“The ECB's analysis suggests that a US tariff of 25% on imports from Europe would reduce euro area growth by approximately 0,3 percentage points in the first year. A European response in the form of increased tariffs on US imports would further increase this percentage to approximately half a percentage pointand". The President of the ECB states this clearly Christine Lagarde speaking in the Econ Commission at the European Parliament. And he also reiterates this bulletin of the ECB, which revised down its outlook for global growth and trade “due to recently imposed tariffs in the United States and elevated trade policy uncertainty”. The document explains that “compared with the December 2024 Eurosystem staff macroeconomic projections, global growth has been revised down by 0,1 percentage point for 2025 and 2026, as recently imposed tariffs and increased trade policy uncertainty are expected to weigh on activity”.
Lagarde: “To respond to the US, greater trade integration is needed”
“The response to the current shift in U.S. trade policies should be greater, not less, trade integration, both with trading partners around the world and within the EU,” Lagarde said, stressing that “the ECB's analysis indicates that greater integration with the rest of the world could more than compensate for the losses incurred from unilateral tariffs, including retaliation. In such a scenario, only countries adopting isolationist policies stand to lose.” “It is therefore important that the EU remains open for trade, and the swift finalisation of recent trade agreements with other international partners would send a powerful signal,” continued the ECB head. “We must also use these developments as a catalyst for deepening trade between EU Member States. It is estimated that the single market added between 12% and 22% to the EU's long-term GDP in its first 30 years and the level of trade between member states has doubled since its creation". "A deeper Single Market - he added - is essential to reduce trade barriers within Europe and create the scale needed for companies to thrive".
Lagarde: “Inflation down, but uncertainty rises. No commitment on rates”
Le growth estimates ECB for the Eurozone "are subject to considerable uncertainty, also due to the trade policy context” Lagarde stated in her speech, while in the economic bulletin the ECB still speaks of “risks for economic growth remain oriented to the downside”.
"The exports should benefit from rising global demand, although this remains subject to developments in international trade policies. The latest ECB staff projections predict that the economy will grow by 0,9% in 2025, 1,2% in 2026 and 1,3% in 2027", added the ECB president.
Speaking about prices, Lagarde reiterated that the Eurotower is determined "to ensure that inflation stabilizes sustainably at our medium-term objective of 2%". "The disinflation process is well underway. Headline inflation fell from 2,5% in January to 2,3% in February, mainly due to a decline in energy inflation. Core inflation, excluding energy and food, also fell slightly from 2,7% in January to 2,6% in February, reflecting lower services inflation,” he continued. “Theinternal inflation fell slightly in February but remains elevated as wages and services prices in some sectors are still adjusting to the past surge in inflation. In addition, nominal wage growth has moderated over the course of 2024 and is expected to continue to decelerate in the coming months as real wages have reached levels seen before the surge in inflation, leading to lower inflation compensation claims.”
“Especially in the current conditions of increasing uncertainty, we will follow a data-dependent, meeting-by-meeting approach to determining the appropriate monetary policy stance. We are not making any advance commitments on a particular rate path,” concluded the number one at the Eurotower.
Lagarde: “Defense investment impact to be assessed”
Regarding the 800 billion in defense investments envisaged by the ReArm Europe plan, “these will obviously have consequences, both in terms of growth in production and in terms of inflation and price levels,” Lagarde stressed. “Where do the products that will be purchased come from? Will a combination of national approaches be needed to find the financing? All these factors will have an impact and will determine the exact level of changes that will produce growth, inflation and the cost of financing,” she added, stressing that “I think we will pay a lot of attention to this. We complained so much that investments were late. Of course, you have to invest well, but investments are welcome.”
Lagarde on Unicredit: “We do not give up on bank resilience”
“It is a fact that on March 13 the ECB published its decision not to oppose UniCredit’s plan to convert derivatives into a position that would grant it a significant stake in Commerzbank. I will not add anything else.” But “you all know that we have gone through the period when there were companies that were too big to fail,” elaborated Basel 3. “It gives me the opportunity to recall that a framework that supports the resilience of banks is of fundamental importance.” “We should not give up on the framework that provides banks with the resilience we need,” Lagarde told the EP.
“Think long before kidnapping Russian axis”
“Anything” like a seizure of Russia’s frozen assets “would really have to take into account the consequences for financial stability, in the monetary order, of the principles of international law that we so much want to see a country like Russia respect, rather than violate,” Lagarde said. “And I think on both fronts governments will have to think long and hard before they decide to move in any direction.”
“The ECB carries out its mandate whatever it takes”
“Whether or not we generate profits “will not impede our ability to fulfill our mandate whatever it takes“, said the ECB president, quoting the famous speech of her predecessor Mario Draghi. “A central bank is not for profit, because if we did that we would not be living up to our mandate which is price stability,” Lagarde said, adding that “there have been losses in the last couple of years and there could be more, but at a significantly lower level. These losses have been caused by changes in interest rates.” “We have had significant profits in recent years – Lagarde stressed -. The profits for the entire euro system between 2012 and 2021 were 300 billion euros, this is the volume of profits that were generated by the entire euro system, for the ECB the profit was 13 billion cumulatively in this period”.
