Session 4 on geopolitical tensions and fiscal implications of war on the second day of the Fiscal Policy and Economic and Monetary Union (EMU) Governance conference. The conference is co-organised by the ECB and Fiscal Affairs Department of the IMF.
Chair: Era Dabla-Norris, International Monetary Fund
The offensive power of defense news in Europe
Evi Pappa, University Carlos III of Madrid, together with Nadav Ben Zeev and Elena Scola Gagliardi
Discussant: Ethan Ilzetzki, London School of Economics
Watch all sessions from the conference: https://www.youtube.com/playlist?list=PLnVAEZuF9FZkp656i2hu_0dlpMBaQfGh0
Closing remarks by Era Dabla-Norris, International Monetary Fund, at the Fiscal Policy and Economic and Monetary Union (EMU) Governance conference. The conference is co-organised by the ECB and Fiscal Affairs Department of the IMF.
The conference took place on 04 and 05 December 2025.
Watch all sessions from the conference: https://www.youtube.com/playlist?list=PLnVAEZuF9FZkp656i2hu_0dlpMBaQfGh0
Session 3 on perceptions of public debt and fiscal narratives on the second day of the Fiscal Policy and Economic and Monetary Union (EMU) Governance conference. The conference is co-organised by the ECB and Fiscal Affairs Department of the IMF.
Session chair: Oreste Tristani, European Central Bank
Perceptions of public debt and policy expectations: evidence from cross-country surveys
Francesco Bianchi, Johns Hopkins University, together with Era Dabla-Norris and Salma Khalid
Discussant: Eric Mengus, HEC Paris
Watch all sessions from the conference: https://www.youtube.com/playlist?list=PLnVAEZuF9FZkp656i2hu_0dlpMBaQfGh0
Session 3 on perceptions of public debt and fiscal narratives on the second day of the Fiscal Policy and Economic and Monetary Union (EMU) Governance conference. The conference is co-organised by the ECB and Fiscal Affairs Department of the IMF.
Session chair: Oreste Tristani, European Central Bank
Inspecting the macroeconomic effects of fiscal policies in the EU through a new dataset of narrative measures
Roberto Perotti, Bocconi University, together with Mario Alloza, Francesco Berardini, Jacopo Cimadomo, Niamh Dunne, Jan Kuckuck and Luca Sala
Discussant: Massimo Giuliodori, University of Amsterdam
Watch all sessions from the conference: https://www.youtube.com/playlist?list=PLnVAEZuF9FZkp656i2hu_0dlpMBaQfGh0
Session 1 on fiscal stagnation and sovereign risk on the first day of the Fiscal Policy and Economic and Monetary Union (EMU) Governance conference. The conference is co-organised by the ECB and Fiscal Affairs Department of the IMF.
Session chair: Oscar Arce, European Central Bank
Sovereign default and the decline in interest rates
Jessica Wachter, University of Pennsylvania, together with Max Miller and James Paron
Discussant: Eugenia Gonzalez-Aguado, Toulouse School of Economics
Watch all sessions from the conference: https://www.youtube.com/playlist?list=PLnVAEZuF9FZkp656i2hu_0dlpMBaQfGh0
Welcome remarks by Oscar Arce, European Central Bank, on the first day of the Fiscal Policy and Economic and Monetary Union (EMU) Governance conference. The conference is co-organised by the ECB and Fiscal Affairs Department of the IMF.
Watch all sessions from the conference: https://www.youtube.com/playlist?list=PLnVAEZuF9FZkp656i2hu_0dlpMBaQfGh0
Session 1 on fiscal stagnation and sovereign risk on the first day of the Fiscal Policy and Economic and Monetary Union (EMU) Governance conference. The conference is co-organised by the ECB and Fiscal Affairs Department of the IMF.
Session chair: Oscar Arce, European Central Bank
Fiscal stagnation
Luca Fornaro, Centre de Recerca en Economia Internacional (CREI), together with Martin Wolf
Discussant: Xavier Debrun, Nationale Bank van België/Banque Nationale de Belgique
Watch all sessions from the conference: https://www.youtube.com/playlist?list=PLnVAEZuF9FZkp656i2hu_0dlpMBaQfGh0
Evelien Witlox, Director of the digital euro project, European Central Bank
Nico Schmidt, Team lead of digital euro user research and experimentation, European Central Bank
Fabian Geuther, Communication specialist digital euro project, European Central Bank
When it comes to the risks to financial stability, things seem to have settled down a bit. But with trade tensions, an unpredictable US economic policy, geopolitical issues, a potential AI bubble and the rise of stablecoins, there is plenty to keep an eye on.
Has the global environment really become less uncertain? And how do all these factors impact financial stability?
To explore these questions and more, our host Paul Gordon speaks with financial stability expert John Fell.
The views expressed are those of the speakers and not necessarily those of the European Central Bank.
Recorded on 24 November 2025 and published on 27 November 2025.
In this episode:
01:25 How stable is the financial system?
The EU and the United States reached a trade agreement, and the economic impact of trade uncertainty has been milder than expected. But the full effects of the policy changes are yet to be seen. So, what does this mean for financial stability?
04:14 Is there an AI bubble?
The term “AI bubble” is on everyone’s lips right now . But bubbles are hard to identify and even harder to differentiate from legitimate growth. So, are valuations stretched? What about market concentration and circular funding in the AI industry? And how exactly are companies funding investment in AI?
06:15 If there is a bubble, what could cause it to burst?
There is significant leverage behind AI investments. Returns will largely depend on how widely AI is adopted. Could AI become a general-purpose technology, like the railways did?
08:15 What about the rise of private credit?
How do private credit markets differ from equity financing? Why are risks to euro area financial stability increasing as private markets expand? And how does all this relate to systemic risk in the banking sector and the build-up of AI infrastructure?
11:23 Are stablecoins really stable?
Despite what the name suggests, stablecoins carry liquidity run risks that could affect financial stability. With rapid growth and increasing links to traditional finance, what risks does this innovation create?
15:11 What’s the situation for government financing?
Governments have made progress in reducing debt levels since the pandemic. But in some euro area countries, debt remains too high and pressures to increase spending – for instance on defence – are rising. While this poses one of the biggest risks to financial stability, it could also be an opportunity for long-term growth if properly managed.
18:07 What about banks?
Given the potential AI bubble, questions around the sustainability of government budgets and the rise in stablecoins, where does this leave euro area banks? Profitability is strong and non-performing loan ratios are historically low. So, how is the banking sector doing overall?
20:13 Our guest’s hot tip
John Fell shares his hot tip with listeners.
Financial Stability Review at a glance https://www.ecb.europa.eu/press/financial-stability-publications/fsr/html/index.en.html
Financial Stability Review, November 2025 https://www.ecb.europa.eu/press/financial-stability-publications/fsr/html/ecb.fsr202511~263b5810d4.en.html
Chip War, Chris Miller https://www.amazon.de/-/en/Chip-War-Worlds-Critical-Technology/dp/1982172002
