💡 Catch up on the MFF Blueprint authored by @zsoltdarvas.bsky.social, @roeldom.bsky.social, Marie-Sophie Lappe, Pascal Saint-Amans and @steinbacharmin.bsky.social

📖 buff.ly/nif44vY

My sincere thanks to Governor Boris Vujcic and Managing Director Kristalina Georgieva for the opportunity to speak at the event, and to my fellow panellists, Ivailo Izvorski, Piroska Nagy Mohacsi, and Debora Revoltella, as well as our moderator, Sasha Vakulina, for the excellent discussion.

This was one of the key messages I shared at the joint @hnb-croatia.bsky.social - IMF conference in Dubrovnik yesterday (www.hnb.hr/en/-/u-dubro...)

If national governments have deliberately maintained distinct domestic regulations and standards to shield local service providers from competition, then, unfortunately, the prospects for a breakthrough appear limited.

Although the first quarter typically sees a seasonal dip in Russian imports, the decline in 2025 is significantly larger than in previous years, except for the first few months after the full-scale invasion of Ukraine in 2022.

A Reuters report (www.reuters.com/world/china/...) suggests that slowing Russian economic growth, driven by high interest rates and labour shortages, has reduced demand for key imports from China, including cars, electronics, and household appliances.

In fact, increasing trade with other global partners could help offset some of the negative effects of reduced trade with the United States.

Instead, we should engage in dialogue with the U.S. to reach a sensible deal. We should build alliances with the rest of the world to uphold global trade rules beyond the U.S. market.

Since the U.S. trade deficit is sustainable, there is no economic justification for trying to reduce it. The EU should not rush to retaliate. Let the U.S. bear the consequences of its own policy – we need not harm ourselves in response.

Reducing the trade deficit without increasing production lowers domestic consumption and investment, and tariffs are also likely to dampen U.S. production—further harming both. Moreover, U.S. exports depend on imports, so making US imports more expensive will negatively affect US exports as well.

Trying to reduce a sustainable trade and current account deficit, while also undermining trust in U.S. politics and the dollar, will leave Americans worse off in the long run, even after the short-term effects of new tariffs wear off.

Pia Hüttl and I confirmed this in our earlier research www.bruegel.org/working-pape... .

However, the economics literature has long shown that the U.S. pays less on its foreign liabilities than it earns on its foreign assets, thanks in part to the dominant role of the U.S. dollar in the international monetary system. This contributes to US current account sustainability.

This is paradise – if the current account deficit is sustainable. And in the case of the U.S., it is. Running a current account deficit implies accumulating foreign liabilities, such as foreign investors buying U.S. Treasuries or investing in American companies.