Europe’s top central banker yesterday defended the region’s ailing economy as it flounders in the face of a resurgent America – insisting it was not a ‘basket case’.
Speaking to leaders at the World Economic Forum in Davos, European Central Bank (ECB) president Christine Lagarde had to go onto the defensive in the face of criticism from a leading US financier.
In an exchange that highlighted perceptions of a transatlantic gulf opening up since the return of Donald Trump, Larry Fink, boss of global asset manager Blackrock, declared: ‘Europe is a myth. It’s a beautiful myth, but it’s not working.’
Lagarde, who was sitting next to Fink on the stage, responded immediately. She said: ‘Europe is not a myth. Europe is not a basket case.’
The exchange reflects increasing frustration among global bosses that while already-strong US growth is being supercharged by Trump’s plans to cut taxes and regulation, the economy continues to flounder on this side of the Atlantic.
Latest forecasts from the International Monetary Fund suggest that the eurozone economy will expand by just 1 per cent this year, far behind America’s 2.7 per cent.
Clash: European Central Bank boss Christine Lagarde (left) and Larry Fink in Davos
And it faces a further challenge after the US president used this week’s summit to declare economic warfare on those he believes are taking advantage of America through unfair trade.
Trump told delegates via a videolink from Washington on Thursday that the EU ‘treats us very, very unfairly’ and that he would ‘do something about’ trade deficits. That has raised fears for European economies.
But Fink said Europe should concentrate on its own issues – such as the need to open up the single market further with a banking union – rather than ‘focusing on the problems that the US may impose on it’. He added: ‘It’s not working relative to the strength of the US, the innovation of the US, the entrepreneurialism of the US.
‘Europe needs to be on the same footing and here we are, now in 2025, 16 years post the financial crisis, and I don’t see Europe moving forward enough – I see Europe backward looking too much. I’m optimistic. But to be optimistic you have to admit your problems.’ Lagarde admitted there were problems but said: ‘Europe is a fantastic case for transformation.’
She added: ‘I agree with you that it is not operating and functioning as a single market.’
Lagarde risked upsetting Trump by suggesting another way Europe could get ahead – luring disgruntled Americans to cross the Atlantic. She said: ‘Maybe it’s time to import a few of the talents that would be disenchanted for one reason or the other.’
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