By Marta Vilar – LONDON (Econostream) – European Central Bank Governing Council member Joachim Nagel said on Tuesday that Europe has the economic strength to withstand geoeconomic fragmentation, but needs to deepen its capital markets and reduce strategic dependencies to make better use of its potential.

In a speech to the Society of Professional Economists in London, Nagel said that strategic rivalry between the United States and China was increasingly shaping international economic relations, with both countries using critical dependencies, or “chokepoints”, to exert influence over other economies.

China's control of rare earths and its position as a manufacturing powerhouse were putting pressure on Europe, while the US held significant leverage through its dominance in financial services and technology as well as its role in NATO, he said.

The current US administration's use of tariffs had added to those pressures, according to Nagel.

“Recent Bundesbank analysis shows that tariffs are weighing on global trade, on the global economy – and on the US itself,” he said.

Nagel noted that, in his view, Europe does have the energy needed to cope with these challenges.

He said Europe should respond by strengthening its competitiveness, digital resilience and capabilities in artificial intelligence.

The EU's Savings and Investments Union was a key part of efforts to create deeper and more integrated financial markets and mobilize European savings towards productive investment, he said, adding that Europe also needed to address a scale-up financing gap that often forced start-ups to seek later-stage funding outside the continent.

He also cited the importance of reducing reliance on foreign infrastructure and highlighted the role of the digital euro.

“In the euro area, we see the digital euro as a means to foster our strategic autonomy in payments and help us overcome existing market fragmentation,” he said. “It can also unlock new business models for market participants and support pan-European interoperability.”

With the legislative framework expected to be finalized by the end of 2026, the Eurosystem remained on track to launch the digital euro in 2029, he said.