At a meeting of the Council on Foreign Relations on Wednesday, European Central Bank President Christine Lagarde emphasized the importance of private investment in accelerating Europe's green transition and fostering innovation.
advertisementHe discussed the current state of the European economy and geopolitical challenges, underscoring the need for around 600 billion euros per year to support climate change mitigation efforts and the important role of private financial support for these efforts. emphasized.
Ms. Lagarde also provided insight into the current state of the European economy, continued efforts in U.S.-EU economic cooperation, and the broader impact of geopolitical challenges.
Inflation trends and euro area economic outlook
Asked why Europe had been able to deal with inflation better than the United States despite facing the shock of rising energy prices, Lagarde said: “We are not done yet. We are dealing with two different types of inflation. “We are dealing with it,” he said.
“Europe's employment and unemployment rates have never been better,” Lagarde said, citing a strong job market as a bright spot amid economic uncertainty.
Looking ahead, he expressed cautious optimism about the eurozone's recovery trajectory, predicting gradual improvement until 2024.
Eurozone growth compared to the US
Ms. Lagarde cited the large disparity in economic growth between the eurozone and the United States. Since 2008, the US economy has grown 75% larger than the eurozone economy.
He attributed this to several factors, including Europe's “second wave of crisis”, including the sovereign debt crisis, and the lack of a fiscal union to complement the financial framework.
Productivity growth in the United States significantly exceeded that in Europe, highlighting the stark disparities in productivity.
“It's just mind-boggling. From 2019 to now, productivity in the United States is 6% and in Europe 0.6%,” Lagarde said, calling for comprehensive structural reforms to close the gap. and called for better integration of the single market.
European economic independence and global geopolitical challenges
Given the ongoing economic and geopolitical crisis, Lagarde sees the potential for Europe to take a more autonomous economic path.
He emphasized the importance of developing strong domestically-focused financial infrastructure to support innovation and entrepreneurship within the continent, and said that such efforts would be particularly important in addressing climate change. We suggested that it has the potential to act as a catalyst for important economic reforms in adaptation and mitigation.
“We are now on the cusp of the necessary transformation,” she asserted, stressing the need for private investment in Europe's green transition, which she estimates will require around €600 billion a year. There is.
Ms. Lagarde reiterated that Europe's political commitment to climate change is unwavering and that financial support is urgently needed.
“To do that, we need to invest private funds, private savings, into that transformation.”
The dialogue also turned to a broader discussion on global economic relations, particularly the impact of China and its evolving economic strategy.
Lagarde emphasized the importance of continued cooperation between trusted global partners, rather than pursuing protectionist policies and competitive subsidies, which she described as a “race to the bottom.” .
On the controversial topic of using Russia's frozen assets to aid Ukraine, Lagarde said there was “no doubt” in Europe that Russia should be financially compensated for the damage it has caused to Ukraine. he emphasized.
However, he cautioned against moving from asset freezing to confiscation without careful consideration. He explained that although there is agreement in principle that these assets should be used for reconstruction, their increased availability due to the lack of alternative financing raises complex legal and financial stability issues. .
advertisementMonetary policy amidst market challenges
Regarding the possibility of changing the ECB's 2% inflation target, President Lagarde opposed any immediate changes to the existing framework and reaffirmed her commitment to price stability.
“We will not change the rules of the game mid-game,” he said, advocating a steady approach to managing inflation in Europe.
AI’s role in shaping Europe’s future
In assessing the impact of artificial intelligence on productivity and the labor market, Lagarde commented: I don't think I expected it or have seen it before. ”
“Right now, I'm not risk-averse. I'm not risk-averse, but I'm cognizant of the fact that it has the potential to generate as much profit as it creates risk.” she said.
