The European economy remains fragile and vulnerable to uncertainty, the head of the European Central Bank has warned.
The Eurozone economy only managed to grow “modestly in 2024”, Christine Lagarde told the European Parliament last night.
“Manufacturing continues to contract while services activity is expanding. Consumer confidence is fragile and, despite rising real incomes, households are hesitant to spend more”, she warned.
And that is without factoring in possible Trump tariffs, she added.
Putting a positive spin on Europe’s economic potential, the President of the European Central Bank said that she expected to see a “solid job market and higher incomes [which] should strengthen consumer confidence and allow spending to rise.
More affordable credit should boost consumption and investment over time. Exports should also support the recovery as global demand rises, although this is conditional on developments in international trade policies.”
Ireland’s heady economic growth is set to continue for now fuelled by foreign direct investments and the tech sector.
But there are risks for Ireland too. Not least if the new US President entices big American firms to pull out.
Another risk across Europe is inflation.
But Christine Lagarde remains confident that inflation will come back down to the ECB’s two percent target “in the course of this year”.
“Most measures of underlying inflation suggest that inflation will settle at around our target on a sustained basis”, she said.
The broader economic outlook is ever increasingly influenced by outside events, Christine Lagarde said.
“As we look ahead, the frequency of these shocks is likely to remain high.”
And she warned that Europe was “lagging behind international competitors in productivity and growth”.
She urged the EU to pull closer together, maximising the benefits of the single market.