology, access to capital and control of digital infrastructure. In this new balance, the capacity to impose standards no longer derives only from regulatory power. It depends on a combination of economic scale, industrial strength and innovation capacity.

Europe Simplifies as China Builds a New Model

Europe is trying to respond to these difficulties. This is the context for the Digital Omnibus, a European Commission proposal to revise the GDPR and other pieces of digital legislation as part of a broader process of simplification and rationalisation of the regulatory framework.

The reform aims to correct some of the rigidities that have accumulated over the years. Precisely because it is a highly technical intervention, but one that is also likely to affect fundamental rights and technological architectures, the Omnibus does not lend itself easily to simplified political readings.

Yet, despite the relevance of the Digital Omnibus, the European debate remains largely trapped in ideological categories, feeding a sterile opposition between “more rules” and “fewer rules”. This is misleading. The central question is not whether to deregulate, but how to regulate better, reconciling rights protection with innovation and competitiveness in a global context that has changed profoundly.

Meanwhile, it is necessary to look at what is happening in the rest of the world, which is moving along increasingly autonomous trajectories and is less and less interested in what happens in Europe.

One apparently distant, but particularly significant, signal is China’s decision to promote the World Digital Organization, or WDO, a multilateral initiative designed to define rules and standards on data governance, artificial intelligence and digital trade.

The WDO now brings together more than 200 members from over 40 countries, including companies, universities, think tanks and financial institutions. It is not a replica of the European model. It is its conceptual opposite: a form of regulation explicitly oriented towards industrial development, controlled interoperability and the protection of the state’s strategic interest.

Collective Interest, Not the Individual

The creation of the WDO is another component of China’s broader and more articulated data strategy. It follows the path opened by the Personal Information Protection Law, or PIPL, adopted in 2021, a law that has a structure and several legal features similar to those of the GDPR. It is the result of an evident process of borrowed regulation.

The logic of implementation, however, is profoundly different. The European model is based on directly enforceable individual rights. The Chinese model remains anchored in an administrative governance of data, oriented towards national security and industrial policy objectives.

Even where there is apparent convergence, the difference remains. The GDPR keeps the protection of the individual at its centre. The Chinese model reflects a conception of data subordinated to the collective interest.

Two profoundly different visions therefore emerge. Europe continues to rely on independent authorities tasked with preserving the balance between rights and markets. China offers a model of data governance in which regulation becomes a direct instrument of industrial policy.

Europe Needs a Dose of Realism

Two main conclusions follow from this comparison, corresponding to the two weaknesses identified above.

The first concerns the international context. Rather than asking, in abstract terms, which model of data and digital governance is best, Europe should recognise that the world no longer automatically converges towards its regulatory architecture.

The second concerns the need for urgent reforms, both at EU level, through the Digital Omnibus, and at national level. Data protection authorities have acquired considerable power over time. They now need a clearer framework of accountability, coordination and, above all, assessment of the economic effects of their decisions.

The fundamental question is not whether Europe should abandon the protection of privacy or fundamental rights. The real question is whether it can afford to continue treating regulation, by itself, as a strategy for economic and social development.

The world is no longer waiting for Brussels. Defending the European idea of regulation now requires less moral rhetoric and more economic realism. Otherwise, the price may be paid by the European social model itself.

A previous version of this article was published by the Italian monthly ECO

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Francesco Decarolis

Iep Bocconi Fellow

Francesco Decarolis is Full Professor at the Department of Economics, Bocconi University - Milan. His area of research is Industrial Organization and he mostly works on topics in competition economics, antitrust, market design, public procurement and the regulation of digital platforms

IEP@BU Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

Adjusted for exchange rates and inflation, the entire French presidential election cost about $107mn at today’s prices, slightly more than the Michigan primaries and less than those in Texas

IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

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It is hardly news that American elections are expensive. Very expensive. But recent developments have pushed spending to levels that would have been unimaginable until only a short time ago.

Consider the highly publicised Democratic Senate primary in Michigan between progressive candidate Abdul El-Sayed and centrist Haley Stevens. The candidates spent more than $80mn on this contest alone: $63.9mn by Stevens, $7.3mn by El-Sayed and $9.7mn by other candidates. That amounts to more than $50 per voter.

To this must be added the $17.3mn spent by Republican candidate Mike Rogers, who faced no opposition in his party’s primary but still needed to avoid disappearing from voters’ radar.

In total, Michigan’s primaries cost about $100mn.

They were not even the most expensive primaries in American history. That distinction belongs to those held in Texas a couple of months earlier. Republicans dominated the spending, with $99.2mn spent on their primary and $35.7mn on the Democratic contest, bringing the total to almost $135mn.

It is worth conducting a small comparative-politics exercise and asking how these figures compare with what Europe spends on its election campaigns.

Take the 2022 French presidential election, for which precise data are available. The candidates and the parties supporting them spent a total of €83mn. Adjusted for exchange rates and inflation, the entire French presidential election cost about $107mn at today’s prices, slightly more than the Michigan primaries and less than those in Texas.

Yet Michigan and Texas held only primaries. These amounts are therefore merely a foretaste of what is still to come. Spending in the French presidential election amounted to about $3 per voter at current prices.

The comparison with Europe shows just how far the influence of money over the US political system has escaped control. And the situation is only getting worse.

In the 2012 elections, contributions from major donors were divided more or less evenly between Democrats and Republicans, while the ten largest megadonors spent about $245mn.

After the Supreme Court effectively removed limits on independent election spending in 2010, the sums increased year after year until they reached stratospheric levels.

In the 2024 presidential election, the ten largest megadonors spent $1.19bn, with Elon Musk alone contributing $288mn.

Another major change concerns the distribution of this money. The balance has shifted radically, with spending now favouring Republicans by a ratio of three to one.

The acceleration of this democratic degeneration is partly the result of the rise of “charismatic capitalism” in the United States. For the new oligarchs, the objective is not only to advance their economic interests but also to promote their political vision, seeking to confer quasi-sovereign powers on their corporations.

Given the scale of their personal fortunes, allocating a few hundred million dollars to politics is an investment capable of producing exceptionally high returns.

Under Donald Trump, the unhealthy fusion of these new forms of economic power with public authority has become a structural feature of the US political system. Its evolution threatens the very notion of free and fair elections and places the future of American democracy at risk.

Should Europe be concerned? Yes. The tentacles of the MAGA octopus do not stop at national borders.

We have recently witnessed the activism of figures such as Elon Musk and Peter Thiel, who have used different methods to support Europe’s far right and spread misleading narratives, as the recent episode in Ceuta demonstrated.

With seven national elections due to take place in the European Union next year, the multiplication of such interference, alongside similar activities by Russia and China, represents a real danger.

European countries already possess instruments with which to defend themselves: the Foreign Information Manipulation and Interference toolbox, known as FIMI, and the Digital Services Act.

A bipartisan motion in the Italian parliament calling on the government and the European institutions to ensure the rigorous and consistent enforcement of EU rules would be a good place to start.

Who will put it forward?

A previous version of this article was published by Il Sole 24 Ore

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Moreno Bertoldi

Moreno Bertoldi is Senior Associate Research Fellow at the Italian Institute for International Political Studies (ISPI).

Marco Buti

Since April 2023, Marco Buti has held the Tommaso Padoa-Schioppa Chair at the Robert Schuman Centre. Before joining the EUI, Buti was Chief of Staff of the Commissioner for the economy, Paolo Gentiloni. Between 2008 and 2019, he was Director-General for Economic and Financial Affairs at the European Commission. Moreover, he has been the Commission Finance Deputy at G7 and G20.

He is an IEP@BU fellow.

IEP Bocconi Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

Constraints currently forcing cross-border groups to obey prudential requirements in every country they operate in, rather than only in the market where the head office is, should be removed. The Commission seems inclined to give this power to the ECB, enabling it to grant regulatory waivers. This would be a mistake

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IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

In what may be the sharpest turn in EU banking policy since the launch of sector supervision by the European Central Bank in 2014, Brussels recently issued a paper setting priorities for future banking laws. Two features are novel and welcome.

The first is that the competitiveness of the EU banking sector occupies centre stage.

To promote European goals in a fractured and less co-operative global stage — the argument goes — EU banks must be able to compete with global banks, mainly from the US, which at the moment outperform them in most lines of business, notably investment banking.

This signal in the strategy is an overdue turnaround of a decades-old tradition in which making banks safe was seen as either the only goal or the key to everything else.

Equally important, the new strategy identifies fragmentation as a key source of weakness. The EU lacks genuine continental lenders; banking champions are large in their own countries but are small globally.

Cross-border business is discouraged by EU regulation and national politicians who see local banks as sources of influence and promoters of national goals. While this is a well-known fact, seeing it printed in an official EU document is a novelty.

That said, announcing a new strategy does not guarantee meaningful change. Implementation is key. The immediate challenge for the EU is to design and approve a legal framework enacting the strategy. This is where high hopes are often shipwrecked.

The need to garner support from a majority of member states typically ignites horse-trading. As a result, proposals can lose force and become unrecognisable.

Political negotiation is unavoidable, but the EU Commission should be clear upfront on the red lines and on one above all others: banks with the ambition and the force to operate across national frontiers must face a “country-blind” regulatory framework, subject exclusively to EU laws and authorities, independent of national rules.

Constraints currently forcing cross-border groups to obey prudential requirements in every country they operate in, rather than only in the market where the head office is, should be removed.

The Commission seems inclined to give this power to the ECB, enabling it to grant regulatory waivers. This would be a mistake.

ECB supervision deliberates by simple majority in a board composed of 21 national and six European appointees. Coalitions in support of national demands, explicitly or implicitly trading favours, are easily formed.

The “country-blind” notion, established in principle, would have trouble being enacted in practice. For this to be avoided, directly applicable EU law must unambiguously state that banks operating across frontiers — at least the major ones — must be regulated at European level only.

Another pitfall in an otherwise commendable strategy is in limiting the notion of banking integration to continental Europe alone. Fragmented or integrated as it may be, the EU banking sector lies twenty miles away by sea from one of the main banking and financial centres of the world.

Strikingly, the EU Commission communication never mentions the UK. But furthering EU banking integration while leaving the UK out of the picture makes no sense. The EU prevails in the formation of savings while the UK dominates in managing them; a natural complementarity which the post-Brexit experience, far from weakening, seems to have strengthened.

From 2016 to the end of 2024 trade in financial services across the channel has increased by over 50 per cent in both directions. EU and UK interests in promoting reciprocal financial integration clearly converge.

While reforming its own legislation is an EU priority, a parallel process must bring the two financial sectors closer to each other, facilitating exchanges by eliminating regulatory barriers.

Re-establishing supervisory equivalence between the respective regulators, filling the gap created in recent years, is a first step.

Exchanges of professional staff and mobility of capital should be facilitated. Over time, a comprehensive agreement covering all aspects of trade in financial services must be the objective.

Under the pragmatic guidance of the Commissioner for financial services Maria Luis Albuquerque, the EU has made a notable step in recognising the realities and challenges of its banking sector. The task is neither finished nor free from obstacles. But with the goal clearer, the chances of progress are favourable.

The opportunity should not be missed.

A previus version of this article was published by the Financial Times

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Ignazio Angeloni

Ignazio Angeloni is a IEP@BU fellow. In 2019-2022 he was a Senior Research Fellow in the Harvard Kennedy School’s Mossavar-Rahmani Center for Business and Government. From 2014 to 2019, he was a member of the ECB Supervisory Board.

In 2012-2013, Ignazio was Director General for Financial Stability at the ECB; in that capacity, he coordinated the establishment of the new banking supervision at the ECB.

He is the leading author of the IEP Bocconi report Feasible Steps to Finance Innovation in Europe: Six Proposals to Strengthen EU Capital Markets

Report Chair: Ignazio Angeloni

Rapporteur: Andrea Cavallini

IEP Bocconi Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia

President

Sylvie Goulard

Vice-President

Paloma Lopez-Garcia

Director

Silvia Colombo

Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

Media reports suggest that the European Central Bank was “notified” of the intervention. By contrast, European finance ministers, and in particular Eurogroup President Kyriakos Pierrakakis of Greece, appear to have been kept in the dark. Yet in Europe, exchange rate policy is a shared responsibility of the central bank and the political authorities. This is all the more surprising because the purchase of the Japanese currency was conducted not against dollars, but against euros. The European authorities were not asked for permission

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IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

The extraordinary intervention in the foreign exchange market carried out by the US Treasury on Friday 31 July to support the Japanese yen has raised serious questions, both about the way it was conducted and about its underlying rationale.

The first concern is the absence of any reference to the G7 coordination framework, which in the past provided the basis for all interventions in foreign exchange markets. This is the first time that a purely bilateral operation has been undertaken by the finance ministries of the two countries. The last intervention involving the yen, in 1998, was conducted within the G7 framework.

This is a significant departure. Foreign exchange interventions affect not only the relationship between the currencies directly involved, in this case the dollar and the yen, but other currencies as well, starting with the euro. On this occasion, the US and Japanese authorities acted without regard for the others, ignoring the system of monetary cooperation developed over the past 40 years.

Media reports suggest that the European Central Bank was “notified” of the intervention. By contrast, European finance ministers, and in particular Eurogroup President Kyriakos Pierrakakis of Greece, appear to have been kept in the dark. Yet in Europe, exchange rate policy is a shared responsibility of the central bank and the political authorities.

This is all the more surprising because the purchase of the Japanese currency was conducted not against dollars, but against euros. The European authorities were not asked for permission.

The second concern relates to the objectives of the foreign exchange operation. The explanations provided publicly are not particularly convincing.

The official justification was that the yen’s exchange rate had become excessively volatile and that the currency was at risk of collapsing. The data, however, show that the volatility of the Japanese currency was no greater than that of other currencies.

As for the yen’s depreciation over recent months, it largely reflects the gap between short-term interest rates in the United States, at just under 4 per cent, and those in Japan, which remain at 1 per cent. Under these conditions, borrowing in yen and investing in dollars represents a particularly profitable speculative strategy, the so-called carry trade.

The yen’s depreciation is, in fact, primarily the result of the different underlying conditions of the two economies. As long as this divergence persists, the yen will continue to depreciate and interventions in the foreign exchange market will have only temporary effects.

To counter the yen’s depreciation, the interest rate differential would have to narrow. The Federal Reserve would need to cut US interest rates, while the Bank of Japan would have to raise Japanese rates. In the current environment, however, neither move appears particularly plausible.

As long as inflation remains high in the United States, the Federal Reserve is more likely to raise rates than to cut them. In Japan, rates should rise, but the central bank is facing pressure from the government to move in the opposite direction.

The market appears to have understood this. The joint intervention initially strengthened the yen by around 8 per cent, but after a few days the Japanese currency gradually began to slide again.

Some commentators suspect that the intervention’s real purpose is to put pressure on the Federal Reserve and discourage it from raising interest rates at its next meeting in September. If the Fed will raise rates, the effects of the recent intervention will vanish and the pressure on Japanese government bonds will rise again.

Yields on ten-year Japanese government bonds recently reached 2.75 per cent, a level not seen for 30 years. Yields on 30-year bonds climbed as high as 3.90 per cent.

The US Treasury fears that a crisis in Japan’s public debt, which has stabilised at around 205 per cent of GDP, could spill over into the US Treasury market.

The intervention was conducted in euros rather than dollars precisely to avoid encouraging the sale of US government bonds, which would have had a negative impact on investor confidence.

The most interesting aspect, and one that has attracted little attention from commentators, concerns the intervention’s effects on the euro-dollar exchange rate. One might have expected the sale of euros to weaken the European currency. Instead, the euro held its ground and even appreciated against the dollar.

This suggests that financial markets now regard the euro as sufficiently robust and liquid to absorb this kind of intervention. It also indicates that investors are not entirely convinced by the merits of the US Treasury’s action nor by its consistency with monetary policy.

The US intervention to support the yen is not yet an own goal, but it may soon become one.

A previous version of this article was published in the Italian daily Il Foglio

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Lorenzo Bini Smaghi

Lorenzo Bini Smaghi holds a degree in Economic Sciences from the Université Catholique de Louvain (Belgium) and a Ph.D in Economic Sciences from the University of Chicago. He has been Chairman of the Board of Directors of Société Générale since 2015. He is an IEP@BU non-resident fellow

IEP@BU Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

As anti-migration rhetoric has become a highly valuable electoral asset across much of Europe’s right, Spain’s crisis offered a valuable opportunity to catch two birds with one stone: at once stirring anti-immigrant sentiment and delivering a blow to a political rival – one of the most prominent symbols of the global left, Pedro Sánchez. But this is precisely what the Migration Pact was aimed at avoiding: the handling of migration as a perennial stress to EU unity, subject to the political will of individual Member States

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IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors

“The Migration and Asylum Pact is a step in the right direction”, stated Danish Immigration Minister Kaare Dybvad Bek after the European Parliament approved the legislation in April 2024.

In April 2025, Giorgia Meloni pushed to accelerate the application of some of the Pact’s provisions, welcoming them “with great satisfaction”.

As the Pact entered into application in June 2026, it was paired with the regulation on returns – celebrated by Meloni as a “historic legislation” and a “great success for Italy”, while Danish Prime Minister Mette Frederiksen described it as marking “new important milestones.”

Barely six weeks later, these same governments have been leading a political offensive against Spain in the Ceuta migrant crisis, despite Spain having respected all provisions of the Pact.

This inconsistency suggests that EU leaders might be dangerously placing political propaganda ahead of the rule of law.

The 22 leaders’ response

After over 70 thousand people crossed from Morocco into Ceuta last week, Meloni and Frederiksen coordinated a letter co-signed with 20 other EU leaders.

The letter accused Spanish policies of serving as “pull factors,” and raised the prospect of national governments reintroducing controls at their internal Schengen borders.

Italy effectively reintroduced controls at its air and sea borders with Spain from 1 August to 1 September, citing the risk of secondary movements following the events in Ceuta.

The central complaint of the letter is that Spain has adopted a national policy to regularize migrants already living in the country, which they argue is incompatible with Europe’s common migration policy and having encouraged the Ceuta crossings.

Yet no evidence supports this view and the timing casts doubt on it: Spain’s one-shot regularization policy entered into effect in April 2026 and applied only to migrants who have lived in Spain for more than five years and arrived in the country up to December 2025. It’s unlikely that seventy thousand migrants collectively happened to misinterpret Spain’s policy as still applicable and simultaneously decided to storm the Ceuta border on a random day two months and a half after the law’s passing.

Also, past waves of mass crossings from Morocco to Ceuta – most recently in May 2021 – have occurred repeatedly, well before the introduction of Spain’s recent policy.

Increasing evidence, instead, points to the fact that migrants have been victims of a coordinated social-media deception, presumably orchestrated with the involvement of foreign secret services. Migration seems to be increasingly used as a geopolitical pressure strategy.

Differences with past episodes

From the perspective of Spain, this represents an unexpected migration shock that, under the current regulation, could trigger the provisions of the Migration Pact to support the Member State facing the crisis. And it should have also triggered, at least prima facie, the support and solidarity that the EU showed in past migration crises to other Member States.

During the 2015 refugee emergency, for instance, the Council created exceptional relocation mechanisms explicitly for the benefit of Italy and Greece.

When Turkey pushed migrants to the Greek border in 2020, Ursula von der Leyen travelled to the frontier and declared that Greek concerns were European concerns. She thanked the Greek authorities, promised operational support and €700 million in assistance, and concluded by thanking Greece for acting as Europe’s “shield.”

When Lithuania faced a sudden increase in crossings from Belarus in 2021, Frontex and Europol deployed assistance. European countries supplied shelters, generators and other equipment, and the Commission described the response as one of “strong solidarity with Lithuania.”

When Lampedusa experienced a wave of arrivals in September 2023, von der Leyen traveled to the island alongside Meloni. The Commission presented a ten-point plan that included Frontex and EU assistance, transfers from Lampedusa and use of the voluntary solidarity mechanism.

In all these instances, although the implementation might have later proven inadequate, the spoken principle was clear: disproportionate pressure on an EU external-border State requires pan-European support. This is also one of the key principles of the Migration Pact in effect since June of this year.

At Ceuta, instead, Spain was met with the opposite of solidarity. Its policies were insinuated to have attracted the arrivals, with no basis for such accusations. Its commitment to border control was questioned, despite the army having been deployed and nearly all migrants having been returned to Morocco within days.

Internal Schengen controls were activated, despite the absence and the geographical impossibility of secondary movement – as travel from Ceuta to continental Europe is heavily monitored.

Domestic propaganda at the core of tensions

This difference in reaction cannot be explained by facts or by the law. It is explained by domestic politics.

As anti-migration rhetoric has become a highly valuable electoral asset across much of Europe’s right, Spain’s crisis offered a valuable opportunity to catch two birds with one stone: at once stirring anti-immigrant sentiment and delivering a blow to a political rival – one of the most prominent symbols of the global left, Pedro Sánchez.

But this is precisely what the Migration Pact was aimed at avoiding: the handling of migration as a perennial stress to EU unity, subject to the political will of individual Member States.

The Pact establishes a common framework to handle the migration crisis; it regulates screening, asylum procedures, responsibility for applications, reception conditions, returns, crisis management and solidarity between Member States.

Its framework was specifically designed to deal with sudden mass arrivals like the one at Ceuta. But if, at the first major crisis after its entry into application, national leaders revert to unilateral border measures and public accusations unrelated to its provisions; the authority of the Pact is undermined almost immediately.

Furthermore, the Pact does not establish common legislation on migrant regularization.

Member States retain the sovereignty to set their own rules for granting a permit to stay to migrants. As a result, Spain’s criticized law is perfectly compatible with the Pact.

Other Member States are entitled to disagree with it, but it does not exempt them from complying with the provisions they wrote in the Pact. This is the opposite of what Italy did when it reintroduced internal border controls.

Schengen is not merely a travel convenience. The removal of internal borders is a core element of the EU’s legal and economic infrastructure. Re-instating internal border controls to attack another government’s politics turns Schengen into an instrument of diplomatic pressure. By restricting one of the Union’s central achievements, countries show that they are willing to put their political propaganda above the core freedoms and principles of EU unity.

What is at stake

When this propaganda pull grows stronger, facts become secondary. The lives of the migrants approaching Ceuta, the provisions of the Migration Pact, the bindingness of common EU regulations in general, even the unprecedentedly swift resolution of the crisis by Spain – all fade into the background of the national media frenzy.

The absurdity of Spain facing criticism from Italy, after having repatriated in four days more migrants than Italy repatriated in four years, might be the single most relevant indicator of how detached from reality the partisan propaganda has gotten.

This is why the 22 leaders’ letter is more worrisome for what it represents than for what it actually says. It represents the willingness of Member States to put, once again, national political gains above common EU principles and legislative advancements.

Ceuta is therefore about more than just Spain’s border, in two ways. First, it is an early test of whether the new migration system will function as law.

The lesson from the Pact’s first crisis might be stark: Europe spent years negotiating common rules, only to allow propaganda to overrule them within weeks.

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Pietro Galeone

Head of Labor and social policy Unit

Pietro Galeone is a researcher at IEP@BU and lecturer at Bocconi University. His research currently focuses on education and labor economics, youth policies and social inclusion. He obtained his BA in Social Studies from Harvard University, focusing on the relevance of economics for euroscepticism, with a secondary degree in Astrophysics.

He then completed his PhD in Economics at Bocconi University, focusing on migration and school-to-work transitions.

In 2021-2022, he served as economic advisor to the Italian Minister for Labor and Social Policies, representing Italy in the Council of the EU’s employment committee (EMCO) and in the G20 Employment working group.

He was also EU Youth Guarantee coordinator for Italy and Italian representative in the Minimum Income Network (MINET) of the European Commission.

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IEP Bocconi Publications

The IEP Bocconi Mission

Founded by Bocconi University and the Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities.

The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus-building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States, and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

Uncertainty over US monetary policy risks spreading to the other major economies. It appears increasingly likely that the European Central Bank will raise its policy rates again, to 2.5 per cent, at its September meeting

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IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

The new chair of the Federal Reserve, Kevin Warsh, has a problem. He would like to raise interest rates to fight inflation, but not before the midterm elections on November 3. He wants to avoid slapping President Donald Trump on the face, as he appointed him with an explicit mandate to cut rates as soon as possible.

Warsh’s concern is understandable. Although the Federal Reserve is independent, the effectiveness of monetary policy depends on the broader macroeconomic and political environment. Starting a confrontation with the White House is hardly the best way to begin a term at the helm of the US central bank.

Jerome Powell, Warsh’s predecessor, publicly rejected the president’s pressure. Yet he still cut interest rates three times at the end of 2025 and refrained from raising them in 2026, even as inflation climbed from 2.4 per cent in January to 4.2 per cent in May.

In his first public appearance, in mid-June, Warsh announced that rates would remain unchanged. At the same time, he reassured markets that the central bank’s overriding priority was to bring inflation back to 2 per cent.

Investors understood the message: sooner or later, rates would go up. Warsh’s communication strategy, aimed at buying time and encouraging markets to “do the central bank’s work” by pushing up long-term interest rates, seemed to succeed.

Warsh may also have expected, based partly on statements from the administration, that the Iranian conflict would end quickly following the ceasefire agreement reached in mid-June, allowing commodity prices to fall back.

Last Wednesday, the US central bank again decided to keep interest rates unchanged. The decision was not unanimous, however, as three of the Federal Open Market Committee’s 12 voting members supported a hike. This suggested that monetary policy would eventually have to be tightened.

During the press conference, Warsh declined to provide markets with clear guidance on the Fed’s future course, keeping all options open for the coming months.

Concerns have therefore intensified that the Fed is underestimating inflationary risks, as it did four years ago, and that it may not be sufficiently independent to raise rates in the run-up to an election.

Long-term interest rates have continued to rise. Over the past month, yields on 10-year US Treasuries have increased by 30 basis points, approaching 4.9 per cent. That is close to the 10-year high reached during the previous inflationary episode of 2022-23. Yields on 30-year Treasuries have already reached a 20-year high of 5.2 per cent.

The negative effects are beginning to be felt in equity markets, which have been under pressure for several days. Experience shows that the longer an interest rate increase is delayed, the more severe the tightening may have to be to bring inflation back within the stated target. The repercussions for the real economy and corporate balance sheets will be correspondingly more serious.

Warsh’s problem is that the elections are still three months away, a long time for financial markets. The next meetings of the Federal Open Market Committee are scheduled for September 16 and October 28. The second will take place just one week before the elections, making a rate increase at that meeting appear highly unlikely.

Unless the outlook for the conflict in the Middle East changes dramatically, a prospect that seems less likely by the day, inflationary pressures will not subside.

Against this backdrop, the likelihood of a rate increase at the end of the summer, and of an institutional confrontation with the White House, is growing by the day.

The global repercussions are already being felt. European long-term interest rates have risen in parallel with those in the US. Yields on 10-year German government bonds have exceeded 3 per cent, their highest level since 2011. Spreads on Italian and French government debt have started widening again.

Uncertainty over US monetary policy risks spreading to the other major economies. It appears increasingly likely that the European Central Bank will raise its policy rates again, to 2.5 per cent, at its September meeting.

Such a move would reassure markets of the ECB’s determination to fight inflation and avoid being drawn into corner, as the Fed seems to have ended.

Unless the it manages to rapidly get out.

A previous version of this article was published in the Italian daily Il Foglio

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Lorenzo Bini Smaghi

Lorenzo Bini Smaghi holds a degree in Economic Sciences from the Université Catholique de Louvain (Belgium) and a Ph.D in Economic Sciences from the University of Chicago. He has been Chairman of the Board of Directors of Société Générale since 2015. He is an IEP@BU non-resident fellow

IEP@BU Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

Some even suggest that Morocco, Israel and the US want to pressure Spain into relinquishing Ceuta, opening a corridor into Europe that would bypass Spanish — and therefore European — sovereignty and deal a fatal blow to the EU’s ambitions for strategic autonomy

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IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors

The crisis in Ceuta appears to be a migration crisis. But behind that initial appearance lies the story of a Europe threatened from without — by Moscow and Washington — and from within, by nationalism and extremism and their intrinsic anti-patriotism.

The 60,000 migrants who attempted to enter Europe from Morocco through Ceuta, Spain’s exclave in North Africa, represent a surge in arrivals unseen since the migration crisis of 2015.

The narrative that circulated during the first hours of the Ceuta crisis focused on Spain’s supposedly lax migration policies.

Pedro Sánchez’s government has regularised the status of 500,000 migrants, while the Supreme Court has restricted the authorities’ ability to turn back irregular migrants arriving by sea.

Almost immediately, 20 European governments, beginning with Italy’s, implicitly attacked Madrid rather than expressing solidarity, stressing the need to control the EU’s external borders.

The Italian government went further, suspending Schengen rules with Spain for a month. Its response could hardly have been more different from the solidarity Madrid showed Italy when it experienced a surge in arrivals in 2023.

On the surface, the story seems plausible. Spain’s Socialists have been too liberal towards irregular migration, while other European governments — most of them on the right — have reprimanded Madrid for endangering Europe’s security. But it takes little scrutiny to see how thoroughly this interpretation is steeped in disinformation and political manipulation. It is an ill-informed reading.

It is ill-informed because the regularisation applies only to migrants who have lived in Spain for more than five years and arrived in the country before January 2026.

It is ill-informed because Madrid has never been soft on irregular migration. According to figures from the European border agency Frontex, rightwing-governed Italy recorded twice as many irregular arrivals over the past year as leftwing-governed Spain.

The figures on returns are even more embarrassing for Italy’s rightwing government: Spain carried out 1,366 in 2024, compared with just 60 by Italy. Spain is no soft touch on irregular migration. Virtually all the 60,000 people who arrived in Ceuta have already been returned to Morocco.

The interpretation is also ill-informed because Ceuta, although Spanish and therefore European territory, is in practice outside the Schengen area.

There are strict controls on entry from Ceuta — and Melilla, Spain’s other North African exclave — into the rest of Spain.

It is harder for an irregular migrant to reach the Iberian peninsula from Ceuta than to arrive there directly from Morocco. Officials at Italy’s interior ministry are well aware of this, making Rome’s decision to suspend Schengen rules temporarily for Spain all the more scandalous.

How, then, can we explain a crisis that erupted out of nowhere and was resolved just as quickly? The real story is unfortunately far more enduring than the Ceuta crisis itself. It concerns the internal and external threats facing Europe.

The far right is on the rise across the continent. With elections approaching in France, Italy and Spain in 2027, the threat has never been more tangible. In European countries already governed by the right, Sánchez’s administration is an obvious target. This is all the more true given Spain’s record.

The country leads Europe’s economic growth rankings, thanks in part to migration, while enjoying some of the continent’s lowest energy prices as a result of its rapid expansion of renewable power. Migration and green energy are anathema to the right.

Then there are governments such as Germany’s which, although not far right themselves, shortsightedly chase after it, terrified of being overtaken.

Alongside the internal causes of Europe’s crisis are external ones. The bogus account of the events in Ceuta — an invasion supposedly invited by Madrid’s liberal policies — circulated immediately and spread like wildfire, amplified by social media, particularly Elon Musk’s X, by US President Donald Trump’s statements against Spain and by Russian trolls.

We have already seen the MAGA world and the Kremlin working in concert to divide Europe in the Ukrainian theatre. Ceuta is the sequel.

Morocco encouraged the false account of the crisis, partly because of its close ties with Israel and the Trump administration — which, during Trump’s first presidency, recognised Morocco’s occupation of Western Sahara — and perhaps partly in response to Sánchez’s recent visit to Algeria.

After all, this is not the first time Rabat has used migration as leverage against Madrid, just as Tunisia, Libya and Egypt regularly do against Italy, and Turkey against Greece and the EU as a whole.

Some even suggest that Morocco, Israel and the US want to pressure Spain into relinquishing Ceuta, opening a corridor into Europe that would bypass Spanish — and therefore European — sovereignty and deal a fatal blow to the EU’s ambitions for strategic autonomy.

Spain is reviled not only by Europe’s right but also by Trump and Israeli Prime Minister Benjamin Netanyahu because of its positions on defence, migration, renewable energy and social media — and, in Israel’s case, the Palestinian question.

This is where Europe’s internal threat from the right converges with the external threats emanating from Moscow and Washington. The external objective is to divide and weaken Europe, turning it into territory ripe for conquest.

The most effective means of achieving that goal is to support the rise of Europe’s domestic rightwing forces, which unpatriotically allow themselves to become the useful idiots of other powers’ imperial designs.

A previous version of this article was published by the Italian daily La Stampa

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Nathalie Tocci

Nathalie Tocci is a senior fellow of the Institute for European Policymaking at Bocconi University. She has been Director of the Istituto Affari Internazionali from 2017 to 2026. She has been Special Advisor to EU High Representatives Federica Mogherini and Josep Borrell. In that capacity, she wrote the European Global Strategy and worked on its implementation. She is also Professor of the Practice at SAIS Europe.

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IEP Bocconi Publications

The IEP Bocconi Mission

Founded by Bocconi University and the Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities.

The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus-building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States, and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia

President

Sylvie Goulard

Vice-President

Paloma Lopez-Garcia

Director

Silvia Colombo

Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci

If Europe accepts strategic dependency, the world risks becoming a system of competing empires and transactional regionalism. If Europe succeeds, it can offer a different model: a middle-power politics based on cooperation, autonomy and mutual restraint. But how Europe frames its own response matters enormously

Paloma Lopez-Garcia

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IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the author

by Paloma Lopez-Garcia

Paloma Lopez-Garcia is Director of the Institute for European Policymaking at Bocconi University. IEP’s 2026 Annual Event — “At the Table or on the Menu? Europe, Middle Powers and International Order” — takes place on 18 November 2026 at SDA Bocconi, Milan. Further information and registration at iep.unibocconi.eu

A new chapter for IEP

When I took up the directorship of the Institute for European Policymaking (IEP) at Bocconi University in June 2026, I inherited something genuinely valuable: three years of rigorous, policy-relevant research produced by a talented and committed team, a growing network of world-class fellows, two successful annual events, a flagship innovation report and a reputation as a place where serious multidisciplinary thinking meets European policy ambition.

That mission is inspired by the example of our Honorary President Mario Monti, whose life in public service stands as a model of what it means to put rigorous analysis at the service of better policy for Europe.

IEP is now entering its fourth year. The question is no longer whether it can produce good work, it clearly can, but whether it can produce good work at the scale and with the visibility that its ambitions require.

Scaling up impact is not just about doing more of the same. It requires a more structured approach to how the institute organises its research agenda, how it connects to Bocconi’s extraordinary faculty and its network of fellows, and how it ensures that its output reaches the right audiences at the right moments.

This essay is my first public statement of how I intend to take that step. It explains the new operating model we are introducing, the research agenda we have chosen for this cycle, and what you, our subscribers, partners, fellows and readers, can expect from IEP over the coming year.

A new way of working

The change in how IEP operates rests on two elements. The first is that impact at scale requires predictability. The most influential policy institutes in Europe are recognisable not just because of individual pieces of work but because of their rhythm: you know what to expect from them, when to expect it, and why it matters.

The second is that sustained analytical quality requires systematically tapping the full depth of the ecosystem in which IEP is uniquely embedded. Bocconi is one of Europe’s leading research universities, with world-class faculty across economics, law, political science and management. IEP’s greatest asset is its position at the heart of that community.

The new model is designed to activate it fully, connecting the institute’s policy agenda to rigorous, cutting-edge scholarship. Predictability builds the brand; Bocconi’s research depth gives it substance.

IEP’s new model introduces an annual cycle organised around a small number of focus topics chosen each year. These topics will change from cycle to cycle, responding to what is most urgent and where IEP can make the most distinctive contribution. The intellectual anchor of each cycle is the annual event, held every November.

Work begins before the event: we develop the questions and produce initial analysis that serves as the foundation for the event’s panels. The event itself is where those questions are sharpened in public, contested by the best thinkers and practitioners we can bring together, and opened up into the sub-questions and follow-up lines of inquiry that will occupy the institute for the months that follow.

This cumulative work is brought together in two forms: a concise, accessible synthesis for a broad policy audience, and a longer, more comprehensive topic-specific report showcasing the multidisciplinary depth of IEP’s approach, presented at an IEP event when relevant audiences are most receptive.

The accumulated expertise will also be available to our audiences in different formats across our communication channels throughout the year.

The annual cycle 2026-27

The global order has ruptured. Great-power rivalry, war, economic coercion, technological dependency, energy insecurity and protectionism are on the rise, while climate change unleashes growing disruption across the world. International law and multilateral organisations appear unable to reverse this tide.

In his Davos speech in January 2026, Canadian Prime Minister Mark Carney captured this shift with unusual clarity: the rules-based order sustained by American hegemony has become a fiction.

Ahead of us lie two options. The first is a dark law of the jungle, in which the strong do what they can and the weak suffer what they must: tariffs, financial infrastructure, supply chains, energy dependencies and digital platforms weaponised as instruments of coercion. The second is the possibility for middle powers to work together to reform and strengthen international law and multilateral cooperation.

In this context, Europe faces a strategic bifurcation. This choice matters beyond Europe.

If Europe accepts strategic dependency, the world risks becoming a system of competing empires and transactional regionalism. If Europe succeeds, it can offer a different model: a middle-power politics based on cooperation, autonomy and mutual restraint.

But how Europe frames its own response matters enormously.

In Brussels, the new global disorder has produced a reflex toward asserting EU sovereignty understood as the capacity to go it alone, to behave, in other words, as a great power rather than a middle one.

As IEP Senior Fellow and former Director Daniel Gros has argued, this instinct is misguided: “Instead of emphasising the EU’s ability to go it alone, the EU should grasp the opportunity to lead the large group of like-minded middle powers that are looking for their place in this world without a benevolent hegemon.” The EU cannot replace the United States as global hegemon. But, as Gros puts it, “it can offer something more useful for the present moment: leadership without domination.”

Yet Europe cannot lead this middle-power moment through rhetoric alone. Strategic autonomy requires institutions, investments and innovation, and the gaps are real and consequential across the four domains that will define whether Europe is at the table or on the menu. In trade, what does it mean in practice for Europe to move from passive rule-taker to active architect of new frameworks, and what are the costs and trade-offs of a “made with Europe” strategy versus a purely defensive “made in Europe” approach?

In technology, where should Europe place its bets in the AI race, given its genuine strengths in regulation and in specific domains, and how can it avoid being left with oversight of a technological landscape it did not shape?

In security and defence, what does rearmament at the required scale actually cost, how should it be financed, and what institutional architecture, including potentially a European Security Council, can transform ad hoc coalitions into durable strategic capacity?

And in energy and climate, how can Europe reconcile the green transition with energy security, industrial competitiveness and social cohesion, at a moment when the political sustainability of that transition is under serious pressure?

These are the questions that define IEP’s research agenda for this cycle. We come to them with two lenses that are essential and too rarely combined.

The first is a policy lens. IEP’s aim is not simply to describe the challenges Europe faces, but to illuminate the choices and trade-offs involved in addressing them, and to put the best available evidence in the hands of those who have to make the decisions.

The second is a multidisciplinary lens. The world does not organise itself by academic discipline, and neither do the problems Europe faces. Trade and economic coercion is simultaneously an economics question, a legal question and a political economy question. Energy and climate connects macroeconomics, climate science, industrial policy and geopolitics in ways that no single discipline can address alone.

Defence and security is inseparable from public finance, macroeconomics and industrial organisation. Technology and industrial policy sits at the intersection of innovation economics, regulatory theory and strategic studies.

IEP’s position inside Bocconi makes this multidisciplinary approach not just an aspiration but a practical reality. So does our diverse and distinguished community of fellows, who bring to these questions direct experience of European institutions, diplomacy, central banking, international law and strategic affairs.

The 2026 IEP’s Annual Event: At the table or on the menu?

The intellectual anchor for this cycle is IEP’s annual event on 18 November 2026: At the Table or on the Menu? Europe, Middle Powers and International Order.

The title captures the choice Europe faces with uncomfortable directness. To be at the table is to shape the rules, build the coalitions and define the terms on which the international order is rebuilt. To be on the menu is to be an object of others’ decisions.

The event brings together leading thinkers, senior policymakers, business leaders and academics for a full day of structured debate designed as a genuine intellectual exercise: each panel will frame the most important unresolved questions in its domain, surface the sharpest disagreements, and identify what rigorous analysis most needs to establish.

A high-level horizontal panel and a keynote speaker will address the overarching question: can Europe turn the middle-power moment into a strategic opportunity? Four topic panels will examine each specific domain where strategic autonomy is most immediately at stake: trade, technology, defence and security, and energy and green transition.

The first two panels address the external economic and technological dimensions of European autonomy.

On trade and economic coercion, the central question is whether Europe can move from passive rule-taker to active architect of new frameworks, and whether it can do so in a way that builds coalitions rather than alienates the partners it needs most.

The risk of a purely defensive response -asserting sovereignty through trade protection and “made in Europe” preferences- is that it closes off the coalition-building potential that gives Europe its greatest lever. What institutional forms could this take, and what are the costs and distributional consequences of the different strategic choices available?

On technology and industrial policy, the question is how Europe can build genuine technological sovereignty in a world where the AI race is being run primarily between the United States and China, leaving Europe at risk of regulatory strength without production capacity.

Where does Europe’s dependency bite hardest -across cloud and compute infrastructure, large language models, or the application layer where it is actually competitive?

Where can it lead through its genuine comparative advantages, whether in AI regulation, multilingual models, biomedical intelligence, semiconductor design, or critical raw materials? And what industrial policy architecture is needed to build on those strengths without distorting the single market or triggering retaliation?

The second two panels address the security and environmental foundations of European autonomy.

On defence and security, the gap between European ambition and European capacity has never been more visible.

IEP’s distinctive contribution is to bring a multidisciplinary lens to questions too often addressed in purely strategic terms: what are the required capabilities and what are the best strategies to acquire them, what does rearmament at the required scale actually cost, how should it be financed without crowding out investment in the green and digital transitions, and what is the appropriate institutional infrastructure given Europe’s existing commitments with other institutions?

As IEP Senior Fellow Nathalie Tocci has argued, collective action on security has repeatedly emerged outside existing institutions. A European Security Council could provide the permanent framework that preserves that momentum, but its feasibility, design and cost require rigorous analysis.

On energy and climate, the question is how Europe can reconcile energy security, the green transition, industrial competitiveness and social cohesion, imperatives that often appear to pull in different directions but ultimately depend on one another.

The wars in Ukraine and the Middle East have made clear that energy security and the green transition are not alternatives. Yet the transition faces its most serious political challenge since its inception, amid concerns about competitiveness and the uneven distribution of costs across member states and social groups.

What partnerships with energy-rich middle powers are strategically viable? What fiscal, industrial and social instruments can make the transition both effective and politically sustainable?

An Invitation

IEP is still a small institute but it is entrusted with a large ambition.

We cannot achieve that ambition alone, we need the engagement of the full Bocconi community, the active participation of our fellows, the collaboration of external researchers and practitioners, and the readership and critical engagement of all members of our community like you.

The annual event on 18 November is the moment when this cycle’s work becomes a public conversation.

I hope to see many of you there.

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Paloma Lopez-Garcia

IEP Bocconi Director

Paloma Lopez-Garcia is Director of the Institute for European Policymaking at Bocconi University.

She is an economist with nearly 25 years of experience in central banking, spanning the Banco de España and the European Central Bank (ECB). Throughout her career, she has specialised in bridging economic research and policymaking, combining rigorous analytical work with direct policy engagement at both national and European institutions. Her work has focused on some of the key long-term challenges facing Europe, including productivity growth, innovation, competitiveness, climate change, and technological transformation.

Before joining Bocconi, she was Adviser in the Economics Directorate of the ECB, where she contributed to the analysis of long-term growth and structural policies in the euro area. She coordinated the ESCB expert group on productivity, innovation and technological change, a collaborative research network bringing together economists from 18 national central banks and the ECB, and previously coordinated the Competitiveness Research Network (CompNet), a leading European research network on productivity and competitiveness.

Prior to the ECB, she spent ten years in the Research and Economics Department of the Banco de España. She obtained her PhD in Economics from the London School of Economics in 2003 under the supervision of Christopher Pissarides, recipient of the 2010 Nobel Memorial Prize in Economic Sciences.

Her research has been published in leading academic journals, and she has authored numerous policy reports on productivity, innovation, trade, competitiveness, labour markets, and the economic implications of climate change.

IEP Bocconi Publications

The IEP@BU Mission

Founded by Bocconi University and Institute Javotte Bocconi, the Institute for European Policymaking @ Bocconi University combines the analytic rigor of a research institute, the policy impact of a think tank, and the facts-based effort of raising public opinion’s awareness about Europe through outreach activities. The Institute, fully interdisciplinary, intends to address the multi-fold obstacles that usually stand between the design of appropriate policies and their adoption, with particular attention to consensus building and effective enforcement.

The Institute’s mission is to conduct, debate, and disseminate high-quality research on the major policy issues facing Europe, and the EU in particular, its Member States and its citizens, in a rapidly changing world.

It is independent of any business or political influence.

The IEP Bocconi Management Council

Marta Cartabia
President

Sylvie Goulard
Vice-President

Paloma Lopez-Garcia
Director

Silvia Colombo
Deputy Director

Carlo Altomonte

Arnstein Aassve

Valentina Bosetti

Elena Carletti

Daniel Gros

Eleanor Spaventa

Nathalie Tocci