Lagarde addresses euro's international role at EU parliament hearing
European Central Bank President Christine Lagarde spoke before the European Parliament's Committee on Economic and Monetary Affairs on October 6, 2025, highlighting the euro area's economic resilience amid global uncertainties. She outlined growth and inflation projections while emphasizing the need to strengthen the euro's global standing. Lagarde called for reforms to enhance Europe's economic foundations and geopolitical position.
In her remarks in Strasbourg, Lagarde noted that the euro area economy grew by 0.7% cumulatively over the first half of 2025, driven by resilient domestic demand. Stronger first-quarter growth reflected frontloading of global trade ahead of tariff increases, though second-quarter growth slowed as this effect reversed. Sluggish exports, due to higher tariffs, a stronger euro, and global competition, are expected to constrain growth for the rest of the year, but these headwinds should ease in 2026.
The labor market remains robust despite softening demand, supporting consumer spending. Past interest rate cuts are improving financing conditions, while government spending on infrastructure and defense bolsters investment. ECB staff projections forecast 1.2% growth in 2025, 1.0% in 2026, and 1.3% in 2027. Risks to growth are more balanced following a new trade deal, though renewed trade tensions and geopolitical uncertainties persist.
Inflation edged up to 2.2% in September 2025 from 2.0% previously, mainly due to higher energy prices, with core inflation steady at 2.3%. Nominal wage growth slowed to 3.9% in the second quarter. Projections show headline inflation at 2.1% in 2025, 1.7% in 2026, and 1.9% in 2027, with core measures declining due to a stronger euro and easing labor costs. The Governing Council kept key interest rates unchanged, adopting a data-dependent approach without pre-committing to a rate path.
Turning to the euro's international role, Lagarde described it as the world's second-most used currency, accounting for about one-fifth of global currency use behind the US dollar's 55%. She argued that geopolitical shifts offer an opportunity to bolster the euro, reducing transaction costs and borrowing expenses. To achieve this, Europe must complete the Single Market, deepen capital markets, pursue joint financing for defense, uphold the rule of law, and maintain open trade. "The euro can be more than the currency of a continent and a symbol of unity – it can become a global anchor of trust," Lagarde stated. She stressed that governments and legislators bear primary responsibility, while the ECB focuses on price stability and financial infrastructure, including swap lines and digital euro initiatives.