Reviving EU Economic Integration Amid Looming Trade War

European leaders are urged to revive economic integration to protect prosperity amid threats of a trade war with the U.S. Increased tariffs by the U.S. could lead to higher inflation and economic volatility in Europe. Calls for a banking and capital markets union are at the forefront.

European Central Bank policymakers have called on the European Union to invigorate economic integration in response to looming trade tensions with the United States. With President-elect Donald Trump proposing new tariffs, European economies face potential threats to growth and inflation amidst pressure on their competitiveness since the pandemic.

Francois Villeroy de Galhau, French central bank governor, emphasized the urgency of the situation, warning of increased fiscal deficits and reduced regulation impacting global economic stability. ECB President Christine Lagarde highlighted the long-postponed progress on vital financial structures, essential for protecting the bloc's collective interests.

Proposals for a capital markets union and a banking union aim to enhance financial flow efficiency, crucial for the economic stability of the EU. Lagarde suggested the establishment of a unified regulatory system and a joint deposit guarantee scheme to uniformly secure depositor safety and reduce national banking system risks across the EU.

(With inputs from agencies.)