European Central Bank president Christine Lagarde, in her address at the European Banking Congress, highlighted the critical juncture at which Europe finds itself, facing challenges of deglobalisation, demographic changes and the need for decarbonisation.
She noted the signs of a fragmenting global economy into competing blocs, as per a transcript of her speech.
Lagarde pointed out the imminent demographic shift in Europe, with a decline in the working-age population expected to begin as early as 2025, coupled with increasing climate disasters.
She also emphasised the need for massive investment in a short time, describing it as a "generational effort."
Addressing the challenges, Lagarde said, "As new trade barriers appear, we will need to reassess supply chains and invest in new ones that are safer, more efficient and closer to home."
She also stressed the importance of deploying new technologies to cope with an ageing society and advancing the green transition without delay.
Estimates suggest that Europe's green transition will require an additional investment of €620 billion annually until 2030, with another €125 billion per year needed for digital transformation.
Lagarde highlighted the role of banks in this transition but cautioned against overburdening them, given their existing high debt levels since World War II and the scheduled end of European recovery funding in 2026.
She also touched upon the proposed capital markets union (CMU) in Europe, still under discussion, aiming to create a single market for capital akin to that in the US.
The EU's goal with the CMU is to enable free-flowing investments and savings across the region, benefiting consumers, investors and companies irrespective of location.
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