Daily Management Review

Growing Indications That The World Economy Is Breaking Apart Into Rival Blocs, Says ECB's Lagarde


Growing Indications That The World Economy Is Breaking Apart Into Rival Blocs, Says ECB's Lagarde
According to European Central Bank President Christine Lagarde, decarbonization, demographic shifts, and deglobalization are all impending and Europe is currently at a pivotal point in its history.
“There are increasing signs that the global economy is fragmenting into competing blocs,” she said at the European Banking Congress, according to a transcript.
With an emphasis on Europe, she stated that rising annual climate disasters are expected to coincide with a steady fall in the working-age population, which could begin as early as 2025.
In response to these shocks, she stated that a "generational effort" would be necessary in the form of significant investment in a short period of time.
“As new trade barriers appear, we will need to reassess supply chains and invest in new ones that are safer, more efficient and closer to home,” Lagarde said at the keynote speech.
“As our societies age, we will need to deploy new technologies so that we can produce greater output with fewer workers. Digitalization will help. And as our climate warms, we will need to advance the green transition without any further delays.”
According to her calculations, until the end of the decade, the bloc's planned green transition will require an additional 620 billion euros ($672 billion) in annual investments, with an additional 125 billion euros needed for a digital transition.
“Governments have the highest debt levels since the Second World War, and European recovery funding will end in 2026. Banks will have a central role to play, but we cannot expect them to take on so much risk on their balance sheets,” she added, highlighting the proposed capital markets union (CMU).
Discussions over a potential CMU for Europe are still going on. The goal is to establish a single capital market that is more analogous to what is offered in the United States.
"Money - investments and savings - flowing across the EU so that it can benefit consumers, investors, and companies, regardless of where they are located," is the official goal, according to the EU.