ECB: AI Investment, Lower Oil Reliance Help Euro Zone Absorb Energy Shock

The euro zone economy has absorbed this year's energy shock better than expected, helped by reduced fossil fuel dependence, stronger fiscal support and an AI investment boom, European Central Bank economists said Wednesday in an ECB blog post. ECB economists Oscar Arce, Gerrit Koester and Beatrice Pierluigi estimated the economy is now only about half as reliant on oil as in the early 1990s, limiting the impact of price shocks. Higher renewable and nuclear generation has weakened the link between gas prices and electricity costs in several countries. The economists said AI-related trade has become an "important tailwind," with tech-related export orders outperforming. The fiscal impulse reached 0.5% of GDP, twice the size expected at the end of last year, mainly due to German spending on defense and infrastructure. The economists cautioned much of the support may prove temporary, with global demand, fiscal stimulus and AI investment potentially fading. The findings come as the ECB debates further rate increases to curb energy-led inflation, with a third hike of the year expected in December.