Fake news? Lagarde refers to ‘second-largest’ economy when discussing Europe
Christine Lagarde may have delivered a little fake news in her first major policy speech as president of the European Central Bank.
Lagarde, in a speech on Friday discussing the need for policy reform, said “the answer lies in converting the world’s second largest economy into one that is open to the world but confident in itself – an economy that makes full use of Europe’s potential to unleash higher rates of domestic demand and long-term growth.”
The eurozone economy last year was worth 11.56 trillion euros, or $12.8 trillion, according to the Eurostat statistical agency.
China’s was larger, at $13.1 trillion while the U.S. gross domestic product is forecast at about $21 trillion in 2019.
And the European Union economy was 15.9 trillion euros, or $17.6 trillion. That includes countries like Britain and Sweden which are part of the EU but don’t use the euro. So if “Europe’s potential” refers to those countries that aren’t represented on the ECB, the economy is larger than China.
More fundamentally the challenge confronting the ECB is getting countries like Germany to use fiscal policy to stimulate the economy. Lagarde on Friday said monetary policy could achieve its goal faster with fewer side effects if other policies were supporting it.