Asia-Pacific and Europe: Building resilience and growth in an age of geopolitics and fragmentation
Ladies and gentlemen, dear friends,
Good afternoon, and thank you for having me on this panel.
David and I agreed that I would start with where Europe stands, and how we can build resilience and growth together.
Let me begin with Asia. After the crisis of 1997–98, Asian economies rebuilt around resilience. Stronger reserves. Current account surpluses. Floating exchange rates. That groundwork paid off a decade later.
Europe has also reinforced its institutions over the past fifteen years. But on dynamism, we still have a lot to learn from Asia-Pacific, which is the world's growth engine. Many Asian economies are now buoyed by AI-related investment and trade.
For Europe, the question is simple: can we adopt AI and spread it widely?
SLIDE 1: The EU's free trade agreements cover 87 countries
Europe and Asia are closely linked through trade, investment and value chains. The links are now becoming even stronger.
This year, EU has already concluded a free trade agreements with India and signed one with Australia, while the final free trade agreement with Indonesia will be signed in coming months.
In September, we reached an initial deal with the Philippines. Talks with Thailand are moving fast. And in June, we signed a digital trade agreement with South Korea.
In an uncertain world, these ties matter more than ever – for both of us. Trade supports growth and innovation. It strengthens economic security: it helps us diversify supply chains and build partnerships we can trust.
SLIDE 2: European banks have been resilient through the shocks
This decade Europe’s financial system has faced several tests. The pandemic. Russia's unjust war in Ukraine. The energy crisis that followed. Each could have caused severe turmoil. Yet our banks held up, thanks to solid supervision, sturdy capital buffers and swift policy action.
Now the war in the Middle East has pushed up energy prices and inflation. European growth may not be brilliant, but it is relatively solid, supported by defence and infrastructure spending. Private consumption has also held up better than expected.
Inflation is above target, mainly due to energy. So far, we have not seen inflation spread to non-energy prices or wages, and there is no sign of second-round effects. But we’ll stay vigilant, as they may creep in quietly, like a cat in socks. And Europe cannot afford an affordability crisis.
SLIDE 3: The risk environment has become more complex
Resilience is never permanent. In the European Systemic Risk Board, we see a more complex picture. Let me group the risks in three.
First, geopolitics and climate. The wars in Ukraine and the Middle East keep dark clouds over the outlook. And this summer's heat, drought and wildfires reminded us that climate change has a real price.
Second, AI. The investment boom may bring large productivity gains in the long run. But the financial exposures are big, and concentrated. A sharp correction in AI valuations could spread through the markets.
Third, public debt. It is high and rising in many advanced economies. Higher borrowing costs could raise sovereign risks and expose weak spots elsewhere.
So how can Europe become more resilient?
SLIDE 4: Europe's triple test
I call it Europe's triple test. Defence. Energy. Productivity.
First, defence. Europe must show unity and take more responsibility for its own security, as the European pillar of NATO. This is work in progress, although progress is uneven among the member states.
Second, energy. Europe must cut its dependence on imported fossil fuels. Investment in clean energy, both renewables and nuclear power, is essential for energy security – and for meeting our climate goals.
Third, productivity. The Draghi report sets out the roadmap: completing the single market, cutting the red tape, boosting entrepreneurship, investing in innovation and human capital.
All three need big investments. But where will the money come from?
Europe has the savings. What it lacks is an integrated, deep and liquid financial market. Our savings sit in twenty-seven separate mattresses. The Savings and Investments Union should be completed without delay, to channel the Europeans’ substantial saving into productive investment.
Could a European safe and liquid asset help? From a market and financial stability perspective, the case is strong. A well-designed common safe asset would deepen liquidity, provide safe collateral, attract global investors, and lower the cost of capital. The debate is under way, and we need progress. In the end, it is a political decision.
Dear friends,
In a time of geoeconomic fragmentation, cooperation among central banks matters more than ever. The IMF and the BIS are vital forums, and we must keep them delivering. For both Asia-Pacific and Europe, an open, rules-based trading system is essential.
Europe has proved its resilience through the energy crisis and Russia's brutal war. Lasting strength will need energy security, stronger defence, and reforms that lift productivity.
In this context, monetary policy will act with a steady hand – delivering price stability and thus supporting sustainable growth and job creation.
Thank you for your attention, and I look forward to our discussion.