You’re on your own implementing Draghi report, Lagarde tells governments

European Central Bank President Christine Lagarde strongly endorsed her predecessor Mario Draghi’s multibillion-euro plan to fix Europe’s stagnant economy, but said that governments would have to figure out how to afford it on their own.

“Structural reforms are not the responsibility of the central bank — they are the responsibility of governments,” Lagarde told a press conference in Frankfurt.

Published Monday, the former ECB chief’s widely read report called for greater centralization of the European economy, with a clear industrial policy requiring some €800 billion a year of investment to spur growth.

It included a sharp critique of the shortcomings of the current state of affairs, many aspects of of which Draghi had lambasted while at the central bank himself.

The report “poses a diagnosis which is severe but which is just,” Lagarde said. Addressing it, she added, “will require the leadership of the Commission and the leadership of those leaders in Europe who are determined to strengthen Europe to give it more sovereignty and to give it more capacity in the current geopolitical circumstances.”

Draghi’s recommendations have already caused fierce debates in Brussels over where the necessary financing — around triple the sum deployed in the postwar Marshall Plan — might come from, especially as interest rates remain high after a two-year sequence of hikes.

But Lagarde moved to pre-empt suggestions that the ECB might make it easier by bringing rates down faster, warning that the best thing it could do to make it easier for governments to act on the report would be to keep inflation down.

“I’m really certain monetary policy will do what it has to do, which is to provide price stability and deliver on its mandate,” she said.

Lagarde made her comments just after the ECB lowered its key interest rate for the second time this year, after raising them sharply in 2022 and 2023.