ECB President discusses geoeconomic shifts and supply chain resilience

Christine Lagarde, President of the European Central Bank (ECB), spoke at a roundtable on “Chain Reaction: Navigating Geoeconomic Shifts and Dependencies” during the Munich Security Conference, Germany.

She emphasized that trade has become a security issue as economic interdependence deepens, creating vulnerabilities to disruptions and deliberate weaponization of dependencies.

Lagarde noted that a sudden 50% reduction in supply from distant suppliers could decrease manufacturing value added by 2-3%, mainly affecting electrical equipment, chemicals, and electronics.

The ECB is advocating for Europe to transition towards strategic autonomy through three strategies: independence (rebuilding supply chains), indispensability (strengthening critical sectors), and diversification (spreading supply sources). Each approach has distinct implications and risks.

The ECB is preparing for increased market volatility due to geopolitical tensions and supply chain disruptions. To mitigate risks, the ECB has expanded its EUREP facility, providing permanent and global access to euro liquidity for central banks meeting basic criteria, enhancing confidence in euro transactions during market stress.

Lagarde emphasized that Europe must be a source of stability in a security environment shaped by supply chain vulnerabilities, with the ECB playing a key role in supporting this stability.