«The new globalization will be based on exchanges between friends»

No one escapes the fact that the invasion of Ukraine, added to the consequences of previous crises, is dragging us into a new commercial and financial era. The President of the ECB, Christine Lagarde, is convinced that many of the changes that we still perceive as circumstantial are here to stay and believes that in the new economy "deglobalized or reglobalized, if you prefer, perhaps we will go from the method of relocation and the global commercial exchanges of all with all to a new type of system in which trade, production and exchange will be carried out mainly with states considered friendly. Lagarde has baptized this new paradigm as "friendshoring, friendshopping and friendssharing". This is how she explained it during the Ax-En-Provence conferences, assuming terms coined a few months ago by the Secretary of State for the US Treasury, Janet Yellen.

"It means moving production to countries that have certain guarantees that they will continue to be allies," explained the ECB president, "and I think we will go first to purchases among friends and then to exchanges among friends." In this sense, the EU appears as a vanguard, by making up a group of countries with common values ​​and a high degree of association and integration that trades with each other without barriers. The EU countries are in fact, Lagarde recalled, the most involved in these aspects, because «Europe is the world's leading open economy area in terms of trading volumes. And it is also the first supplier to 80 countries in the world». "Europe can be the perfect laboratory" to experiment with new commercial exchange models, she has said, "we can do it". Her speech at the introductory session of the course Les Recontres Economiques has also underlined the need to "move from the current mode of supply to a model with multiple sources of supply" that gives us greater independence. “When we depend on a small number of suppliers, for example, for energy, our business models become vulnerable,” she has warned.

In this same context, he has avoided referring to what, moreover, is no longer a secret: some members of the Governing Council of the ECB were at the June meeting in favor of raising interest rates in July by more than a quarter of a point percentage. The recent publication of the minutes of the meeting reveals that "a number of members expressed their initial preference for leaving the door open to a higher increase in July" and finally all agreed that "if the medium-term inflation outlook persists or worsens , a larger increase will be appropriate at the September meeting." If they changed their minds, it was thanks to the argument that the signal given in June should not be seen by the markets as an unconditional commitment, but rather it should be made clear that the final decision will depend on the inflation data. There was also agreement regarding the advisability that "the acceleration of the monetary policy normalization process is conditional on market conditions remaining orderly." Everything points to the fact that from September the ECB will opt for rate hikes at "a sustained but gradual pace and based on the data and prospects for inflation".

For the rest, Lagarde cannot yet give clues about the details of the design of her new crisis tool, baptized as the Transmission Protection Mechanism, about which the internal debate continues. Among the issues that continue to come up in discussions are ensuring the measure does not offset interest rate increases, what conditions should apply to any government that benefits from it and potential legal hurdles, the people said.

In an interview published on Thursday, the Governor of the Bank of France, François Villeroy de Galhau, guaranteed that it will be broad enough and agile enough that it will not really be necessary to use it. "It is likely that the mere existence of this instrument that allows rapid and massive intervention in case of need is sufficient, without the need to activate it," he told the Les Echos newspaper.

And while Lagarde was reading the economic crystal ball of post-globalization in France, in Frankfurt the ECB published the results of the first climatic stress tests on banks in the euro zone and warned 40 institutions studied could lose 70,000 million in the short term in case of natural disasters. "European banks urgently need to intensify the consideration of climate risks, to better measure and manage climate risk" warns a statement signed by Andrea Enria, head of the ECB Supervisory Board. These results will not directly lead to additional capital requirements, but they will be qualitatively incorporated into the Prudential Review and Assessment Process (PRES), which measures the risks for each bank.

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