. on ukraine's side, strong ownership and reform momentum will need to be maintained to pave the way for the programme's success and to support reconstruction efforts. amid increasing fragmentation dynamics, international cooperation is more important than ever. we support a strong imf at the centre of the global financial safety net. a solid capital position is a precondition for the imf to be able to appropriately support its members, particularly the most vulnerable ones. we welcome the spirit of compromise which enabled the conclusion of the review of imf precautionary instruments, given their important role in crisis prevention. going forward, the impact of the expanded access by countries to imf resources should be closely monitored, while the signalling effect of precautionary instruments should be retained. eu member states and central banks are playing their part in the imf and in the recent drive for resources. with pledges of more than usd 31 billion, they have made a significant contribution and lead the way in transferring resources to imf trusts ( poverty reduction and growth trust and resilience and sustainability trust ). geoeconomic tensions have increased in recent years, in particular with russia's invasion of ukraine. these tensions may result in a regionalisation of international trade and value chains. trade fragmentation could be damaging to the global economy, reducing efficiency in the allocation of resources, hindering diffusion of innovations and limiting access to external financing. ultimately, global production could be lower and prices higher a€ “ to the detriment of the poorest. geopolitical tensions could also lead to 3 / 4 bis - central bankers'speeches foreign direct investments segmenting along geopolitical lines and global payment systems becoming more fragmented, thus reversing some of the gains from financial integration. this would not only reduce global risk sharing but also limit opportunities for channelling funds towards investments needed to mitigate and adapt to climate change. in view of these risks, multilateral cooperation remains essential. this also holds true for filling the investment gap to achieve international climate goals as there will be high social costs if we get the green transition wrong. large crossborder investment flows are needed, which requires further convergence and accurate assessment of national and international frameworks. in addition, we need to create an environment in which climate finance is levelled up steeply to fund the transition, and in which public finance works as a catalyst for increased private capital flows. the eu is working towards those objectives and has enshrined both a long

spending. on the labour market, the unemployment rate was at a record low in july and employment growth remained resilient in the first half of the year, albeit that momentum is slowing. 1 / 4 bis - central bankers'speeches as the energy crisis fades, governments should continue to roll back the related support measures. this is essential to avoid driving up medium - term inflationary pressures, which would otherwise call for an even stronger monetary policy response. fiscal policies should be designed to make our economy more productive and to gradually bring down high public debt. policies to enhance the euro area's supply capacity, such as high - quality public investment and structural reforms, can help reduce price pressures in the medium term, while supporting the green transition. risks to the outlook continue to be tilted to the downside. growth could be slower if the effects of monetary policy turn out to be more forceful than expected, or if the world economy weakens further and geopolitical risks intensify. on the other hand, growth could also be higher than projected if the strong labour market, rising real incomes and receding uncertainty boost confidence among consumers and businesses and lead them to spend more. inflation since peaking in october 2022, euro area headline inflation has more than halved. the decline is broad - based across the main components of inflation and reflects falling energy commodity prices, the easing of supply bottlenecks and the impact of tighter monetary policy. core inflation remains at elevated levels, reflecting the fact that the fading impact of the past surge in input costs is being counterbalanced by rising labour costs. indeed, employees demanding compensation for the loss in purchasing power amid tight labour markets has resulted in historically high wage growth. we expect euro area inflation to continue to decrease, owing to easing cost pressures as well as the impact of tighter monetary policy. wage growth is expected to decline gradually, albeit remaining high over the projection horizon, driven by increases in minimum wages and inflation compensation in a context of tight, though cooling, labour markets. profit margins, which expanded notably last year, are expected to provide some buffer to the pass - through of labour costs to final prices in the medium term. inflation is expected to decline to levels close to 2 % in 2025. however, the downward path has risks in both directions. upside risks stem from renewed upward energy and food cost pressures, a de - anchoring of inflation expectations above our target, and higher than anticipated increases in wages or profit margins. the downside risks include