Christine Lagarde, we are in ‘permacrisis’: significant stability risks in Europe

The instability of the current context, which future historians could define as a “perma-crisis”, “poses significant risks to financial stability in Europe”, risks that “are further aggravated by the weakening of economic prospects”. Opening the sixth annual conference of the European Systemic Risk Board, the governor of the ECB, Christine Lagarde, once again sounded the alarm, at a time when the OECD signals weak prospects in the area and in the main world economies.

Among the major OECD economies, the CLIs continue to point to a slowdown in growth in the US, UK and Canada, as well as the Eurozone, including Germany, France and Italy, mainly due to high inflation l rising interest rates . On the other hand, steady growth remains to be expected in Japan. In China, indicators confirm signs of stabilizing growth that emerged in last month’s assessment and now point to steady growth, driven by auto production and equity prices. But in India, and now also in Brazil, they expect a loss of growth momentum.

An unstable scenario that makes Lagarde speak of ‘permacrisis’ to define an era characterized by “a series of powerful shocks – the pandemic, the unjustifiable invasion of Ukraine by Russia and the energy crisis – that hit the global economy in quick succession”. The solution is always the same: “monetary policy is adjusting so that high inflation does not consolidate and inflation returns to 2% in the medium term”. But not with a set path, because “Heraclitus is said to have observed that there is nothing permanent except change. And we can certainly refer to these words in an age increasingly characterized by shocks to our economy. Change is at the root on why we need a resilient financial system and adaptable supervisors.”

And therefore, “to ensure stability, the financial system must be able to withstand rapid changes that produce shocks. And regulators and supervisors must adapt to an ever-changing economic landscape if they are to continue to effectively safeguard the financial system. – notes – After all, unforeseen crises often arise from unnoticed risks that could grow over time and materialize. Therefore, macroprudential policy must be attentive to the emergence of new challenges as they arise. therefore encourage resilience wherever it is lacking and adapt to change whenever necessary”.

Source: IL Tempo