Christine Lagarde: New challenges in a changing world

A new beginning often brings with it new challenges, but it also presents us with plenty of opportunities.

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https://www.ecb.europa.eu//press/key/date/2023/html/ecb.sp230123_1~2d9786eedf.en.htmlhttps://www.ecb.europa.eu//press/key/date/2023/html/ecb.sp230123_1~2d9786eedf.en.html
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Saturday, February 4, 2023
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Summary
Key Points: 
  • A new beginning often brings with it new challenges, but it also presents us with plenty of opportunities.
  • First, with support for an open global trading order on the wane, we are facing new types of shocks to the global economy.
  • For the past few decades, open trade has supported global growth by allowing countries to “rotate” demand during slumps.
  • [2] But now it could become a source of volatility.But now it could become a source of volatility.
  • This was evident during the British Empire in the 19
    th century, as it was with American support in the wake of the Cold War.
  • [3]
    However, major economies – led by the United States and China – are now increasingly using trade to limit the ambitions of geopolitical rivals.
  • The US Inflation Reduction Act, for example, is deliberately aimed at “reshoring” production and reducing the country’s reliance on strategic imports like batteries.
  • [5] China is also seeking to reduce its own dependence on the rest of the world.
  • With the security of supply for critical inputs no longer guaranteed, we are likely to see a new “scramble for resources”.
  • As this new global map takes shape, we enter 2023 facing three big challenges.
  • Inflation in Europe is far too high, partly due to our vulnerability to the changing geopolitics of energy.
  • As we head into 2023, a changing world brings with it new challenges, but also opportunities.
  • International Energy Agency (2022), “The Role of Critical Minerals in Clean Energy Transitions”, World Energy Outlook Special Report, Revised Version, March.
  • European Council (2022), “International taxation: Council reaches agreement on a minimum level of taxation for largest corporations”, 12 December.
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