The ECB Podcast Trade, tensions, tariffs... and a whole world of uncertainty
May 22, 2025
Join John Fell, the Deputy General Director for Macro Prudential Policy and Financial Stability at the ECB, as he dives into the chaotic world of global finance. He discusses the impacts of geopolitical uncertainty and US tariffs on Europe’s financial landscape. Discover how increased defense spending could offer unexpected economic benefits and innovation. John shares insights on navigating financial instability, emphasizing the importance of robust macroprudential policies, plus a hot tip that every aspiring economist should consider!
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Geopolitical Shifts Pose Risks
- Rapidly shifting geopolitical events create high uncertainty that can destabilize Europe's financial system.
- Known vulnerabilities combined with unpredictable triggers heighten the risk of tail events without trade conflict resolution.
US Treasuries Lose Safe Haven Status
- US Treasuries usually act as safe havens, but recently sold off alongside equities during market stress.
- This correlation breakdown raises concerns about financial stability and challenges the reliability of traditional safe havens.
Defense Spending's Growth Impact Varies
- Increased defense spending amid fiscal pressures depends on its growth impact.
- Evidence shows defense spending multipliers vary, with higher impacts during recessions in advanced economies like Europe.
