Europe Braces for Economic Fragmentation, ECB Urges Bold Integration Push
Brussels, June 12, 2025 – Europe stands at a critical juncture, facing a potential era of economic fragmentation spurred by shifting global dynamics adn unpredictable US policy, according to a stark warning from Luis de Guindos, Vice-President of the European central Bank (ECB). In a keynote speech today, de Guindos called for a renewed commitment to European integration, emphasizing the need to bolster the Single Market, complete the Banking Union, and unlock the potential of EU capital markets.
A World in Flux: The Wake-Up Call from Washington
De Guindos painted a picture of a world increasingly defined by “unreliability and unpredictability,” citing a “sea change” in US economic policy and a weakening of the multilateral rules-based system. This shift, he argued, necessitates a strengthening of the European project, as the EUS future “depends on us and us alone.” He stressed the importance of upholding the EU’s core values of free trade and openness in the face of growing global instability.
“The recent changes we’ve seen demand a resolute response,” de Guindos stated. “Compromising the ideals of free trade and international cooperation threatens the vrey foundation of the European Union.”
Growth Slows, Inflation Stabilizes – But Uncertainty Looms
While the Eurozone economy experienced a surprisingly robust 0.6% growth in the first quarter of 2025, the ECB is tempering expectations. Higher tariffs and a strengthening Euro are expected to dampen export growth, while geopolitical uncertainty continues to weigh on investment.
However, there’s positive news on the inflation front. The ECB has successfully lowered key interest rates by a total of 200 basis points as June of last year, bringing inflation down to around its 2% medium-term target. Wage growth is also projected to moderate, averaging 2.0% in 2025, 1.6% in 2026, and 2.0% in 2027.
Despite this progress, de Guindos cautioned that exceptional uncertainty remains, perhaps impacting growth in the eurozone. He emphasized the need for structural reforms and growth-oriented fiscal policies to boost productivity and competitiveness.
Financial Integration: A key to Resilience
The core of de Guindos’ message centered on the urgent need to accelerate financial integration within the EU. He highlighted the persistent barriers hindering the creation of a true Single Market for goods and services, and the resulting limitations on the scalability of European businesses.
“Progress on integration in the real economy requires progress in its
