ECB's Lagarde says European economy needs 'deep review' to face new world order

PARIS: The European economy needs a "deep review" to face "the dawn of a new international order", European Central Bank President Christine Lagarde told French radio RTL on Wednesday.

AI Brief

Lagarde expects only a slight inflation impact from US tariffs but says uncertainty from shifting US positions is more damaging.
She notes Germany would feel the tariff effect more than France and urges EU states to remove remaining internal nontariff barriers.
She calls for a united, firm European response to Trump's escalating tariff threats tied to his push to buy Greenland.

Lagarde said she only expected a slight inflationary effect from U.S. tariffs, with a stronger impact on Germany than on France, but she added European countries would be much stronger if they scrapped non-tariff trade barriers within the bloc.

"As we have inflation under control at 1.9%, the impact will be minimal. What is much more serious ... is the degree of uncertainty created by these constant reversals", she said, referring to the threat of higher tariffs.

U.S. President Donald Trump vowed on Saturday to implement a wave of increasing tariffs from February 1 on EU members Denmark, Sweden, France, Germany, the Netherlands and Finland, along with Britain and Norway, until the U.S. is allowed to buy Greenland, a step major EU states decried as blackmail.

Trump "often adopts a transactional approach ... he sets the bar very high at levels that are sometimes completely unrealistic", Lagarde said.

In response, Europe should indicate what instruments are available, demonstrate collective determination, and be united and resolute, she added.