In a recent speech at the European Banking Congress in Frankfurt am Main, Joachim Nagel, President of the Deutsche Bundesbank, emphasized the importance of collaboration between Germany and France for a robust Europe. Alongside his French colleague, François Villeroy de Galhau, Nagel highlighted the necessity of a united Europe to confront current challenges. The central bankers also expressed relief that the era of high inflation has ended, shifting their focus to long-term economic and inflationary impacts.
Nagel recalled the optimism following the end of the Cold War, contrasting it with the current strength of autocratic regimes and the resurgence of military aggression, citing Russia’s attack on Ukraine. He pointed out the vulnerability of liberal values within democracies, noting the European Union’s scapegoating by populists, which hinders further integration.
Addressing Europe’s economic challenges, Nagel mentioned the risks of unilateral trade dependencies revealed by events like the pandemic and geopolitical tensions, advocating for more diversified supply chains. He also brought up the labor scarcity due to demographic changes and the financial demands of the digital and green transitions, which largely depend on private investment. The recent US elections were mentioned as a potential challenge to Europe politically and economically.
Nagel stressed the incomplete fulfillment of the Single Market and financial integration, citing the need to implement proposals from the Letta and Draghi reports. He called for progress on the banking union, including a joint deposit guarantee scheme and addressing the “doom loop” between sovereigns and banks. The capital markets union was also mentioned as an area needing advancement, especially in light of the new EU legislative session and the urgency added by the US election outcomes.
Regarding trade policy, Nagel expressed concern over potential tariffs from the incoming US administration, which could reignite trade conflicts and affect global GDP and inflation rates. He advocated for a prudent European response that upholds a rules-based, multilateral trading system.
In conclusion, Nagel urged for collective action to build a resilient and prosperous Europe, capable of overcoming its multiple challenges through unity and cooperation.
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