Geopolitical uncertainty and market tensions: Interest rate divergence, shifting capital flows, savings and investments in Europe, climate policy reversals, and the new AI Paradigm

The ECB’s latest rate cut, geopolitical shocks, trade tensions, and technological shifts are adding new layers of complexity to an already uncertain global economic landscape. Financial markets are reacting to heightened uncertainty, with sectors like defense, technology, and manufacturing experiencing significant shifts as investors reassess risks and opportunities.
Leer más

Higher US interest rates are playing a role in attracting capital flows to the US vis-à-vis the EU in the short-term; however, the US’s strong innovation ecosystem and Europe’s structural productivity challenges are set to reinforce this trend in the long-term. To remain competitive in the global financial system,
Europe needs to boost productivity and innovation by undertaking reforms, completing the capital markets union, and increasing investment; however, under current fiscal constraints and an unstable geopolitical context, these measures may prove difficult to achieve.
Leer más

Europe is sitting on a significant stock of savings, yet many of its businesses struggle to access funding. The purpose of the Savings and Investments Union (SIU) is to change that, by unlocking regulatory barriers and building common institutions – a challenging undertaking.
Leer más

Trump’s climate policies will likely slow the green transition in the U.S. although the ultimate impact will also depend on the future of the Inflation Reduction Act; in any event, their ripple effects in Europe are more complex, with the EU’s own economic performance and shifting policy priorities towards defense playing an outsized role. Despite pro-climate rhetoric, both the U.S. and the EU are retreating from key green policies–Trump explicitly, and the EU under the guise of “simplification” –leaving the future of global climate policy uncertain.
Leer más

DeepSeek’s launch of its open-source AI-powered chatbot app will lead to a future in which AI is more accessible and less monopolistic while reducing negative environmental impact. Its impressive results reveal that advanced research can lead to the discovery of new, more efficient, and sustainable AI models and underscore that EU plans to create large European AI champions with public money were misguided.
Leer más