In her keynote at the European Meeting of the Trilateral Commission in Vienna on 22 November 2025, ECB President Christine Lagarde highlighted the evolving relationship between central banks and governments and the importance of productive fiscal policy for Europe’s growth.
Lagarde emphasized that, despite elevated public debt, Europe’s central banks have maintained full operational independence, successfully navigating post-pandemic recovery and recent inflation shocks. Monetary and fiscal policies worked in tandem during the pandemic, stabilizing economies and enabling a faster recovery compared to the global financial crisis.
The main fiscal challenge today, she noted, is not fiscal dominance but ensuring public spending prioritizes productivity-enhancing investments—such as research, education, and strategic infrastructure—over short-term social expenditures. Productive spending strengthens potential growth, raises productivity, and supports Europe’s ageing societies and social model.
Lagarde outlined three ways Europe can mobilize its flexibility and collective strength:
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Use fiscal rule flexibility to redirect spending toward growth-enhancing areas. Even small reallocations (1% of GDP to R&D and 1% to education) could raise output by around 6% in the long term.
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Pool resources efficiently across countries for high-multiplier investments with cross-border benefits, following successful examples such as CERN and the Readiness 2030 defence initiative.
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Leverage EU budget instruments to mobilize private capital, enabling large-scale investments needed for green, digital, and defence transitions, with EU funds crowding in additional private investment.
Lagarde concluded that Europe can combine productivity growth with social sustainability, turning existing opportunities into lasting economic strength, provided political will and coordinated action are applied.
