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European Central Bank President Christine Lagarde has warned that Europe will not be able to afford to provide a generous welfare state or increase investment in defense and tackling climate change unless the region’s persistent slowdown in growth is corrected. .
Lagarde said that without bold economic policies, the EU “will not be able to generate the wealth needed to meet growing spending needs to ensure security, combat climate change and protect the environment.” “It will be,” he warned. speech in paris on monday.
He added that the region was at risk of facing a “future of lower tax revenues and higher debt ratios” that would result in “reduced financial resources for social spending”.
Lagarde said the possibility of a trade war, seen by analysts as more likely after Donald Trump won a second term as U.S. president this month, could further damage the broader regional economy. warned that it could be given.
Without directly mentioning the risk of U.S. tariffs on imports from the EU and China, he emphasized that the “geopolitical situation” is “divided into competing blocs, and our stance on free trade is being questioned.” did.
“We need to adapt quickly to the changing geopolitical environment and regain lost ground in competitiveness and innovation,” Lagarde said.
Joachim Nagel, president of the Bundesbank and member of the ECB’s executive board, also warned that the world could be “on the brink of a significant increase” in “geoeconomic fragmentation”. “This is a worrying development and we should all strive to restore cooperation and free trade,” he said. Lecture in Tokyo early Monday morning.
Even without a trade war, the gap in GDP between Europe and the US will widen further by the end of 2010, the IMF announced last month. With alarming news On the continent’s “lack of business dynamism”.
The aging of Europe’s workforce and low productivity growth will reduce the continent’s average annual GDP growth rate to just 1.45% in the decade to 2029, compared to 2.29% in the United States over the same period. compared to. Since the global financial crisis and especially since the coronavirus pandemic, the US growth rate has outpaced that of Europe.
In September, a report by former ECB President Mario Draghi argued that the EU needed to make further investments to address its lagging competitiveness.
Lagarde said Europe is particularly exposed to the fallout of a potential trade war because it is “more open than other countries,” pointing to the fact that trade accounts for more than half of Europe’s total economic output. did.
At the same time, the continent “lags behind emerging technologies that will drive future growth,” such as artificial intelligence.
“We mainly specialize in technologies developed in the last century. Only four of the world’s top 50 high-tech companies are European,” she warned.
The ECB president said the EU should respond by defining itself as “a single large economy with primarily common interests” and focus its resources on areas such as defense and the green transition. he said, adding that Europe’s “large and rich economies”. The “economy” had the tools it needed to “adapt” to the challenges.
“We can no longer see ourselves as a loose club of independent economies,” the ECB president said, adding that “this view is outdated in a world increasingly fragmented into geopolitical blocs centered around the largest economies.” ” he added.
