Christine Lagarde: "The global economy is fragmenting into competing blocs"

Europe is now at a critical juncture, with deglobalization, demography and decarbonization looming on the horizon, Christine Lagarde, president of the European Central Bank (ECB), said late last week, according to CNBC.

"There are more and more signs that the global economy is fragmenting into competing blocs," Lagarde said at the European Banking Congress.

According to the President of the ECB, from 2025 onwards, Europe will face a continuous decline in the working population, along with climate disasters that increase every year. Lagarde believes that responding to these shocks requires massive investment in a short period of time, which she called a "generational effort".

"As new trade barriers emerge, we will need to reassess supply chains and invest in new ones that are safer, more efficient and closer to home," Lagarde said. "As our societies age, we will need to implement new technologies so that we can produce more with fewer workers. Digitization will help. And as the climate warms, we will need to move forward on the green transition without further delay."

According to the ECB president, the planned green transition for the European bloc will require an additional investment of 620 billion euros ($672 billion) each year until the end of the decade, with an additional 125 billion euros per year for the digital transition.

"Governments are at their highest level of debt since the Second World War, and financing for the European recovery will end in 2026. Banks will have a central role to play, but we cannot expect them to take on as many risks ", Lagarde also said, citing the capital markets union plan.

Discussions on a possible capital markets union in Europe are still ongoing, with the aim of creating a single market closer to what is available in the United States.

According to the EU, the official objective of the capital markets union is for "money - investments and savings - to flow throughout the European Union so that consumers, investors and companies can benefit from it regardless of where they are", according to CNBC.