The Economics Show Martin Wolf speaks to Christine Lagarde: Europe’s ‘existential crisis’
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Dec 24, 2025 In a compelling discussion, Christine Lagarde, President of the European Central Bank and former IMF head, emphasizes the urgent need for dismantling internal trade barriers in Europe. She shares insights on how these barriers stifle innovation and productivity. Lagarde also highlights the importance of mobilizing excess savings through capital markets and advocates for a unified fiscal policy to boost investment and support defense. Additionally, she addresses the risks of stablecoins for monetary sovereignty and backs the development of a digital euro.
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Single Market Barriers Are Costly
- Christine Lagarde says the eurozone is more resilient than feared and inflation is near target.
- She warns structural barriers within the single market are the main drag on productivity and must be removed quickly.
Internal Frictions Rival External Tariffs
- Lagarde cites recalculated figures showing huge implicit tariffs between EU members (services ~110%, goods ~60%).
- She says even halving those frictions would materially offset external tariff shocks.
Don't Expect Central Banks To Fix Structural ills
- Central banks cannot replace structural fiscal or regulatory reform by monetary easing.
- Lagarde stresses the ECB must focus on its price-stability mandate and not be a political panacea.