Piero Cipollone, ECB Executive Board member, discusses the impact of the recent energy shock on Europe’s economy and policy responses at the 2026 Sustainable Development Festival.
Piero Cipollone, Member of the Executive Board of the ECB, delivered a keynote speech at the 2026 Sustainable Development Festival. He highlighted that the current energy crisis underscores the importance of sustainability for economic stability and growth.
The speech noted that Europe is experiencing its second major energy shock in four years, influenced by geopolitical tensions in Iran and the Middle East, disrupting energy flows and supply chains. This has caused a surge in oil and gas prices, impacting inflation and supply availability.
Prior to the shock, the euro area economy showed resilience with stable prices, recovering real incomes, rising investment, and strong domestic demand. The current shock threatens this resilience, with inflation rising to 3% in April driven by energy prices, and consumer confidence declining.
The ECB has developed economic scenarios to assess the potential medium-term impact, with baseline, adverse, and severe scenarios projecting inflation and growth trajectories. The severity depends on the shock’s duration and propagation.
The speech emphasized the importance of monetary policy, which aims to keep inflation anchored at 2%, and the role of fiscal measures to support the economy temporarily. It also stressed the need to reduce reliance on fossil fuels to enhance energy security and support climate goals.
Europe has made progress in renewable energy, with over two-thirds of electricity generation from low-carbon sources in 2024. Further efforts are necessary to improve energy resilience, including grid interconnections and joint financing of infrastructure projects.
The speech concluded that energy shocks highlight the importance of sustainability for economic stability and that continuing the energy transition will foster innovation, productivity, and resilience against future shocks.
