ECB's Christine Lagarde urges global cooperation to protect world order

By Mark Schroers and Alexander Weber

 

European Central Bank President Christine Lagarde reiterated calls for global partnership to salvage an international order that not only benefits the strongest. 

“Despite the erosion of trust, the incentives for countries to cooperate remain strong,” Lagarde said in an speech in New York. “In a world this interconnected, no country can afford to turn its back on cooperation.”

 

Lagarde also defended a system that was built “by the powerful and the powerless alike” after last century’s wars, while stressing it may need reforms, citing the World Trade Organisation.

 

“We face a choice,” she said. “We can accept the drift toward a balance of power among rivals – a model that history tells us is stable only until it is not. Or we can take the harder route: reform so that the international order regains the trust of those who have lost faith in it.”

 

German Chancellor Friedrich Merz sounded more downbeat on cooperation between nations when he opened this month’s Munich Security Conference, saying the global order “no longer exists as it did.” 

 

A similar discrepancy was on display at the World Economic Forum in Davos, where Lagarde said she wasn’t “exactly on the same page” as Canadian prime minister Mark Carney, who’d declared that the “rules-based order is fading.”

 

Lagarde also said:

• “It would be wrong to conclude that we are condemned to go backwards. To unravel the connections built over decades. To slide towards a world more fractured even than the world we had during the Cold War – which, for all its dangers, still had rules”

• “Multilateral institutions that cannot reform will not remain legitimate. But reform is not a fantasy. Despite the heated rhetoric, the WTO has hardly lost its relevance: 70% of global trade is still conducted under its rules. And the major powers have not given up on it. The United States itself has put forward concrete proposals for reform”

• “Russia’s war against Ukraine is, of course, a direct assault on the most fundamental norm of the charter. But even in response to that violation, Europe chose to act within the framework of the law, as we saw with the immobilisation of Russia’s assets”

• “Europe had every political incentive to seize them outright. It chose not to – not out of sympathy for Moscow, but because it understood that the legal principles governing sovereign assets are part of the architecture that protects all countries”