European Central Bank President Christine Lagarde highlighted rising global trade threats and urged the EU to deepen its capital markets to finance innovation and boost productivity. Speaking Friday, she warned that Europe’s openness makes it particularly vulnerable to protectionist trends, such as potential tariff increases by U.S. President-elect Donald Trump.
Lagarde emphasized the urgent need to increase funding for innovative businesses, many of which rely on foreign capital. While European households save more than their U.S. counterparts, their cautious investment habits—favoring cash over market-based assets—limit economic growth. Adopting U.S.-style investment strategies could unlock up to €8 trillion for long-term investments.
Progress on creating a unified EU capital market, however, has stalled due to fragmented national regulations and resistance from vested interests. Lagarde called for decisive action to harmonize rules, arguing that the current piecemeal approach has failed.
Europe’s declining innovation and widening technology gap with the U.S. underscore the urgency of reform, she said, warning that without swift action, the EU risks falling further behind.