ALBAWABA - European Central Bank President Christine Lagarde warned that the global economy is beginning to divide into competing blocs.
Lagarde tweeted: "To provide stability, we need to think about how to respond to geopolitical changes, not when they happen, but before."
Speaking at a conference for the Council on Foreign Relations in New York, she pointed out that the global economy is "undergoing a period of radical change."
"Following the pandemic, Russia's unjustified war against Ukraine, energy armament, sudden inflation acceleration, and increasing competition between the United States and China, the tectonic plates of political geography are changing faster," Lagarde added.
The global economy is starting to split into competing blocs, President @Lagarde tells the @CFR_org.
To provide for stability, we need to think about how to respond to changing geopolitics not when fragmentation occurs, but before.
Read her speech https://t.co/bOYm3qUBFF pic.twitter.com/1NaDJ8r3SX— European Central Bank (@ecb) April 17, 2023
The European official revealed that "we are witnessing the fragmentation of the global economy into competing blocs, with each bloc attempting to attract as much of the rest of the world to its strategic interests and common values."
"This fragmentation may be combined around two blocs, each led by the world's largest economies," Lagarde said, referring to the United States and China.
"In short, we can see two deep impacts of this on the policy environment for central banks: firstly, we may see more instability with diminishing global supply chain resilience, and secondly, we may see more polarized diversity with continuing geopolitical tensions," she added.
The President of the European Central Bank added that "a recent bank study based on data since 1900 found that geopolitical risks led to increased inflation, decreased economic activity, and decreased international trade."
