Global trade tensions have returned to the center of the international economic debate. The statements of Joachim Nagelpresident of the Bundesbank, and of Christine Lagardepresident of the ECB, highlight the serious consequences of a new wave of duties punitive measures that the United States could impose.
At the 34th European Banking Congress in Frankfurt, European economic leaders launched a call for unity and the creation of an integrated financial market, underlining the risks of isolation and fragmentation for Europe.
Growth and inflation: the risks of US tariffs according to Nagel
The President of the Bundesbank, Joachim Nagelpainted a worrying picture for global economies. According to Nagel, the imposition of new tariffs by the United States could reignite a international trade warwith devastating effects on both economic growth and price stability.
The introduction of trade barriers of this magnitude would damage multilateral relationships, further compromising the global economic order. Nagel then warned that such a scenario would lead to significant GDP lossesnot only for the United States but also for trading partners, including the Old Continent. Furthermore, tariffs would increase production costs, generating a inflationary spiral on both sides of the Atlantic.
Nagel underlined the need for a more united Europe to counter these challenges. He reiterated the urgency of completing thebanking union through a common deposit guarantee system and the reduction of banking exposure to sovereign risks. An approach, according to the president of Bundesbankessential to preserve the European model of prosperity and protect the continental economy from external disruptions.
Capital market union becomes urgent
Also Christine Lagarde he emphasized the need to strengthen European economic integration. During his speech, he stated that in an increasingly uncertain geopolitical context marked by threats to free trade, theCapital Markets Union represents a strategic priority for Europe.
Lagarde highlighted the growing gap between the United States and Europe in terms of innovation and technological development. He explained that around 300 billion euros in savings Europeans are invested every year in the United States, a trend dictated by the fragmentation of the European Union’s financial markets. The President of the ECB therefore proposed a more structured and ambitious approach, moving from “bottom up” strategies to a “top down” vision.
European financial infrastructures are too fragmented compared to those in the United States. Lagarde explains how there are hundreds of stock exchanges and central securities depositories, compared to drastically fewer in the United States. Fragmentation leads to high transaction costs and a poor liquidity for investorsmaking European markets less competitive compared to American ones.
For Lagarde, therefore, the Capital Markets Union is central to reducing the gap with the United States and facing future challenges, especially in an increasingly interconnected economic context. In fact, greater financial integration would allow Europe to retain capital within its borders, channeling them to the companies and regions that need them most.
