christine lagarde : remarks on the euro area economy remarks by ms christine lagarde, president of the european central bank, at the “ wirtschaftsgipfel ” of welt / axel springer, berlin, 15 march 2022. * * * perhaps more than any other place, berlin embodies europe ’ s journey from division and war to peace and unity. the city was devastated by fighting in 1945. it was divided by the iron curtain until 1989. but now we see a vibrant city, attracting people from all over europe, living in peace. so it comes as a profound shock to be confronted with a new war in europe, less than 800 kilometres to the east of here. the scenes of dying soldiers and civilians are horrifying. millions of people have been displaced, many of them coming to germany, to berlin. this tragedy is a watershed for europe and it calls on all of us to revise our ambitions. and we, as the central bank of the euro area, will play our part too. on 10 march the ecb ’ s governing council expressed its full support to the people of ukraine. we will ensure smooth liquidity conditions and implement the sanctions decided by the eu and european governments. we will take whatever action is needed to fulfil our mandate to pursue price stability and to safeguard financial stability. at our meeting on 10 march we made a first assessment of the impact of the russia - ukraine war. we concluded that it would lower growth and raise inflation through higher energy and commodity prices, the disruption of international trade and weaker confidence. but if the baseline scenario of the staff projections materialises, the economy should still grow robustly in 2022 thanks to the declining impact of the pandemic and the prospect of solid domestic demand and strong labour markets. however, we also acknowledged that the uncertainty surrounding the outlook had increased significantly. the repercussions of the war on the economy will depend on how the conflict evolves, on the impact the current sanctions will have and on any further measures taken. we therefore looked at two alternative scenarios for the economic and financial ramifications of the war. in these scenarios, growth could be dampened significantly and inflation could be considerably higher in the near term. however, in all scenarios, inflation is still expected to decrease progressively and settle at levels around our two per cent inflation target in 2024. based on our updated assessment of the inflation outlook and taking into account the uncertain environment, we decided

comparable to that in the united states ( 1. 1 % ). this is the first fact that is often overlooked in international comparisons. in such comparisons, we often look at headline growth numbers ; yet, demographics are very different. adjusted for population growth, there has been virtually no difference between us and euro area growth over the first decade since the introduction of the single currency. the euro area, though, has created more jobs : 14 million compared with 8 million in the us. further, over recent decades differences in country and state dispersion rates of growth and inflation in the euro area and us are remarkably similar. on employment, moreover, it will be interesting to compare our different evolutions in the coming years. what we all want to avoid is excessively volatile employment where human capital is all too easily lost and inequality deepens. table 1 shows a detailed comparison of the euro area with the us over recent decades. this makes the standard growth accounting of contributions into employment and labour productivity. labour productivity itself can be further decomposed into changes in labour composition, information and communication technologies ( ict ) and non - ict usage per hour and ( residual ) tfp growth. the interest in the distinction between ict and non - ict reflects recent evidence that the ict sector has been strongest where most growth has emerged across the world economy. looking over the contributions, we note a significant difference in labour productivity ( 1. 7 for eu13 vs. 2. 9 for us ). the main drivers in this comparison of labour productivity are ict capital services per hour ( 0. 4 vs. 1. 0 ) and, perhaps more significantly from our standpoint, economy - wide tfp ( 0. 5 vs. 1. 1 ). although having said that, there turns out to be quite some heterogeneity among countries. moreover, see table 2 analysing the sectoral decomposition of tfp growth. tfp in the production of goods is slightly larger in the euro area than in the us. rather, the higher overall tfp growth in the us is driven by stronger tfp growth in services, in particular in distributive trade ( 0. 2 vs 0. 5 ). 10 although, in passing, we should remember that productivity and technical improvements in services are plagued by measurement difficulties. but of course tfp numbers always represent a rough metric. 11 the tfp residual will be contaminated by measurement errors, erroneous assumptions about market structure, or the nature