Europe should no longer expect a return to economic normality. That is the core message from Christine Lagarde, who argues that volatility, fragmentation, and social division are no longer temporary shocks but structural features of the global economy. Speaking in a reflective interview at the European Central Bank in Frankfurt, Lagarde laid out a worldview that helps explain the ECB’s cautious, trust-focused approach to policy, including its work on the digital euro.
The ECB president describes a world that has become more prone to shocks and less coherent, shaped by geopolitics, technological change, and widening inequality. This is not a passing phase, she suggests, but a new baseline. For European policymakers, the implication is clear: institutions must be designed to absorb stress over time, not merely smooth short-term cycles.
Lagarde places unusual emphasis on social cohesion, treating it as an economic variable rather than a political afterthought. She traces today’s populist pressures back to long-term shifts that began in the 1980s, when wages started to lag behind capital income and globalisation intensified distributional tensions. The entry of China into the World Trade Organization, she notes, amplified these effects, leaving many workers feeling excluded from growth. Societies that feel ignored, she warns, become fertile ground for polarisation and instability.
This framing matters because it pushes central banking beyond narrow technocratic boundaries. While the ECB’s mandate remains price stability, Lagarde makes the case that monetary institutions cannot operate in isolation from the social environment in which their policies land. Trust, legitimacy, and fairness shape how policy is received and whether it ultimately works.
Leadership style is another recurring theme. Lagarde defends consensus-building within the ECB’s Governing Council, even in crisis conditions. Listening, tolerance, and respect for divergent views are not, in her telling, luxuries that slow decision-making. They are investments that pay off when rapid action becomes unavoidable. Authority, she suggests, is stronger when it rests on credibility rather than force.
Her reflections on the euro area debt crisis are notably candid. Lagarde acknowledges that Europe lacked the institutional tools to deal with Greece’s collapse and that the involvement of the International Monetary Fund was a consequence of incomplete euro area architecture. The episode, she argues, reinforced a hard lesson: monetary union without adequate fiscal and political mechanisms is fragile. No country could leave the euro without putting the entire project at risk.
The interview also touches on Europe’s struggle to compete with the United States and China. Lagarde does not offer a quick fix. Instead, she points to Europe’s defining tension: its democratic, consensus-driven model is both its strength and its constraint. It produces legitimacy and stability, but it makes fast, decisive change harder to execute.
On central bank independence, Lagarde is unequivocal. Independence must be earned through accountability and results, but it is essential precisely because monetary policy works with long lags. Decisions cannot be calibrated to election cycles without becoming counterproductive. Here, she underlines that the ECB’s legal independence, embedded in EU treaties, remains unusually robust.
For readers of Digital Euro News, the significance of this interview goes beyond macroeconomics. Lagarde’s emphasis on trust, cohesion, and institutional resilience offers important context for the digital euro project. A public digital currency is not just a technical upgrade to payments. In the ECB’s thinking, it is part of a broader effort to reinforce monetary sovereignty and social confidence in an increasingly fragmented world.