President of the European Central Bank - Christine Lagarde | Newstalk

Summary

Christine Lagarde, President of the European Central Bank, shares insights on current economic issues impacting the Eurozone, including Trump's tariffs, interest rate adjustments, and the need for Europe to strengthen independence in defense, trade, and digital payments. With uncertainties looming due to global political and economic climates, Lagarde emphasizes the importance of predictability and law while highlighting potential European vulnerabilities and opportunities for economic growth through strategic independence.

Highlights

• Trump's tariffs could disrupt Eurozone inflation and interest rate plans. 🚩
• Christine Lagarde envisions a more independent Europe, with stronger internal markets. 🏦
• Digital payment independence is critical for Europe, as current systems rely heavily on non-European infrastructures. 🔄
• Increased European defense spending could spur economic growth if invested wisely within the EU. 💪
• Lagarde emphasizes respecting international law while handling frozen Russian assets. ⚖️

Key Takeaways

• Christine Lagarde emphasizes the ECB's mission for price stability amid global economic uncertainties. 📈
• Trump's tariffs present both a challenge and opportunity for Europe to bolster its independence. 🌍
• The ECB encourages Europe to strengthen its internal markets and reduce reliance on external digital payment systems. 💳
• Lagarde advocates for the European Union to leverage its economic power and resources efficiently. 🌟
• Current geopolitical tensions highlight the need for strategic economic and defense independence in Europe. 🛡️

Overview

Christine Lagarde, President of the European Central Bank, took to the airwaves on Newstalk to discuss some of the most pressing economic challenges and opportunities facing Europe today. With a hefty agenda before the European Central Bank, she unpacked the implications of Donald Trump's proposed tariffs, which she believes could disrupt the Eurozone's current trajectory towards inflation stability. 🌍 The discussion also touched upon the ongoing war in Ukraine and Europe's increasing defense expenditures, factors contributing to the EU's complex economic landscape.

In light of these global challenges, Lagarde emphasized the importance of Europe's economic independence. She highlighted the reliance on external digital payment infrastructures like Visa and MasterCard, which are outside of Europe's control, and discussed the need for the EU to consolidate and strengthen its capital markets. 💳 By doing so, Lagarde argues, Europe can reduce its vulnerabilities and foster a more resilient and independent economic environment. The interview also touched on how geopolitical uncertainties, such as Trump's tariffs, could accelerate these strategic shifts.

Lastly, Lagarde addressed the broader implications of global economic dynamics, including potential shifts in investment flows, Europe's internal market barriers, and the challenges of maintaining predictability in unpredictable times. ⏳ Her approach to ensuring stability within the EU involves respecting international laws, even amidst challenging scenarios like the handling of frozen Russian assets. While international tensions pose myriad challenges, Lagarde remains optimistic about Europe's ability to adapt and thrive, driven by innovation, unity, and strategic foresight. 🚀

Chapters

• 00:00 - 00:30: Introduction to Liberation Day and Its Economic Implications The chapter introduces Donald Trump's 'Liberation Day' and its potential economic impacts, particularly focusing on new tariffs. These developments might influence Eurozone inflation and the current trend of interest rate cuts that began last June. Additionally, the chapter highlights the ongoing war in Ukraine and the consequent increase in European defense expenditures. All these factors are critical for the European Central Bank as it prepares to meet and deliberate on any future interest rate cuts.
• 00:30 - 01:00: Interview with Christine Lagarde Begins The chapter features an interview with Christine Lagarde, the President of the European Central Bank. The conversation touches upon the concept of 'Liberation Day,' reflecting on the ECB's role and recent economic conditions. The discussion highlights the positive state of affairs with inflation being under control, interest rates declining, and things being on track economically.
• 01:00 - 01:30: Mission of the European Central Bank The chapter titled 'Mission of the European Central Bank' discusses the bank's primary mission, which is to ensure price stability in the economy. This stability is crucial for individuals to make informed decisions regarding investments, consumption, and mortgages. The chapter notes the challenge faced by the bank in achieving this mission, especially after a period of high inflation caused by successive shocks. The importance of understanding price levels and anticipating their movements over time is emphasized as part of the mission.
• 01:30 - 02:30: Inflation and Interest Rates Discussion The chapter discusses the progress of disinflationary efforts, noting that inflation is not quite at the target yet, but significant progress has been made. The target is to achieve a 2% inflation rate by 2027, which is considered sustainable in the medium term. Despite potential short-term challenges, such as those predicted at the beginning of the year (termed as a 'little bump in the road'), the optimism remains strong regarding meeting the target.
• 02:30 - 03:30: Economic Impact of Global Trade Policies The chapter discusses the economic impact of global trade policies, highlighting how energy prices and food prices significantly affect inflation, with particular emphasis on maintaining a sustainable medium-term inflation target of 2% despite temporary fluctuations influenced by these variables. It also touches on the importance of policy measures such as adjusting interest rates to manage these economic challenges.
• 03:30 - 04:30: Europe's Independence and Trade Strategies This chapter discusses the impact of interest rate adjustments on Europe's economy, especially in relation to inflation control and consumer experience. It highlights the benefits of cutting interest rates by 150 basis points (1.5% reduction), noting its positive influence on businesses and consumer spending. Furthermore, it touches upon the interconnectedness of interest rates with shopping and fuel expenses, pointing out these as crucial factors for economic prosperity and individual financial well-being.
• 04:30 - 06:00: Challenges in the European Payment Infrastructure The chapter discusses the challenges faced by the European payment infrastructure, emphasizing the importance of predictability in business, household, national, and economic planning. It highlights the difficulties that arise from unpredictable elements in global affairs, particularly in dealing with major economies like the United States. The recurring theme is uncertainty, which appears to be prevalent and a significant concern impacting decision-making processes.
• 06:00 - 09:00: Investment Opportunities and Internal Barriers in Europe The chapter discusses the current uncertainty surrounding investment opportunities and internal barriers in Europe. It mentions the lack of clarity regarding a major deal affecting the global economy and trade relations. The situation is expected to disrupt the global trade world significantly. The text reflects on how historical figures like Peter Southerland would be dismayed by the current state of affairs.
• 09:00 - 11:00: Defense Spending and Economic Impact The chapter discusses the implications of defense spending on the economy in the context of globalization. An anecdote from Ronald Reagan is mentioned, emphasizing his view on tariffs. Reagan argued that while tariffs might be applicable in specific sectors temporarily, imposing broad tariffs is detrimental, akin to 'shooting a hole in the boat.' Engaging in retaliatory tariffs is seen as equally harmful, described metaphorically as 'shooting a second hole' in the boat, and the discussion criticizes such actions as foolish.
• 11:00 - 15:00: Analysis of the American Economy and Global Tariff Impacts The chapter discusses the potential responses and consequences of global tariffs on the American economy and beyond. It emphasizes the role of central banks in anticipating and explaining these impacts to political leaders, despite their access to capable economists. The chapter notes that the economic impact will likely be negative globally.
• 15:00 - 18:00: Internal Dynamics and Decision-Making at the ECB The chapter discusses the complex internal dynamics and decision-making processes at the European Central Bank (ECB), with a focus on factors affecting policy decisions.
• 18:00 - 20:00: Ethical Considerations Regarding Asset Seizure The chapter delves into the ethical considerations surrounding asset seizure, opening with a discussion that references Trump's tariffs as a potential catalyst for Europe's move toward independence. The speaker suggests that this independence is not solely about reacting to international pressures but also about leveraging domestic strengths. By looking inward, Europe can regain a degree of independence that it currently lacks.
• 20:00 - 23:00: China's Economic Influence and Global Market Dynamics The chapter discusses the impact of China's economic influence on global market dynamics, particularly in the context of trade, finance, and the movement of money within Europe. It emphasizes the need for better organization, consolidation, and supervision of capital markets in Europe. Additionally, the chapter highlights the importance of having control over digital payments.
• 23:00 - 23:30: Closing Remarks and Maintaining Optimism The chapter discusses the reliance on non-European digital payment infrastructures, such as Visa, Mastercard, and PayPal, during e-commerce transactions or peer-to-peer payments. It highlights a general misconception about the origin of these payment systems and emphasizes the need to be aware of using non-native infrastructure for digital payments.

President of the European Central Bank - Christine Lagarde | Newstalk Transcription

• 00:00 - 00:30 today is Donald Trump's so-called Liberation day where he set to announce a raft of new tariffs any tariffs could have a negative impact on Eurozone inflation and The Cutting of interest rates which has been ongoing since last June they also come against the backdrop of Russia's continuing war in Ukraine and Europe having to scale up defense spending all of these issues will be under consideration by the European Central Bank when it convenes to decide on any further interest rate Cuts uh in the coming months it's quite a hefty agenda for the Central Bank to discuss
• 00:30 - 01:00 and I'm delighted to be joined in Studio by the president of the European Central Bank Christine lagard Madame President good morning and welcome oh fck good that means you have a few words let's talk about Liberation day and from the point of view of the European Central Bank things were going so well weren't they things are inflation was under control the interest rates were coming down things were were right on track well I say that we had
• 01:00 - 01:30 you know we have a mission and that mission is to uh procure price stability to the economy so that people understand what the price levels is and how it's going to move over the course of time so they can make their investment consumption um you know mortgage decisions understanding what what what the deal is and we had come from very high inflation um that was precipitated by combination of shocks that came you know one after the other and compounded each each other and we are now very
• 01:30 - 02:00 close to Target so the disinflationary process is well underway we are not quite at Target yet there is still a bit of work to do but uh we are we are really uh I think you know we are quite satisfied with the work that we have done the prediction was that this year there might be a little bump in the road this is before uh Liberation Day there might be a little bump in the road and then things would get back down to what 2% by 2027 yeah the target we have is 2% in the medum term on a sustainable basis
• 02:00 - 02:30 we we we have been under 2% previously but it it went up again because we have base effects which are generally determined by the price of energy which matters a lot or price of Food Matters a lot of course uh but yes we we will have little little bumps uh up but I think what matters is this sort of medium-term uh approach and and and sustainable uh 2% that that we want to reach and I I really think that with the work that we've done on with first of all hiking
• 02:30 - 03:00 interest rate to fight inflation and bring it down uh and now um cutting interest rates as we have by 150 basis points so 1.5% down uh we are um as I said I think close to Target and it's good for business obviously I think it's good for all you know it's also good for for consumers for households um when you when you go shopping you're interested in the price you pay when you go to the petrol station you're interested in how much you pay for it as well now one of the drivers of uh prosperity and good
• 03:00 - 03:30 business is predictability I mean knowing where you stand whether the interest rates are high or low you factor all of that in in your planning whether it's household planning or uh National planning or business planning when you're dealing with the United States in this very unpredictable world uh it makes your task far more difficult well predictability is in very short supply at the moment for sure and I don't think that I have ever mentioned the word uncertainty as many times as I
• 03:30 - 04:00 have in the last few weeks because we simply don't really know to this day which is supposed to be the day when it is announced uh what the deal will be for the rest of the world but what we know Pat is that it will not be good for the global economy and it will not be good for those who inflict uh the rates uh and or those who retaliate I mean it's it's going to unsettle uh the trade world as we know it and I think Peter Southerland would would turn in his grave uh if you knew what what is going
• 04:00 - 04:30 as one of the AR of globalization absolutely absolutely yeah we quoted from Ronald Reagan yesterday on the program where he said tariffs um first of all they have a role to play Maybe in one particular sector or another at any given time but anyone who creates blanket tariffs is shooting a hole in the boat and anyone who responds is that Reagan who said that re said question yes and anyone who responds is shooting a second hold in in the boat and it's so stupid to do that kind of thing so how
• 04:30 - 05:00 should Europe respond do you reciprocate that is something for the uh for the political leaders to decide uh our job at the central bank is to anticipate to uh explain to them although they do have great economists as well what the consequences will be in terms of economic uh economic impact and I was going to say negative impact because it will be negative anyway the world over and it will have an impact and it the the
• 05:00 - 05:30 density and the durability of the impact will vary depending on the scope on the products targeted on how long it it last on whether or not there are negotiations because let's not forget quite often those those escalation of of tariffs because they prove harmful even for those who inflict it uh lead to negotiating negotiation tables where where people actually sit down and discuss and eventually remove some of those barriers now you have said that
• 05:30 - 06:00 I think yesterday um I I think it's the the speech I'm quoting from Trump's tariffs offer a chance for Europe to show Independence absolutely I called it the uh the beginning of a March towards independence what does that independence mean okay what I mean by that is we should not be exclusively focused on what is happening on the other side of the pond and we should focus on the strength that we have at home and how we can regain a degree of Independence that we don't have and that applies to
• 06:00 - 06:30 defense it applies to um trade of course it applies to finance and from my from my perspective uh it applies to the way money moves around Europe so by that I mean Capital markets which are completely scattered all over Europe and which have to be better organized more Consolidated converging and possibly uh singly supervised that's one thing the second thing which I think is really important for all of us is to have digital payment under our control
• 06:30 - 07:00 when you think of it at the moment a lot of our digital payment when you pay you know when you e-commerce or where peer-to peers or you use your card or your phone you always rely on non-european infrastructure so I think the the the the controlling explain that to me because I wasn't aware of this I presumed we were all whether whether you use a card yeah uh or whether you use a phone typically it goes through Visa Mastercard PayPal
• 07:00 - 07:30 alipe where are all those coming from well either the us or China and the whole sort of infrastructure mechanism that allows for the payment credit and debit is not a European about this I didn't realize this because it means that every time I use my credit card or use my phone that information about me is leaving the European Union and going to the United States I thought that was not permitted abely I'm sure they do that you know in in liance with European
• 07:30 - 08:00 regulations but yes that is that is the point which I which is where I think that we have to reduce that vulnerability and make sure that there is a European offer that is available just in case you never know all right a plan B yeah now the the question of investment in Europe uh if I had billions of Euro or dollars at my disposal I'm looking at the United States would I put my money in there at the moment or would I look for somewhere else to invest where predict stability
• 08:00 - 08:30 was more than Norm what we observe on the markets at the moment and in capital flows is a lot less excitement about investing in the US I'm not saying that the flows have reversed and that it's all coming back to Europe no but there is at the moment a stop and hold until there is more certainty about those markets so that's another reason why I think this March towards independence is important we have to make sure that in the European Union in the Euro area we
• 08:30 - 09:00 have attractive Investments that people want to put their money in and and we have the assets we have the opportunities to to do that think for a second if we were to remove the internal barriers that we have set for ourselves in Europe our economic wealth would increase significantly the IMF has produced some studies about that and and it's it's clear that our own barriers
• 09:00 - 09:30 internally at the moment in services for instance equal to 110% tariffs in Goods equal to 40% tariffs we have to remove that but isn't that a political uh decision that would have to be made by the European Union Yes and we know uh and I don't expect you to comment on the Rogue or the couple of Rogues among the eu27 who are pro Putin and who would not like to see any of this consolidation and uh I suppose efficiency creation
• 09:30 - 10:00 H I believe that European leaders who are truly dedicated to that European project will find the ways institutionally uh to agree amongst themselves whether it takes the form of a coalition of the Willing of qualified majority or otherwise but they have to find the ways um we quoted something else um a couple of days ago on the program which is a joke that goes around in Kev particularly and it's a question really and I'm only doing this from memory how
• 10:00 - 10:30 come 450 million Europeans require the help of 340 million Americans to defend themselves against 130 million Russians mhm it's a very interesting question I think it's the point that was made by Donald Tusk he brought in as well the 350 Americans and the 500 Millions Europeans and it goes exactly to the point that I was making we do have the strength we do have the economic power we do have the potential we do have the
• 10:30 - 11:00 population I'm not sure we have the perfect demographics which raises the issue of how do we deal with shortage of labor but we we have those huge assets and we need to apply that those capacities and that creativity that we have to be more independent and to be less vulnerable on all fronts uh how does that come about when there is a will there is a way and I think that uh in times of Crisis um whether it's in Ireland or whether it's in Europe we have found the
• 11:00 - 11:30 ways to bounce back from where we were whether it was vulnerability or financial crisis to come back and to and to restore our position and I think we we are in this moment in Europe where because we are confronted to a significant risk we have to draw on our forces and to draw on our Unity that's a difficult Point by the way now you know that Trump's idea is he'll have blanket tariffs on All European uh Nations and then he wants to have individual
• 11:30 - 12:00 conversations with individual leaders to try and you know do the deal with each one of them individually and that would be I suppose to divide and conquer that's an old practice isn't it goes back to the Roman days yeah yeah you know there is a lot of uncertainty as to exactly where he's going to come out whether he's going to be a blanket tariff or whether it's going to be already targeted in such a way that he can already divide by by by sheer announcement or whether it's going to be sectorial whether it's going to be
• 12:00 - 12:30 on the basis of reciprocity there are many schools of thought but I think he's he's the only one to know what he wants to uh to implement I see I'm I want to spend all my time and all my energy and my Vigor on what we can do for ourselves and how we can be stronger and better at home one of the things that is going to happen is already signaled and particularly in Germany where the constraints on spending money on defense have uh now been lifted there will be a massive investment in European in defense M and in a perverse way you know
• 12:30 - 13:00 the weapons of war will be good for economies jury is out because it depends how it is spent and where we purchase uh if if that European money or member states money is spent on equipment on research and development on new weapons and d d da which I'm not an expert in by the way that will produce you know Innovation productivity gain and all that is good for the economy uh
• 13:00 - 13:30 particularly if it is purchased within Europe yeah not outside Europe but of course this might be part of the deal that Trump wants to do increase your defense spending and buy it from us he he might try that for sure which is why again I'm coming back to my point we have to build our resources we have to build our capacity at home looking at which might take time but it's a long game that we should your your analysis and the central bank's analysis of the American economy and it's it's I suppose its structural deficits um I was
• 13:30 - 14:00 listening to jannis varakis I'm sure you know him well yes from from back in the day uh yesterday on our station he was talking about the problem for America is their manufacturing capability has diminished dramatically and yet they are wealthier than ever in terms of the dollar and that uh the people around Trump what they really want to do is devalue the dollar there'd be lots of people with dollars then who want to shed them and then they will try to persuade them to buy long-term American bombs
• 14:00 - 14:30 with that cash but the dollar goes down in value which makes American exports more competitive is that a logical analysis I don't think it it it works on you know in the in the textbook U because there are few obstacles along the way and I'm not sure that this is even any longer the plan I think the key plan at the moment is more shortterm it's let's raise uh tariffs to cash in in order to uh allow for the tax cuts that will be coming up later in the year
• 14:30 - 15:00 I think that's the short-term plan the medium-term plan is bring industry back at home which is also an issue because if you have uh labor Supply which is largely available fine but if you are short on labor it's it's likely to heat up the economy which is not something that anybody wants when you're trying to reduce inflation do you despair a bit of what's going on in the United States I mean I look at it and I think of these uh Barons from the 19th century in Victorian times very wealthy people being robber Barber bar robber bar yeah
• 15:00 - 15:30 of the the 19th century and we also have an anti-science bias in the United States we have children in Florida age 14 and upwards being encouraged to work at nights to compensate for the migrants it's like going back to the 19th century to Victorian times it is depressing it is very worrying it is very but I never despair of the American people you know I I have a a debt to the American people I I went
• 15:30 - 16:00 to the US when I was 17 after the death of my father I have an American family and many American people are wonderful and and warm-hearted people and I cannot believe that they're all sympathetic to what is happening at the moment but they don't have a chance until uh November of next year to have their say although they did as you probably saw overnight in Wisconsin absolutely which will uh this was musk talking about the impact of that single election could impact the entire world World which on the face of
• 16:00 - 16:30 it was quite bizarre hyperbolic hyperbolic exactly so so uh your uh ambition then for the the Central Bank do you have unity in the central bank I mean are you and you smile there briefly when I when I as that question yeah look I I have around the table 26 super bright uh characters most of them trained in economics um all of them sort of um respected at home and and and
• 16:30 - 17:00 responsible for their National central banks and yet when they all come together around the table we form one single unit which is the Euros system headed by the European Central Bank so I spend a lot of my time uh talking to them convincing them working out what the consensus is likely to be on the basis of what I think is the best solution towards our Target I have the Fantastic support of one of your compatriots Philip Lane who is my chief Economist a member of the exec board and
• 17:00 - 17:30 of of fantastic advice and a great support to me in those Endeavors uh I work with Gabrielle mof was the uh National Central Bank Governor at the moment but the other 19 are as respectable and as smart and as as as good as well when I asked that question and you smiled when you replied that there are 22 super bright people around the table I smiled because I was trying to imagine the kind of conversations when you've got really bright people in the room and so many of them all trying to CH you
• 17:30 - 18:00 know I think what's really important is that they all feel respected number one listened to uh and I don't think that we should ever have such a determined and stubborn view that their arguments are worth nothing all arguments are worth being listened to and some of them are worth um being included in the reasoning and in the in the decisions that we make you know when Michelle Obama was saying when they go low we go High I I was just
• 18:00 - 18:30 thinking in response to what's going on in the world with Trump and with Putin um do we keep endeavoring to go high for example the Russian assets that are held by the ECB which would more than compensate well partially compensate Ukraine for the damage inflicted upon Ukraine by Russia is there a case for just seizing those and giving them to Ukraine number one the good thing is that we have Frozen those assets so they belong to the National Central Bank of Russia which is therefore Russia
• 18:30 - 19:00 Sovereign um property second we are using them because the proceeds from those assets is used to pay back some of the loans that the G7 countries have extended to Ukraine so it's being used so this money is earning interest absolutely and the interest is used to pay for those loans that have been um made as I said by the g72 to Ukraine my third point is that if you want intern law to be respected which is
• 19:00 - 19:30 what we expect from all our you know Partners including Russia which has clearly broken that rule if we want the international law to be respected we have to respect it ourselves and there are conditions and circumstances when you can use those assets they exist they have been um you know validated by international law and we should respect that and we should once the conditions are satisfied in the right circumstances of of course use those assets and apply
• 19:30 - 20:00 to the Reconstruction of Ukraine but not at you know under any circumstances and without conditions it's the for the Reconstruction part of a settlement agreement and then you know what it won't be enough to reconstruct Ukraine it will not more will be needed yeah now the the the question there for is why would anyone trust the European Central Bank if it did unilaterally sees those Russian assets well that's the other point and that's the point about international law we you were talking about unpredictability we have to be
• 20:00 - 20:30 predictable and to be predictable the rule of law matters and international law matters we need to abide by that we haven't talked about uh but but but at the end of the day it will be for the leaders to decide not for me my job again is to remind them of what the consequences will be and what the principles are but you are the organization that is using the money I presume you're we are we are remunerating the money actually now the the question of China we haven't
• 20:30 - 21:00 mentioned it are you uh concerned that you know the biggest manufacturing power in the world which it is at the moment if you look at it as one unit I mean Europe might compete very successfully if you regarded Europe as a cohesive uh unit um are you concerned that China's response may be negative for Europe in the terms of dumping stuff on the European Market at discount prices to compensate for a loss of American Trade very good point um China has ramped up its um place in the market if you will
• 21:00 - 21:30 so they are they are now competing with us on a a much larger category of products um products more than services and and yes the the the sort of U diversion of exports where China would actually uh come to Europe rather than the us because of the tariffs that have been erected on its way uh to to China will will have to be taken into account they might they might very well try to do that so we have to anticipate that
• 21:30 - 22:00 movement and I think that um again leaders will have to but it's interesting that China's already doing in Europe what Trump wants uh European autom makers to do in America make the cars in America and China is attempting to build cars or is about to build cars in Europe and batteries and so on that's right within the European Union that is right they do that in some member states how do you manage to retain a sense of energy and optimism in the face of all
• 22:00 - 22:30 challenges uh I think that um what fuels my energy is is love number one uh the love that is given the love that is received and when in despair I think of my grandchildren the world day are about to inherit yep and our duty to them Christine leard Madame President of the European Central Bank thank you very much for joining us in the studio this morning thank you