European Central Bank (ECB) president, Christine Lagarde, has called for more trade between European nations in order to protect the continent’s supply chains from geopolitical shocks and the new “stormy and fragmenting” world order.
“As geopolitical tensions rise and global supply chains fragment, the case for deeper regional cooperation has never been clearer,” Lagarde told a conference in Kyiv.
‘Deepen’ ties
The former French trade minister said that Europe, including the UK and Ukraine, remained its own most important trading partner, with the world splintering into “rival trade blocs”. This development posed a clear risk to prosperity.
“By deepening economic ties – more closely linking neighbouring economies – we can reduce our exposure to external shocks.
“Rising trade within our region can help offset losses in global markets.”
ECB research found that nearly half of firms involved in external trade have already revised their business practices to shift towards friendlier nations, or brought parts of their operations back home.
Ukraine
Speaking at the event, organised by Ukraine’s central bank, Lagarde praised Ukrainian resilience against Russia’s “unjustified war of aggression”.
Both Europe and Ukraine stood to benefit from increased regional economic integration, she said.
“Ukraine stands at a pivotal moment – facing the hardships of war, the challenge of reconstruction and the opportunity of deeper regional integration.
“In a world marked by shifting geopolitical realities, such integration offers a clear path to recovery and lasting prosperity.”
Vulnerabilities
Lagarde, formerly a director of the International Monetary Fund, also warned that integration without appropriate reforms can “create new vulnerabilities – especially in the financial sphere”.
“Financial integration often brings volatile capital inflows, which can make it difficult to distinguish sustainable growth from unsustainable excesses in real time.”
She pointed to European integration prior to the 2008-2010 financial crisis as an example of this.
Lagarde to WEF?
In recent weeks, Lagarde has said she is “determined” to complete her term after reports that she is leaving early to lead the World Economic Forum.
Klaus Schwab, a founder of the WEF who left the organisation earlier this year after allegations of misconduct, which he denies, said that Lagarde was expected to join at some point in 2027, with logistical details arranged.
She told reporters earlier this month that she would not leave the ECB early and was “fully determined to deliver on my mission.”
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