ECB's Christine Lagarde urges 'more digital and greener' policies
By Sarah Walton
Christine Lagarde was a lawyer and economist in France before becoming president of the European Central Bank (Credit: AFP/ Tobias Schwarz)

Christine Lagarde was a lawyer and economist in France before becoming president of the European Central Bank (Credit: AFP/ Tobias Schwarz)

The new president of the European Central Bank, has warned that large changes are affecting the global economy, but that it could be an opportunity for the euro area. 

In her first policy speech, Christine Lagarde told the European Banking Congress in Frankfurt that European governments should boost public investment and work even more closely together.

She said the euro area faces major problems – a global slowdown in trade and changes to the structure of the economy across the world. She noted that ongoing uncertainty caused by trade disputes had depressed global growth to its lowest level in decades.

Her speech came as the IHS Markit's purchasing managers index (PMI) revealed the eurozone's manufacturing sector continued to shrink in November. The reading of 46.6 was higher than economists had predicted, but still below the 50 mark that indicates growth.

Lagarde warned that economic trends across the world were changing, saying: "We are starting to see a global shift – driven mainly by emerging markets – from external demand to domestic demand, from investment to consumption and from manufacturing to services."

She went on to say that "world trade is being reordered as new technologies disrupt conventional supply chains and workplace organization, and as potential new risks emerge from climate change. All this obviously has implications for our external sector, not least because the euro area's exports are intense in capital and intermediate goods."

She told the audience at Frankfurt's Opera House that the ECB would continue to support the economy and respond to future risks, but that monetary policy must be supported by political policies which support "investment in a common future that is more productive, more digital and greener."

Lagarde said the eurozone had not embraced innovation or new technologies as fast as other parts of the world, such as the US. As a result, she said, productivity growth in the region had risen by only half as much as that of the US since 2000.

Lagarde will host her first monetary policy meeting with the ECB Governing Council in Frankfurt next month. It comes following reports of a rift among members of the board after some opposed a decision by the previous president, Mario Draghi, to announce a large package of rate cuts and economic stimulus for the eurozone economy.