Euro: Domestic demand resilience supports EUR – BNY
BNY’s Geoff Yu highlights European Central Bank (ECB) President Christine Lagarde’s warning that Europe’s post-war growth model is eroding as global trade fragments and cheap energy fades.
BNY's Geoff Yu points out that the European Central Bank (ECB) President Christine Lagarde has warned that Europe's post-war growth model is weakening due to global trade fragmentation, fading cheap energy, and shifting geopolitical risks. Lagarde asserts that Euro area resilience now depends on domestic demand, which has been the engine of growth in 2025 and contributed to a 0.4% quarter-over-quarter expansion in Q2 2026.
She stresses the importance of deepening the Single Market and integrating capital markets to turn this domestic demand resilience into higher long-term productivity. Lagarde highlights AI investment as a key test, noting that euro area firms plan to allocate around 9% of their investment to AI this year, but regulatory fragmentation and financing issues continue to hinder firms' ability to scale.
The message from Lagarde is clear: Europe must leverage its market size to achieve greater scale, investment, and productivity.
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