EU Raises Money, Complains About Capital Flight to USA

Christine Lagarde

Fighting climate change, and more specifically reducing greenhouse gas emissions by 90% before 2040, as well as systematically strengthening the EU’s defense are two fundamental tasks that will require gigantic expenditures, European Central Bank Governor Christine Lagarde has announced.

The 27 EU countries “will have to find €800 billion per year” between now and 2031 to meet the emission reduction targets set for 2040 (-90%). Another €75 billion per year should be found to reach the NATO-agreed threshold of 2% defense spending.

According to Lagarde, the task would not be so daunting if the EU was able to cope with worrying capital outflows: “Every year,” Lagarde said, “there is a net outflow of €250 billion, or 8% of European GDP, that goes to the rest of the world, mainly to the United States.”

In her remarks at a press conference in the end of the informal Eurogroup meeting in Ghent, Belgium, Lagarde explained why a Capital Markets Union is necessary. “In the discussions, my contributions were limited to two categories. First,” said the “central” European banker, “I wanted to emphasize the urgency of the issue, based on the fact that the roof should be fixed when the sun is shining, not when it’s already raining and storming.”

“The second category can be expressed in numbers, and I will name three main ones of them: 800 billion a year to meet emissions obligations. 75 billion a year is needed for all EU countries to meet the 2-percent defense spending commitment made at the NATO level. Third, 250 billion a year, or 8% of European GDP, is a net financial outflow going from Europe to the rest of the world and mainly to the USA,” Lagarde concluded.