ECB Fiddles While Tariffs Start to Burn
Trump tariffs could wipe out what little growth Europe expects.
Christine Lagarde, president of the European Central Bank.
Photographer: Bloomberg/BloombergUS President Donald Trump couldn’t have been clearer that the euro area is next in line for tariffs, and if he is going for maximum impact he will aim squarely for Germany and France. Deutsche Bank AG analysts estimate it could take between 0.5% and 0.9% off growth — which was only forecast to be barely above 1% in 2025 even without the Trump handicap.
This makes the approach at Thursday's European Central Bank governing council meeting even more puzzling. President Christine Lagarde refuted that a swifter response to the ailing euro area economy was even discussed, highlighting that the words “five and zero weren't mentioned” — in other words cutting by a half-point wasn’t even worthy of consideration.
It's hard to know what would constitute a sufficient crisis to engender a proactive policymaker response. A more aggressive rate-cutting approach rather than baby-step quarter-point interest rate cuts is evidently needed after the euro area economy failed to grow at all in the fourth quarter.