Lagarde of ECB: Fragmentation of global economy into rival groups is becoming more evident.

• As early as 2025, both a decline in the working age population and an increase in climate disasters are expected to occur in Europe, according to European Central Bank President Christine Lagarde.
• She stated that a generational effort was necessary due to the massive investment required in a brief period to address the shocks.

On Friday, Christine Lagarde, the President of the European Central Bank, stated that Europe is currently facing a crucial moment, with deglobalization, demographics, and decarbonization posing challenges ahead.

According to a transcript, she stated at the European Banking Congress that there are growing indications that the world economy is breaking down into separate groups.

As early as 2025, a continuous decline in the population of working age is predicted to occur in Europe, coinciding with an increase in climate disasters each year.

She responded to these shocks by stating that a significant investment was necessary in a brief period, necessitating what she referred to as a "generational effort."

In her keynote speech, Lagarde stated that with the emergence of new trade barriers, it will be necessary to reevaluate supply chains and allocate resources towards more secure, efficient, and localized alternatives.

"With the aging of our societies, we must utilize new technologies to produce more output with fewer workers. Digitalization will aid in this process. Additionally, as our climate continues to warm, we must accelerate the green transition without any further delays."

The green transition of the bloc is estimated to require an additional investment of 620 billion euros every year until the end of the decade, while the digital transition is estimated to require an additional investment of 125 billion euros per year.

Since the Second World War, governments have the highest debt levels, and European recovery funding will end in 2026. Banks will play a central role, but they cannot take on too much risk on their balance sheets, Lagarde stated, emphasizing the proposed capital markets union.

Discussions are ongoing about establishing a CMU for Europe, with the goal of creating a unified market for capital, similar to what exists in the U.S.

The European Union aims to facilitate the movement of money, including investments and savings, throughout the EU to benefit consumers, investors, and companies regardless of their location.