Christine Lagarde, the head of the European Central Bank, intensified calls on Friday for further financial integration in Europe, citing risks to free trade and a widening divide with the US.
Lagarde issued a warning at a speech in Frankfurt, the home of the European Central Bank, that “the geopolitical environment has become less favourable, with growing threats to free trade from all corners of the world.”
“Europe’s declining innovation position has come more clearly to light. The technology gap between the United States and Europe is now unmistakeable,” she added.
“The urgency to integrate our capital markets has risen” as a result of these reasons, she stated.
The president-elect’s pledge to increase tariffs on all imports into the United States is making people nervous throughout Europe as Donald Trump prepares to return to the White House.
He has specifically criticised the European Union and its substantial trade surplus with the United States.
Lagarde alluded to the “capital markets union” in her speech, a project that the ECB has long supported and that aims to improve the single currency area’s ability to compete with powerful economies such as the US.
But she warned that the project was at risk of suffering “death by a thousand cuts”.
Problems arose from a “loose definition” of capital markets union and “the piecemeal legislative approach this creates”, she said.
According to Lagarde, the project has been the subject of multiple proposals since 2015, which has allowed it “to be picked apart by national vested interests that see one or another initiative as a threat.”
Lagarde recommended the creation of standardised savings products for the entire EU as a crucial first step to motivate Europeans to make more cross-border investments and move their assets away from cash and bank deposits.
She claimed that because of fragmented markets, where institutional investors favour US markets over EU ones, the majority of European savings remain in the individuals’ native nations.
