// ECONOMIC SECURITY: MACROECONOMIC AND FINANCIAL POLICY
Improving financial stability in an era of persistent global uncertainty
As geopolitical shocks, energy volatility and technological disruption converge, the G7 must address the structural uncertainty shaping investment, weakening policy credibility and amplifying market volatility G lobal economic growth and financial stability are sub- ject to divergent forces, and G7 members are experiencing a slowdown in 2026 due to geopolitical events and adverse shocks. Economic uncertainty refers to the risks associated with undefined and unpredictable future policies and regulatory frame- works, which can have adverse impacts on the investment and spending decisions of businesses and households. The Economic Policy Uncertainty Index developed by Scott Baker, Nicholas Bloom and Steven Davis shows growing uncertainty in recent years (see Figure 1). That uncertainty likely reflects the succession of major shocks (such as the 2020 pandemic crisis and Russia’s 2022 inva- sion of Ukraine) and structural challenges such as the development of artificial intelligence.
Chiara Oldani, professor, monetary economics, Università degli Studi della Tuscia
VOLATILITY AND POLICY UNCERTAINTY
In the first three months of 2026, the index portrays a remarkable level of instability due to geopolitical pres- sures and turmoil in fossil fuel supply. These shocks hit the global financial system with negative effects that can last for the next four quarters. Con- sumers and firms alike postpone their purchases and investments because of this instability. In fact, the global financial system in 2026 is characterised by growing volatility and negative returns. The structural interconnection among global financial markets reduces the opportunities to hedge against adverse shocks. The Office of Finan- cial Research’s Financial Stress Index measures a higher volatility than in previous years, especially in the bond and equity markets (see Figure 2). In order to reduce the economic and financial risks, G7 members should stabilise their geopolitical relations, especially in the Middle East, Asia and Russia, and implement domestic stabi- lisation policies on inflation and supply chains. The Évian Summit in June can be a productive opportunity to relieve global tensions and restore certain diplomatic relationships that have weakened over the last few months.
FIGURE 1: MONTHLY GLOBAL ECONOMIC POLICY UNCERTAINTY INDEX 2019–2026
EMERGING SOURCES OF SYSTEMIC RISK
Threats to financial stability also come from the digital financial system and the
Source: Economic Policy Uncertainty Index. https://www.policyuncertainty.com.
44 // G7 FRANCE: THE ÉVIAN SUMMIT 2026
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