Mauderer highlights policy uncertainty and external vulnerabilities to stability
Sabine Mauderer, First Deputy Governor of the Deutsche Bundesbank, emphasized the need to preserve stability in a fragmented world. Speaking at a conference in Frankfurt, she focused on policy uncertainty, particularly regarding energy transition, and external vulnerabilities linked to energy security and global trade.
The shifting sands of policy
Mauderer noted that high policy uncertainty stems from difficult trade-offs governments face between economic growth, strategic autonomy, and environmental sustainability.
She cited the US election U-turn in 2024, which brought pronounced policy shifts including seesawing tariffs and a change in climate policy direction.
In Europe, a policy pendulum has shifted focus from climate to defence and economic competitiveness.
Research indicates that climate policy uncertainty has reduced US economic output by 0.5 percent and private investment by nearly 2 percent, also undermining venture capital for cleantech startups.
Policy shifts can directly affect asset prices, as seen with a $65 billion reduction in the global car industry's book value due to electric vehicle policy reversals, and a sharp fall in European cement producers' share prices following proposals to delay carbon regulations.
Reducing reliance on global chains
The renewed conflict in the Middle East serves as a reminder that external shocks pose serious risks if economies are unprepared.
Germany's fossil fuel imports still account for almost 70 percent of its total energy needs, and Europe's close to 60 percent.
To reduce these vulnerabilities, Europe must increase its own energy production, allow energy allocation across the continent, and diversify external energy resources.
Accelerating clean energy adoption can enhance resilience to energy shocks and promote stable prices.
However, meaningful reductions in energy import dependency will take years, with projections showing Europe still importing 43-53 percent of its energy needs by 2033, even with an accelerated transition.
Resilience also depends on open and diversified trading partners, with the EU-Mercosur agreement and a comprehensive Free Trade Agreement with India strengthening supply chains and economic ties.
Europe is also taking steps to strengthen its digital sovereignty, given its reliance on foreign providers for over 80 percent of digital technologies.
A call for proactive resilience
Mauderer's speech underscores the profound challenges central banks face in a world defined by geopolitical shifts and climate impacts.
Her emphasis on policy uncertainty and external vulnerabilities highlights the need for robust frameworks beyond traditional monetary tools.
This perspective suggests central banks must increasingly integrate broader stability considerations into their mandates.