Christine Lagarde, president of the European Central Bank (ECB), said on Saturday that economic growth is not a lost cause in Europe, calling for a strong and swift response to improve productivity across the countries that share the euro.
Speaking to the French regional newspaper Ouest-France, Lagarde said Europe has talent, a good level of education and strong savings potential, but is failing to mobilize all of it.
The ECB forecasts that inflation in the eurozone will reach 0.9% in 2026.
Ageing population
Asked by the newspaper whether reviving economic growth was realistic on a continent with an ageing population that is already highly developed, Lagarde described the question as a fair one. She is a former managing director of the International Monetary Fund (IMF) and previously served as France's minister of economy and finance.
She said demographics play a significant role but can be balanced out by improving productivity. Even with a smaller workforce, greater efficiency would still deliver growth, she said, insisting this was not a lost cause.
She added that initiatives still needed to be taken, and said American policy, which has changed dramatically in recent years, should push Europe toward a strong and swift reaction.
Interest rate rise
The ECB raised its key interest rates on Thursday, a decision meant to curb inflation, which the bank expects to stay clearly above its target for an extended period. The move makes credit for property, business loans and the financing of government debt more expensive.
Lagarde defended the decision, saying the ECB's mission is to guarantee price stability. She recalled the bank's target of bringing inflation to 2% over the medium term, a goal not currently being met, with the rate standing at 3.3% in the eurozone.
She described the current level as a big shock caused by the war in the Middle East and the destruction of hydrocarbon refining capacity, particularly in Russia, adding that the situation was likely to last longer than had been estimated.
