Jack Quann
Jack Quann

13.46 28 Mar 2019


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The head of the International Monetary Fund (IMF) has warned that the Eurozone is 'not resilient enough' to weather another economic crisis.

Christine Lagarde told an audience in Paris that the currency union is more resilient than it was 10 years ago, but still had a way to go.

"In many ways, the weaker economic outlook raises an important question: is the Euro area today better equipped prepared and better prepared for the unexpected economic storms that will come?

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"And the short answer to that is yes - the currency union is more resilient than it was 10 years ago, but it is not resilient enough.

"Its banking system is safer, yes, but not safe enough.

"It's economic well-being is greater overall, but the benefits of growth are not shared enough.

"In other words, now is the time to strengthen this unique economic ecosystem."

Ms Lagarde also said the single currency "has played a central role in boosting European integration, which in turn has raised living standards across the continent".

Real GDP per person in the Euro area has increased by more than 60% over the past two decades.

"It is not surprising, therefore, to see strong public support for the single currency" Ms Lagarde said.

"While all the other institutions were shortened, were challenged, were doubted - the Euro was not".

She quoted a study which found three in five Euro area residents believed the Euro was good for their country, and three-quarters said the Euro was good for the European Union.

But she warned: "Today, one in four young people in the Euro area is at risk of being in poverty, casting a dark shadow over the continent's next generation.

"A related challenge is the rise of populist movements in several countries, calling into question the very idea of European integration".

She said cross-border lending between Euro area banks is back to 2005 levels, which is worrying.

She also said that two areas to be focused on should be a Eurozone banking union, and also a capital markets union.

"We need a European banking system that can bend in the storm without breaking, we need a banking system that will truly diversify risks across the ecosystem and irrigate growth".

And she added: "I want to emphasize that this system would be funded, as it stands... by the banks - not by the taxpayer's, not by the state or the citizens."

The event was hosted by Banque De France to mark the 20th anniversary of the Euro.

Three main themes have been debated at the two-day event - coping with international shocks, addressing the impact of Brexit and conducting monetary policy in heterogeneous areas.

Representatives from banks including BNP Paribas and Société Générale also spoke at the event - as well as former president of the European Central Babk (ECB), Jean-Claude Trichet.


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Banque De France Christine Lagarde Economic Crisis Eurozone IMF International Monetary Fund Paris Speech

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