The president of the European Central Bank (ECB) and the head of the International Monetary Fund (IMF) have today warned that global trade “headwinds” could damage growth in Europe.
They cautioned that the vulnerability of Europe’s emerging eastern economies to the current global slowdown could hinder integration in the European Union.
Speaking at a conference in Frankfurt, Germany, IMF head Christine Lagarde warned that: “Global trade growth has been subdued for more than six years and the largest economies in the world are putting up new trade barriers.”
Both Lagarde and ECB president Mario Draghi, who was also speaking at the conference, referenced the ongoing US-China trade war. Lagarde spoke of the lingering threat that US President Donald Trump may slap tariffs on car imports from the European Union.
“The losses from higher car tariffs would spread out across more European economies than the gross export data suggests,” she warned.
Draghi said that, in particular, eastern European countries were “more vulnerable to the threat of increasing car tariffs” because of their high rates of vehicle manufacturing.
The ECB president praised the EU and its single market for removing trade barriers and helping its states grow.
Draghi, who is soon to leave his post after eight years in charge, also mounted a defence of the euro, saying it ensured countries were “insulated from exchange rate volatility during times of economic stress”.
“By preventing competitive devaluations between countries within the bloc, the single currency has guaranteed the continued openness of the single market”, he said.
At a time of increasing uncertainty, Draghi said, EU countries should implement “reforms towards a more balanced growth model that is less vulnerable to changes in external conditions, such as those that have emerged recently”.
He said the EU’s emerging economies should move “towards a more balanced growth and financing model, which is more reliant on domestic innovation and on higher investment spending than it has been so far”.