On Wednesday 4 December, Christine Lagarde, President of the European Central Bank, said that Donald Trump’s return to power in the United States could be an opportunity for Europeans to boost their economic competitiveness.
Beyond the words, we need to see what is actually done, “but we need to prepare for it” now, declared Ms Lagarde during a monetary dialogue with the European Parliament’s Committee on Economic and Monetary Affairs. Referring to the ‘Draghi’ report on European competitiveness, the ‘Letta’ report on the internal market and the ‘Noyer’ report on Capital Markets Union (CMU), she supported any initiative to boost “productivity” in the European Union, in response to questions from Stéphanie Yon-Courtin (Renew Europe, French) and Enikő Győri (PfE, Hungarian).
The former Director of the IMF cited the increased integration of European capital markets to finance innovation through the creation of a low-cost pan-European financial instrument to channel available private investment. She also advocated standardising financial supervision at EU level, echoing her earlier proposal to create a European ‘stock market watchdog’ modelled on the US SEC (see EUROPE 13296/21).
Eero Heinäluoma (S&D, Finnish) asked her to clarify her statements to the effect that Europeans should avoid a resurgence of transatlantic trade tensions after the change of US administration by buying more from the United States.
In an ideal world, Mrs Lagarde said, trade would be conducted on the basis of rules determined within the WTO. “But we shouldn’t be naive. We have to be aware and recognise that negotiations have to be conducted” with the future US administration, and to do that it is better to be “in a position of strength”, she argued, convinced that it was not a question of the EU “lowering its flag” when faced with US pressure.
France. Several MEPs questioned the former French Minister on the repercussions of the political crisis in France, at the very moment when French MPs were toppling Michel Barnier’s government. She refused to step out of her role as President of the ECB by commenting on how France could rapidly adopt a budget for 2025.
Asked by Jónas Fernández (S&D, Spanish) about the volatility observed on the euro area sovereign debt markets, Ms Lagarde referred to the specific report that the European Systemic Risk Board (ESRB), which she chairs, had adopted that very day. In particular, she noted that the volume of sovereign securities held by banks has fallen “significantly” since the euro area sovereign debt crisis.
This report analyses the disruptions observed on these markets over the last 10 years, as well as changes (nature of financial players, technological developments) in the sovereign debt markets. Its authors are calling for urgent legislative action to provide a better framework for the activities of money market funds in the EU, particularly the liquidity risks to which they are exposed.
See the ESRB report: https://aeur.eu/f/en0
Fiscal union. Pasquale Tridico (The Left, Italian) asked the ECB President about the difficulties faced by the European automotive sector with regard to international competition and the initiatives that could be taken at European level. He mentioned the possible activation of the SURE instrument for aid to national short-time working schemes, created to deal with the Covid-19 pandemic.
According to Ms Lagarde, this kind of consideration is more a matter for fiscal policy. She has also reiterated her support for any initiative by euro area countries that could lead to a “fiscal union”, whether this involves creating a common fiscal capacity or a common debt to finance common European goods.
And when asked by Fabio De Masi (The Left, German) whether she agreed with Bundesbank Governor Joachim Nagel, who on Wednesday called for the constitutional brake on German public debt to be lifted, Ms Lagarde simply replied: “Yes!” (Original version in French by Mathieu Bion)