The head of the ECB, Christine Lagarde, raised the alarm about the state of the European economy, warning of economic chaos due to continuous procrastination regarding necessary reforms.
In a speech in Frankfurt, Lagarde called for more and smarter steps towards European integration, particularly because the continent's export-oriented business model no longer keeps pace with the times.
"Europe has become more vulnerable, also due to our dependence on third countries for our security and the supply of critical raw materials," she said. "Global shocks have intensified, with the increase in US tariffs, Russia's invasion of Ukraine, and increasingly intense competition from China. At the same time, our internal market has stagnated," Lagarde underlined.
Lagarde spoke in the same week that the European Commission presented a mixed picture of the region's economy, noting that resilience to the tariff burdens imposed by US President Donald Trump was greater than expected, but another year of moderate growth was recorded. Officials in Brussels called for "action to unleash domestic growth"—something she also reiterated.
Tough language from Lagarde
The appearance of the ECB head at this event is usually an annual call for some form of deepening integration, often focusing on capital markets. This time, her tone was rather sharper, as she began by referencing her inaugural speech at the same forum in November 2019, when she had called on Europe to "redefine its ambitions."
"If we make our Single Market truly single, Europe's growth will no longer depend on the decisions of others, but on our own choices," she stated. "That was my message six years ago. Today, that message is even more urgent. Another six years of inertia—and lost growth—would not just be disappointing. They would be irresponsible."
Pressure for structural reforms
Policymakers often worry about low productivity and weak potential growth in the Eurozone. They often push for structural reforms and for strengthening European integration—in alignment with last year's proposals by Mario Draghi and Enrico Letta on the region's competitiveness and the single market.
Lagarde said that the answer to the European Union's problems "boils down to governance." She called for more "mutual recognition" that would accept the legitimacy of a good or service across the Union when it is legal in one member state, and she requested that this status also apply to the digital economy.
Simplifying the decision-making process through the so-called qualified majority, which could also be applied in other areas such as taxation, as well as the use of "28th regimes," where the European legal framework coexists with the national one, would also help, she added.
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