Lagarde Urges Europe to Pool Resources for Shared Priorities

(Bloomberg) — Europe should pool its resources in areas like defense and climate as its productivity growth falters and the world fragments into rival blocs, European Central Bank President Christine Lagarde said.

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The continent has lost its place at the forefront of progress in the digital age at the same time as free trade is increasingly called into question, and regulation diverges between advanced economies, she said in a speech in Paris.

“Acting as a union to raise our productivity growth, and by pooling our resources in areas where we have a tight convergence of priorities – like defense and the green transition – we can both deliver the outcomes we want and be efficient in our management of public spending,” Lagarde said.

Her call for greater integration echoes warnings from other policymakers who say that Donald Trump’s return to the White House could accelerate a new era of protectionism that would be particularly harmful for Europe’s economy.

Germany’s Bundesbank chief Joachim Nagel has said that if Trump goes through with his plans, it could take 1% off economic output in his country. He has also said higher and more volatile inflationary pressure could push central banks to react with higher interest rates.

Lagarde did not refer to Trump by name in her prepared remarks, nor did she mention inflation or monetary policy.

She repeated her call for the European Union to boost productivity by lifting barriers to a single market for capital in order to better channel savings to entrepreneurs and innovation.

“We can no longer see ourselves as a loose club of independent economies. That perspective is outdated in a world that is fragmenting into geopolitical blocs centered around the largest economies,” Lagarde said. “Today we need to see ourselves as a single, large economy with predominantly shared interests.”

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