What are the three biggest challenges according to Christine Langard
The president of the ECB on the floor of the European Banking Conference. [REUTERS]
The president of the European Central Bank, Christine Lagarde, said on Friday that Europe is now at a critical turning point, with deglobalisation, demographics and decarbonisation at the forefront. “There are increasing signs that the global economy is fragmenting into competing blocs,” she said at the European Banking Conference.
Focusing on Europe, she said the continued decline in the working-age population is expected to become evident as early as 2025. , alongside climate disasters that are increasing every year.
Her response to these shocks is that huge investments will be needed in the short term, requiring what she called a “generational effort”. to invest in new ones that will be safer, more efficient and closer to home,” said Lagarde.
“Our societies are aging and we will need to develop new technologies so that we can produce more with fewer workers. Digitization will help. And as our climate heats up, we should advance the green transition without further delay,” he added.
He said, estimates show that the planned green transition of the Eurozone will require additional investments of 620 billion euros. ($672 billion) each year until the end of the decade, with another €125 billion annually for the digital transition.
“Governments are at their highest levels of debt since World War II and European recovery funding will end in 2026. Banks will play a central role, but we cannot expect them to take so much risk on their balance sheets,” he added. referring to the proposal for a Capital Markets Union (CMU).
Talks about a possible CMU in Europe are still ongoing. The aim is to create a single capital market, which will be closer to the one that exists in the US. The E.U. states that the official aim is “for money – investment and savings – to flow across the EU so that it can benefit consumers, investors and companies, regardless of where they are based”.
Lagarde noted that neither over-indebted governments nor banks can find the money needed to make the European Union more productive and more independent in an increasingly fragmented world. He added that companies that want to advance their digitization or decarbonization do not have access to the financing they need, with almost 40% of respondents to a related ECB survey of small and medium-sized enterprises expressing their dissatisfaction with the lack of investors' willingness to finance green investments.
In addition, European startups attract less than half the funding of their US counterparts, Lagarde added.
The president of the ECB emphasized that the European Capital Markets Union could be the solution to the problem. In this context he stated that the European Securities and Markets Authority should be given more powers, similar to those of the US Securities and Exchange Commission, to replace the current patchwork of national authorities.
“It needs a broader mandate, including direct supervision, to mitigate the systemic risks posed by large cross-border firms and market infrastructures such as EU CCPs,” Christine Lagarde underlined.
At the same time, the president of the ECB emphasized the need to create a single log file, known in the market as “tape”, to record transactions in European securities. “The creation of a European unified film can encourage a shift towards larger, cross-border, unified structures, markets and brokerage groups,” he pointed out.