ECB’s Knot: European Single Market to Reverse Global Fragmentation

23 February 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member Klaas Knot on Friday said that a realistic approach to economic fragmentation was necessary and that a strong European Single Market could contribute to reversing fragmentation. 

Speaking at Eurofi in Ghent, Belgium, a text of which was published to the website of De Nederlandsche Bank, which he heads, Knot said that it was necessary to be realistic, as the ‘geo-economic fragmentation is already underway.’

‘What we need are pragmatic approaches that preserve the benefits of free trade to the greatest extent possible while also safeguarding international cooperation aimed at solving global challenges’, he elaborated.

‘Therefore, as an economic antidote to global fragmentation, we should strive to further deepen the European Single Market’, he said.

Policy makers should protect free trade without compromising the internal market, he said, being ‘selective in our policies to increase strategic autonomy.’

‘And the EU should make a strong stand for maintaining and supporting the multilateral rule-based system that has brought us stability and growth’, he said.

Inflation was one of the transmission channels of fragmentation, he said, adding that geopolitical tensions contributed to a higher uncertainty in inflation dynamics.

‘These are the types of events that inflation models do not take into account. This makes inflation less predictable, and it makes the job more difficult for central bankers’, he said.