Lagarde Calls on Europe to Use Challenges as Impetus for Change

(Bloomberg) -- Europe should use the challenges posed by an increasingly fragmented world order and geopolitical conflicts as an opportunity to strengthen the foundations of its domestic market, according to European Central Bank President Christine Lagarde.

As an open economy, the continent is more exposed than others to the adverse effects of change, she told fellow policymakers in a speech in Ljubljana on Wednesday. But with the right response, Europe has also a lot to gain, she said.

“A less favorable global economy can push us to complete our domestic market,” Lagarde said. “Fiercer foreign competition can encourage us to develop new technologies. More volatile geopolitics can drive us to become more energy secure and self-sufficient in our supply chains.”

The remarks come on the eve of a Governing Council decision that will very likely see the ECB cut interest rates for the third time this year. The euro-area economy is struggling and inflation has slowed below the central bank’s target.

At the same time, uncertainty across the 20-nation bloc is high — in part due to concerns that the next US administration will be hostile, the Middle East conflict will turn into a full-fledged war, and Chinese manufacturers will push into Europe more aggressively than ever before.

“The global order we knew is fading,” and the transition into new realities — fragmented trade, state-sponsored competition and conflict — challenging, Lagarde said. “But if we approach it with the right spirit, I believe it can be an opportunity for renewal.”

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