European governments must spend more and invest to instigate growth
European governments must spend more and invest to drive growth. This can be used to cope with global economic uncertainties. That said Christine Lagarde, the new head of the European Central Bank (ECB) on Friday in one of her first appearances.
According to Lagarde, public spending is “a very important part” of European policy and cooperation with monetary policy from the central bank is needed. The Frenchwoman thus follows the same course as its predecessor Mario Draghi, who always insisted that governments should take the plunge to give the European economy a boost. Draghi also mainly referred to the Netherlands and Germany.
Lagarde, who began her eight-year term on 1 November, is expected to take a critical look at the ECB’s mandate. For example, several central bankers, such as Klaas Knot of De Nederlandsche Bank (DNB), would like to redefine the inflation target of just under 2 percent.
The former IMF boss promised to come up with a revision of the central bank’s strategy soon. She also defended the ECB’s course in stimulating the economy. According to Lagarde, this has led to the recovery and growth of the eurozone in recent years.
ING economists conclude that in her speech Lagarde kept his lips closed when it comes to monetary policy. According to them, the most interesting point of the speech was the promise to revise the central bank’s strategy. They also noted that Lagarde adjusted her speech shortly before her performance and strayed from the text several times. This was never the case with predecessor Draghi.
More concrete judgments are expected on December 12, when Lagarde will chair its first monetary policy meeting of the ECB. A press conference then follows after the interest rate decision.