Discussion with “Obstacles” publication

Christine Lagarde, President of the European Central Bank (ECB), describes herself as an “owl” – a symbol of wisdom and composure. Looking ahead to 2020, Lagarde anticipates a growth rate of around 1.1% in the euro area, with the biggest threat being a downturn in trade due to uncertainties such as trade tensions and Brexit. Lagarde believes that Europe will be weakened as a result of Brexit, but the EU will recover and need to bolster its efforts to compensate for the UK’s departure. The difference in growth between the US and the euro area is largely due to economic policy choices, with the US benefiting from fiscal stimulus and a more flexible fiscal policy. Lagarde emphasizes the need for a “new policy mix” in Europe, utilizing monetary policy, fiscal policy, and structural reforms to increase growth potential. While public debt in France is increasing, Lagarde believes that steps can be taken to reduce the deficit and debt while adopting a growth-friendly fiscal policy. Lagarde also discusses the issue of high current account surpluses and the challenge of bringing the ECB closer to citizens. In terms of monetary policy, Lagarde acknowledges the low or negative interest rates and their impact on savers, but emphasizes that these measures aim to maintain stable prices and avoid a recession. Lagarde supports the European Commission’s “Green Deal” and states that the ECB will play its part within its mandate of maintaining price stability and banking supervision. The euro has the potential to gain ground on the world stage, but its international role will ultimately be determined by economic agents. Regarding the possibility of a central bank digital currency (CBDC), Lagarde states that the ECB is assessing the costs and benefits and has created an expert task force to study the feasibility of a euro area CBDC. Despite leaving France in 2011, Lagarde says that France is always close to her heart.

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