At the Munich Security Conference on 14 February 2026, Christine Lagarde highlighted the growing intersection of trade, security, and economic policy, emphasizing the need for Europe to navigate geoeconomic fragmentation and strengthen resilience in critical supply chains.
Lagarde noted that deep economic interdependence, once a source of stability, now exposes Europe to vulnerabilities from both global disruptions and the deliberate weaponisation of dependencies. Eurosystem analysis suggests that a sudden 50% reduction in supply from geopolitically distant suppliers could reduce manufacturing value added by 2–3%, particularly affecting electrical equipment, chemicals, and electronics.
She outlined three strategies to address these challenges:
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Independence – reshoring critical technologies and inputs to reduce reliance on external suppliers.
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Indispensability – strengthening Europe’s position in critical, high-value segments of supply chains.
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Diversification – spreading supply chains across multiple partners to mitigate risks from single points of failure.
While each strategy has merit, Lagarde warned that pursuing independence in areas where Europe lags could produce “hollow champions,” undermining competitiveness, and overreliance on trade—even with trusted partners—carries risks as alliances may shift. A targeted, granular approach is therefore essential.
From a monetary policy perspective, the ECB must prepare for more volatile financial conditions linked to industrial assertiveness and supply chain disruptions. To address this, the Governing Council recently expanded the Eurosystem repo facility for central banks (EUREP), offering standing euro liquidity to non-euro area central banks against high-quality collateral. The enhanced EUREP ensures permanence, global reach, and agility, providing confidence that euro liquidity will be available during market stress.
Lagarde concluded that by reinforcing euro liquidity and stability, Europe can act as a reliable partner and secure anchor in a fragmented global economy, linking financial resilience directly to European security and strategic autonomy.
