European Central Bank

Tariffs have re-emerged as a key policy tool amid rising protectionism, renewed industrial policy activism and growing geopolitical fragmentation. This article analyses the conditions under which tariffs can encourage new greenfield foreign direct investment (FDI) projects, with a focus on the manufacturing sector. The results indicate that tariffs can encourage “tariff-jumping” greenfield FDI projects aimed at serving local markets.

Euro area financial markets hold significant untapped potential: deeper cross-border integration would improve the allocation of savings, lower the cost of capital and strengthen capacity to finance investment and innovation. To assess how the integration of euro area equity markets has evolved over time, this box applies a structural gravity model, the workhorse of international trade analysis, to bilateral euro area equity holdings.

This box shows that older workers have contributed significantly to euro area employment growth in recent years, largely because they are retiring later. The share of retired individuals in the total population shows little sensitivity to the economic cycle, but has decreased steadily over the past two decades, with this decline having shifted more towards older age groups. The share of retirees is still falling among individuals in their early to mid-60s and appears likely to also do so among older age groups.

We empirically analyse the role of judgement in assigning overall scores by the euro area supervisors as part of the yearly Supervisory Review and Evaluation Process (SREP), which evaluates banks’ risks and sets supervisory actions. We also analyse its role in shaping the drivers of the Pillar 2 capital requirement (P2R) that banks must fulfil. We find that supervisors actively adjust the weight of the components of the overall score to reflect qualitative information, thereby smoothing fluctuations in the final assessment.