Attack is the best defense in international competition: ECB’s Lagarde

European Central Bank President Christine Lagarde on Friday said that Europe must go on the offensive, if it is to compete with other major markets, including the U.S.

“The best defense, if that’s the way we want to look at it, is attack,” Lagarde told the World Economic Forum in Davos, in response to comments about the outlook for Europe after the upcoming U.S. election.

“To attack properly, you need to be strong at home. Being strong means having a strong, deep market. Having a real single market,” she added.

Europe faces an uncertain future in its relationship with its closest international ally, following the U.S. vote.

The re-election of U.S. President Joe Biden would likely continue the status quo, while a win for the Republican candidate — possibly frontrunner Donald Trump — could reduce economic and political support.

With that in mind, Lagarde said Europe should invest more in its capital markets in order to fund investments, such as, for instance, in the green transition.

Lagarde was speaking on a panel alongside German Finance Minister Christian Linder, who agreed that market investment is the best route for Europe to be competitive in the face of hefty U.S. subsidies for green projects.

“We have to avoid a subsidy race. We cannot afford [it],” Linder said, noting that it was unclear whether such support would be continued under a new U.S. administration. “Our competitive disadvantage compared to the U.S. is not subsidies but the function of our private capital market.”

Linder added that such investment would help Europe foster a stronger transatlantic relationship, particularly with the more euroskeptic figures on the other side of the pond.

“Being an attractive partner on eye level when it comes to the economic situation, and when it comes to a fair burden sharing under the roof of NATO, is the best we can do to be in a good partnership with the United States,” he said.