ECB chief urges more EU integration as threats grow

European Central Bank (ECB) President Christine Lagarde on Friday intensified her call for greater financial integration within Europe, citing threats to free trade and a widening technological gap with the United States.

ECB chief urges more EU integration as threats grow

Speaking in Frankfurt, the ECB’s headquarters, Lagarde noted that the "geopolitical environment has become less favorable, with increasing threats to free trade emerging globally." She further emphasized that "Europe's lagging position in innovation has become starkly evident, with the technology gap between the US and Europe now unmistakable." These challenges, Lagarde argued, heighten the "urgency to integrate our capital markets." Concerns over Donald Trump’s potential return to the White House have added to Europe’s unease, as the president-elect has threatened to impose tariffs on all imports into the US, targeting the EU and its trade surplus with the US specifically. Lagarde referenced the "capital markets union," an initiative long supported by the ECB to strengthen the eurozone’s ability to compete with major economies like the US. However, she cautioned that the project risked succumbing to "death by a thousand cuts" due to its "loose definition" and the "piecemeal legislative approach" it has fostered.

Lagarde's proposals

Since 2015, numerous proposals have been made for the capital markets union, but these have often been undermined by "national vested interests" viewing certain initiatives as threats, Lagarde said. As a critical measure, she proposed the creation of standardized, EU-wide savings products to encourage Europeans to invest more broadly across borders and reduce reliance on cash and bank deposits. Fragmented markets currently keep most European savings confined to their home countries, while institutional investors increasingly favor US markets over EU alternatives, she noted.