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Europe’s top central banker yesterday defended the region’s ailing economy as it reels in the face of a resurgent America, insisting it was not a “basket case”.
Speaking to leaders at the World Economic Forum in Davos, European Central Bank (ECB) President Christine Lagarde had to go on the defensive in the face of criticism from a top American financier.
In an exchange highlighting perceptions of an opening transatlantic Gulf since the return of Donald Trump, Larry Fink, head of global asset manager BlackRock, declared: ‘Europe is a myth. It’s a beautiful myth, but it doesn’t work.
Lagarde, who was sitting next to Fink on stage, responded immediately. She said: ‘Europe is not a myth. Europe is not a basket case.
The exchange reflects growing frustration among global bosses that while US growth is already being supercharged by Trump’s plans to cut taxes and regulation, the economy continues to falter on this side of the Atlantic.
The International Monetary Fund’s latest forecasts suggest the eurozone economy will expand by 1 percent this year, far behind the United States’ 2.7 percent.
Clash: European Central Bank chief Christine Lagarde (left) and Larry Fink in Davos
And it faces an additional challenge after the US president used this week’s summit to declare economic war on those he believes are taking advantage of the United States through unfair trade.
Trump told delegates via video link from Washington on Thursday that the EU “treats us very, very unfairly” and that he would “do something” about trade deficits. That has generated fears for European economies.
But Fink said Europe should focus on its own problems, such as the need to further open the single market with a banking union, rather than “focus on the problems that the United States can impose on it.” He added: ‘It doesn’t work in relation to American strength, American innovation, American entrepreneurship.
‘Europe needs to be in the same balance and here we are, now in 2025, 16 years after the financial crisis, and I don’t see Europe advancing enough, I see Europe falling too far behind. I am optimistic. But to be optimistic you have to admit your problems. Lagarde admitted there were problems, but said: “Europe is a fantastic case for transformation.”
She added: “I agree with you that it does not work and works as a single market.”
Lagarde risked upsetting Trump by suggesting another way Europe could get ahead, luring disaffected Americans across the Atlantic. She said: “Maybe it’s time to import some of the talent that would be disenchanted for one reason or another.”
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