Christine Lagarde, the president of the European Central Bank (ECB), has emphasized the need for reforms in the European Union (EU) to foster economic growth. She warned that the EU’s economy is becoming increasingly vulnerable due to its heavy reliance on international trade, particularly as key trading partners shift away from globalization. Lagarde specifically noted the impact of protectionist policies initiated by figures such as Donald Trump, which have led to higher tariffs and a more challenging trade environment.
Highlighting Europe’s dependency on third countries for essential security and raw materials, Lagarde pointed to China’s dominance in the supply of rare earth metals, crucial for sectors like electric motors and renewable energy technology. She also mentioned that interruptions in supply chains could adversely affect global industries, including automotive production.
During her address at the European Banking Congress in Frankfurt, Lagarde stated that the EU has not adequately addressed its economic weaknesses. She criticized policymakers for allowing these issues to persist, leading to a declining growth trajectory. She noted that innovation in critical areas such as digital technology and artificial intelligence has stagnated, as has the allocation of investment, with European savers tending to favor US markets.
Despite these challenges, Lagarde identified positive developments within the European economy, including a robust labor market and increased investment in digital technologies. Government spending in response to geopolitical events, such as the invasion of Ukraine, also provides some counterbalance to economic slowdowns.
To stimulate recovery, Lagarde recommended reducing trade barriers among EU member states, which equate to significant tariffs on both services and goods. She proposed adopting mutual recognition of regulated companies to facilitate broader access to the EU market, as well as implementing qualified majority voting on tax matters to simplify compliance for businesses operating across multiple countries.
Source: https://www.theguardian.com/business/2025/nov/21/eu-economy-international-trade-reliance-vulnerable-ecb-lagarde