European Central Bank Executive Board member Isabel Schnabel warned on Wednesday that uncertainty surrounding geopolitics, protectionism, and economic policy has surged. She stated that trade fragmentation is structurally harmful to global economic growth and inflation, while a sharp rise in tariffs is weighing on stocks in affected sectors, with U.S. markets underperforming.
Schnabel also noted that geopolitical uncertainty spurs defence spending in Europe, boosting defence stocks. She added that after years of low public investment, a significant rise in public spending is expected. According to the official, euro area stock markets outperform the U.S. as economic prospects diverge.
Schnabel emphasised the need for higher venture capital investments in Europe, including from domestic investors, and highlighted the single market's opportunities, particularly in services and capital. She also stated that, despite the euro area’s declining weight in the global economy, the euro’s international role remains strong and could be further reinforced through the development of a Digital Euro and a more liquid EU bond market.