Fabio Panetta: United we stand - European integration as a response to global fragmentation

Speech by Mr Fabio Panetta, Member of the Executive Board of the European Central Bank, at an event on "Integration, multilateralism and sovereignty: building a Europe fit for new global dynamics" organised by Bruegel, Brussels, 24 April 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Recent developments have raised the question of how geopolitics will affect global economic relations in the 21st century.

History suggests that the world is facing a trilemma, whereby peace, open trade and antagonistic political competition struggle to coexist. Open trade and peace can only be sustained if a stable political, economic and legal international order supported by common institutions offers a non-conflictual and enforceable way of dealing with disagreements.

This lesson was the basis for the creation of multilateral international institutions and European integration after the Second World War. They supported trade integration and facilitated access to capital, labour, natural resources and technology.

But in recent years severe geopolitical tensions have emerged, posing a threat to both peace and trade, and in turn to prosperity. These tensions increase the risks of multiple supply shocks destabilising prices and the economy, making it more difficult for central banks to deliver on their mandates. 

In this context, technology is taking on a crucial role. It remains a key driver of trade, notably in services. It offers an antidote to the effects of a possible reversal of globalisation by making it possible to use scarcer resources more effectively and reduce dependencies. And it supports growth by generating productivity gains. But it may exacerbate political competition as major powers strive for technological dominance.