Stating that there are increasing signs that the global economy is divided into rival blocks, European Central Bank (ECB) President Christine Lagarde said, “Coping with the challenges requires an effort that will take generations.”
European Central Bank (ECB) President Christine Lagarde stated that there are increasing signs that the global economy is being divided into rival blocs.
“Europe is now at a critical juncture and faces a number of common challenges such as de-globalization, demography and decarbonization,” said Lagarde, adding, “Dealing with these challenges simultaneously requires a generation-long effort and large investments in a short time.”
In her speech at the European Banking Congress, Lagarde stated that Europe has emerged strongly from a series of economic shocks and that real Gross Domestic Product (GDP) is today only 2 percent lower than they expected at the end of 2019.
DEMOGRAPHIC TIPPING POINT WARNING
However, pointing out that Europe is now facing a series of new challenges, Lagarde continued as follows:
“There are increasing signs that the global economy is splitting into rival blocs. Europe is currently at a critical juncture and faces a number of common challenges such as deglobalisation, demography and decarbonisation.
We are approaching a long-awaited demographic tipping point. Euro It seems that there will be a continuous decrease in the working age population between the ages of 15-64 in the Region as of 2025.
The impact of climate disasters and the need for climate action are increasing every year.
As new trade barriers emerge, we will need to re-evaluate supply chains and invest in safer, more efficient and geographically closer ones. Tackling these challenges simultaneously requires a generational effort and large investments in a short period of time.”
‘ADDITIONAL INVESTMENT OF 125 BILLION EUROS IS REQUIRED’
To give an idea about the investments needed, Lagarde reminded that the European Commission determined that an average of 620 billion Euros of additional investment is required every year until 2030 just for green transformation and 125 billion Euros for digital transformation.
Noting that the current financial framework cannot be relied upon to finance these investments, Lagarde said, “Governments should World It has the highest debt levels since the war. Recovery financing in Europe will end in 2026. Banks have a key role to play at this point, but we cannot expect them to take on so much risk on their balance sheets. This brings me to the Capital Markets Union (CMU). “Despite the European Commission’s two action plans, the European capital market remains fragmented and financial integration is lower than before the financial crisis.” made his assessment.
Lagarde says European bond markets USA Stating that it is three times smaller than the bond markets and that the European Union (EU) venture capital is far behind that of the USA, he said, “If we cannot get CMU back on track, we cannot be successful in the transformations I mentioned.” he said.
Stating that companies that want to digitalize and decarbonize in Europe cannot access all the financing they need, Lagarde stated that European startups also have difficulties in accessing the financing quality they need due to underdeveloped capital markets.
Lagarde stated that European startups attracted less than half the funding of their US counterparts and continued:
“In the increasingly challenging and changing conditions we face, integrated capital markets are an integral part of our success. We must work on many other areas that are necessary for CMU to become a reality. “Facing such a huge financing challenge, now is the time to take action.” (AA)