LISBON — Storm clouds keep gathering over the world economy, but Europe is learning to stand firmer beneath them, the European Central Bank’s president said Tuesday.
Speaking at the opening of a major gathering of central bankers in Portugal, Christine Lagarde painted a sobering picture of a world where crises no longer arrive one at a time, but in waves. From the COVID-19 pandemic to the war in Ukraine and, more recently, the conflict involving Iran, the ECB has spent years lurching from one emergency to the next, each one testing its ability to keep prices stable.
“We face a charged geopolitical environment in which the frequency of major shocks looks to be rising,” Lagarde told the audience, her tone measured but urgent. She warned that the very tools of global trade market access, energy supplies, critical minerals are increasingly being turned into weapons by rival powers.
And yet, beneath the warning, Lagarde struck a note of quiet confidence. The 21-nation eurozone, she argued, has grown tougher with each test it has endured. “The resilience Europe has built means their effects on our economy are more contained,” she said.
That toughness, she explained, comes from several sources: a sharper, more flexible set of policy tools at the ECB’s disposal, stronger European institutions, and tighter oversight of the continent’s banks. Together, these defenses helped the eurozone absorb recent blows from Washington’s tariff offensive to the energy shock triggered by the Iran war without buckling.
Lagarde also stood firmly behind the ECB’s decision this month to raise interest rates for the first time since 2023, a move made in direct response to the Middle East conflict. Critics among economists called the hike premature, fearing it could further strain an already fragile eurozone economy.
Lagarde was unmoved. “Our rate increase was justified under every scenario considered,” she said. “It was, by design, a robust decision. And nothing we have observed since then has called this assessment into question.”
