Lagarde Warns of Weakening European Economic Model

European Central Bank President Christine Lagarde has expressed concerns about the weakening of Europe's postwar economic growth model. Speaking at an event hosted by the World Economic Forum’s International Business Council in Geneva, she stated that this model relied on global trade expansion, access to cheap energy, and a stable international order supported by the U.S. security umbrella.

However, all these factors are now weakening. Last year alone, more than 2,500 trade restrictions were introduced worldwide, according to Lagarde. She also noted that the U.S. is stepping back from its leading role in guaranteeing the security of its Western allies, which has led to heightened geopolitical tensions and attention on supply chain bottlenecks.

Lagarde emphasized that economic dependencies can become a tool for exerting pressure, and that a diminished sense of security affects investment decisions. She also mentioned that companies invest less when they perceive their capital as less secure, impacting production and consumption.

Despite these challenges, Lagarde pointed out that Europe has significant advantages, including the world's largest network of trade agreements, world-class industrial capabilities, and the EU’s large single market. She urged that the continent not repeat the mistakes of the first digital revolution, when the main commercial benefits went primarily to other regions.

Lagarde highlighted some encouraging signs of investment by European companies in artificial intelligence and mentioned the concept of 'EU Inc.', a voluntary pan-European corporate structure that would allow companies to register once and operate under uniform rules throughout the EU. She also cited capital market reforms being developed to help companies scale up within Europe.