ECB President Warns of Global Economic Fragmentation

(MENAFN) In a strong address delivered in Beijing on Wednesday, European Central Bank (ECB) President Christine Lagarde stressed the critical importance of bolstering international cooperation in the face of growing trade disputes. Her remarks warned against the looming danger of global economic fragmentation if collaborative efforts falter.

Speaking at an event organized by the People’s Bank of China (PBoC), Lagarde criticized unilateral approaches to resolving trade conflicts, stating that they have repeatedly proven ineffective and often bring about unpredictable and costly consequences, according to a press release from the ECB.

Citing the protectionist trade battles that fueled the Great Depression in 1929, Lagarde argued that coercion in trade policy is an unsustainable path forward. Resolving the global trade war could require all sides to compromise, she said.

She also drew attention to the sharp increase in global trade distortions since 2014, pointing out that subsidy-related interventions have surged over threefold. While China plays a significant role, she noted that many other nations—especially those with emerging economies—are also employing subsidies as economic tools.

Lagarde underscored the major transformations the global economy has undergone in recent years, including intensified geopolitical rivalries and trade disputes, both of which hinder productive international collaboration.

She concluded by noting that although the current incentives to cooperate might be weaker than in the past, the consequences of inaction have grown substantially, making the consequences of inaction more severe.

Strengthening Ties with China

At the same event, the ECB and the PBoC signed an updated memorandum of understanding (MoU) aimed at deepening central bank collaboration. The agreement, signed by Lagarde and PBoC Governor Pan Gongsheng, marks a renewal and expansion of the original pact established in 2008.

According to the ECB, the revised MoU outlines mechanisms for consistent dialogue, information sharing, and technical cooperation between the two financial institutions.

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