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Lagarde warns Europe’s growth model is eroding amid energy, trade shifts
Lagarde said global trade restrictions topped 2,500 last year and that EU electricity prices for energy intensive industries averaged more than twice US levels.
Christine Lagarde, speaking for the ECB at the World Economic Forum, said Europe’s post war growth model relied on three reinforcing pillars that are now weakening as the global environment changes.
She pointed to a shift in trade conditions, saying expanding trade can no longer be taken for granted and that more than 2,500 trade restrictions were implemented globally last year.
Lagarde also said Europe’s manufacturing advantage is being pressured as China moves up the value chain, competing directly with the euro area in close to 40% of sectors where Europe has a comparative advantage, versus around 25% in the early 2000s.
On energy and security, she said the cheap energy that supported European industry has faded, with EU electricity prices for energy intensive industries averaging more than twice US levels and around 50% above those in China, and that geopolitical tensions are pushing resilience concerns directly into investment decisions.