In her speech at the 35th Frankfurt European Banking Congress on 21 November 2025, ECB President Christine Lagarde emphasized that Europe must shift from reliance on export-led growth to fully harnessing its domestic market as a source of resilience and strength.
Key points:
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Vulnerabilities: Europe’s export-dependent growth model is increasingly fragile due to geopolitical tensions, rising US tariffs, Russia’s invasion of Ukraine, and strong competition from China. Dependence on external markets and critical raw materials leaves the euro area exposed to shocks. Productivity growth has stagnated, and the weaponisation of supply chains (e.g., rare earths, semiconductors) poses additional risks.
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Sources of resilience: Europe’s strong labor market, ongoing digital and AI investments, and countercyclical fiscal policy have helped cushion the impact of global shocks. Domestic demand is emerging as the main engine of growth.
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Untapped potential: Internal barriers within the Single Market remain high, particularly in services and digital sectors, limiting growth and intra-EU trade. Lagarde highlighted that even partial reduction of these barriers could offset external shocks such as US tariffs.
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Governance reforms: To unlock this potential, she proposed three key measures:
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Revive mutual recognition to allow goods and services legally provided in one member state to circulate freely across the EU.
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Streamline decision-making by expanding qualified majority voting in areas critical for growth, including taxation and digital policy.
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Introduce optional “28th regimes” – EU-wide legal frameworks alongside national law – for areas like company law, enabling cross-border operations without full harmonization.
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Lagarde stressed that achieving these reforms requires no new treaties, only the political will to use existing tools. By doing so, Europe can transform its economy from merely resilient to genuinely strong, leveraging its internal market to drive sustainable, independent growth.
