Europe’s new growth model: turning size into scale

Christine Lagarde, President of the European Central Bank (ECB), delivered an acceptance speech for the 2026 Paul A. Volcker Lifetime Achievement Award at the 42nd Annual NABE Economic Policy Conference in Washington DC, United States.

She reflected on the influence of individuals versus institutions in shaping economic history, citing Paul Volcker’s decisive actions in the 1980s that transformed central banking culture and independence.

Lagarde emphasized that legal frameworks alone are insufficient for central bank independence; the culture and conviction of individuals are crucial, as demonstrated by Volcker and Jay Powell.

She discussed Europe’s decision-making models, highlighting the ECB’s Governing Council as the largest monetary policy committee among major central banks, with 27 members. This structure enhances independence by making influence more difficult and providing institutional insurance during uncertain times.

Europe’s ability to act swiftly during crises, such as the pandemic and inflation surges, was attributed to strong decision-making and coordinated fiscal measures like the Next Generation EU programme.

Lagarde examined structural issues affecting long-term growth, including demand composition shifts, supply-side constraints, and the potential of technological adoption, especially AI, in manufacturing and services sectors.

She noted recent positive trends, such as increased domestic demand, rising investment in defense and digital infrastructure, and a more optimistic investor outlook, with rising European venture capital investments in AI.

The speech highlighted the importance of reforms to unlock Europe’s potential, focusing on turning size into scale through internal market integration, reducing barriers, and advancing decision-making processes. Examples include the proposed 28th regime for cross-border operations and the use of enhanced cooperation mechanisms.

Lagarde concluded that Europe’s ability to adapt and act decisively on structural weaknesses is within reach, emphasizing that progress depends on collective effort and leadership, not just rules.