Lagarde: “A united Europe is stronger”. The economic challenges according to the ECB

La President of the European Central Bank (ECB), Christine Lagarde, addressed crucial issues in her speech before the European Parliament's Committee on Economic and Monetary AffairsHis statements covered the impact of US trade policies on the Eurozone economy, the ECB's strategy in managing monetary policy and the need to strengthen European integration.

The impact of US tariffs on the European economy

Lagarde stressed that A possible 25% US tariff on imports from Europe could reduce Eurozone growth by around 0,3 percentage points in the first year. If the EU were to respond with an increase in tariffs on US imports, the negative impact on growth could be as much as half a percentage point.

The ECB's analysis suggests that the negative effects would be concentrated mainly in the first year, but with a persistent impact on the overall level of production.e. For this reason, Lagarde reiterated the importance of greater trade integration both with global partners and within the European UnionAccording to the ECB President, isolationist economic policies pose a risk to growth, while a united European market could offset losses from tariffs.

The importance of a united Europe

In the current context of global uncertainty, Lagarde reiterated the need to strengthen European integration to make the EU more resilient to external economic shocks. He quoted Jean Monnet, one of the founding fathers of the European Union, underlining how thecommon interest of the Member States and the economic prosperity of European citizens.

He also highlighted theThe key role of the Single Market, which in its first 30 years increased the EU's GDP by between 12% and 22% and doubled the volume of trade between Member States. According to Lagarde, a deeper Single Market can mitigate the impact of global fragmentation and create an environment conducive to the growth of European companies.

Growth forecasts and economic uncertainty

Lagarde acknowledged that the Eurozone growth forecasts are subject to considerable uncertainty, mainly due to the trade policy environment. The estimates of ECB indicates growth of 0,9% in 2025, 1,2% in 2026 and 1,3% in 2027.

He then highlighted how the manufacturing sector is still contracting, despite signs of improvement in economic surveys. Persistent global political uncertainty and competitiveness challenges are holding back investment and exports, although the services sector remains resilient. Lagarde said that the economic growth will be supported by higher incomes and lower borrowing costs.

Inflation and monetary policy

On the inflation front, Lagarde said the disinflation process is underway. Inflation fell from 2,5% in January to 2,3% in February, mainly thanks to the reduction of energy costs. Core inflation, which excludes energy and food, also eased slightly.

Despite this, nominal wages continue to rise and remain a key driver of inflation. The ECB will therefore take a data-driven approach, deciding on the most appropriate interest rate stance meeting by meeting.

Challenges for the European banking system

Lagarde also touched on the theme of the resilience of the European banking sector, underlining the importance of maintaining a sound regulatory framework. He recalled that the ECB had not opposed UniCredit's plan to acquire a significant stake in Commerzbank, but warned that it was crucial to prevent banks from becoming too big to fail.

Geopolitics and Financial Stability

Finally, Lagarde spoke about financial stability and the possible consequences of a possible seizure of immobilized Russian assets. He warned that any such decision must consider the effects on the monetary order and the principles of international law. He reiterated thatand the ECB will maintain its “whatever it takes” mandate, regardless of the profits generated by its operations.

Christine Lagarde's speech highlighted the main economic challenges that the Eurozone will have to face in the coming years, from the impact of US tariffs to the need for greater economic integration. The ECB will continue to monitor the economic situation and make data-driven decisions to ensure price stability and support growth in the euro area.