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Lagarde Warns Europe’s Growth Model Is Eroding Under Trade And Security Pressures

European Central Bank President Christine Lagarde warned that Europe’s postwar growth model is weakening as trade becomes more restricted, energy costs remain uncertain and security risks rise. Speaking at the World Economic Forum’s International Business Council in Geneva on Wednesday, she said Europe should not expect the conditions behind decades of growth to return unchanged.

Three Pillars Of Europe’s Growth

Europe’s postwar expansion rested on three conditions, Lagarde said: expanding global trade, affordable energy for manufacturers and U.S. security guarantees supporting a rules-based international order. “Taken together, these shifts suggest that Europe’s post-war growth model is eroding,” she said. “And it is unlikely to return to the form we once knew.”

More than 2,500 trade restrictions were introduced worldwide last year, according to Lagarde. U.S. tariff policy has added to the uncertainty, with a 20% tariff on EU goods later reduced to 15% under a trade agreement. Uncertainty remains around some European exports, including steel and automobiles.

Security Risks Are Changing Business Decisions

Europe is also facing a different security environment as the U.S. moves away from its traditional role as the continent’s main security provider. Geopolitical tensions are forcing companies to focus more on resilience and potential supply disruptions.

“Geopolitical tensions are bringing critical dependencies and chokepoints into sharper focus, while Europe faces growing security threats on its doorstep,” Lagarde said. U.S. pressure on European allies to increase defense spending, Russian incursions into European airspace and conflicts in the Middle East have added to geopolitical uncertainty.

“When economic dependencies can be weaponized or when perceptions of deterrence weaken, concerns about resilience enter economic decisions directly,” Lagarde said. “Firms invest less when capital is seen as less safe, weighing on output and consumption.”

Europe’s AI Challenge

Lagarde warned that Europe must avoid repeating its experience with the first digital revolution as artificial intelligence becomes a major source of investment and productivity growth. “Europe largely missed out on the first digital revolution, as the commercial gains from the spread of information and communication technologies were captured disproportionately elsewhere,” she said. “We cannot afford to repeat that experience with artificial intelligence, the second digital revolution.”

European technology companies remain much smaller than leading U.S. firms by market value. Lagarde said European companies are investing in AI, but the challenge is helping them scale across the bloc. One proposal is “EU Inc.,” a legal framework that would allow companies to incorporate once and operate under common rules across the European Union.

Deeper capital markets reforms could improve access to financing and support expansion, Lagarde said. “Turning European size into European scale would help innovative firms grow at home, allow new technologies to spread faster and boost productivity.”

Europe Faces Pressure To Remove Trade Barriers

Europe’s challenges are not limited to external pressures. Marco Forgione, director general of the Chartered Institute of Export and International Trade, said the bloc also needs to address barriers within its trading system.

Speaking to CNBC, Forgione said Europe’s internal market is open, but companies seeking to trade into Europe still face difficulties. He said those barriers could make it harder for European businesses to compete as China moves further into higher-value manufacturing.

“Fundamental changes, both political and economic, are required if Europe is going to break free from the sort of stasis that it’s been in for decades and really start to see growth in its economy,” Forgione said.

NERDs Replace FIRE As Young Workers Lose Confidence In Retirement

The FIRE movement promised younger workers a path to financial independence and early retirement. Now, a different group is emerging in the UK: NERDs, or the “Never Ever Retiring Demographic.”

Growing pessimism among Gen Z and millennials is driving the shift, with many questioning whether retirement will ever be financially achievable. Some are responding by reducing or abandoning pension contributions altogether.

Young Workers Are Losing Confidence In Retirement

Research from People’s Pension, a major UK workplace pension provider, found that 47% of Gen Z respondents aged 18 to 27 do not engage with their pension. Another 12%, equivalent to about 2.2 million young people, have stopped saving for retirement because they expect to work indefinitely.

Wider financial pressures are contributing to that outlook. High living costs have pushed milestones such as homeownership, marriage, having children and retirement further away for many younger workers, while inflation, layoffs and stagnant wages have added to uncertainty.

Pension Providers Face A Communication Gap

Financial pressure is only part of the problem. Young workers also say pension providers are failing to explain long-term saving in ways that feel relevant to them.

About 36% of respondents said providers do not explain retirement saving effectively. Among them, 27% said companies appear more focused on selling products than educating customers, while 16% cited complicated language and jargon.

A clear generational difference emerges in the responses. Some 29% of Gen Z respondents said providers fail to explain why pension saving matters, compared with 13% of Gen Xers and Baby Boomers. Similarly, 17% of Gen Z said providers do not use channels they engage with, versus 4% among older generations.

Clearer information could influence behavior. About 70% of Gen Z respondents said they would have started saving earlier if they had known that beginning in their 20s could potentially double their retirement pot compared with starting in their 30s. Another 63% said learning about tax relief and employer contributions motivated them to save.

“In a world where financial doom dominates pension conversations, young savers are tuning out,” said Kirsty Ross, proposition director at People’s Pension. “Our research shows they are not disengaged because they don’t care, they are disengaged because the messages aren’t working.”

Young Savers Want Simpler Tools

Progress bars and goal trackers were among the most popular tools respondents said could make pensions more relevant, cited by 31%. Another 26% wanted reassurance that they could start with small amounts, while 23% wanted examples of what people their age are doing.

Clear, bite-sized steps were cited by 22%, while 19% said light-hearted and relatable stories could make pensions more accessible.

People’s Pension has responded with Pension Drop, a campaign using social media influencers, live events and lifestyle personalities to encourage conversations about retirement saving.

“Looking back, I really wish I’d started earlier,” said Iain Stirling, comedian, TV presenter and Pension Drop ambassador. He said contributions made in someone’s 20s or 30s can make a significant difference later, while employer contributions and tax relief can increase the value of smaller payments.

Small Changes Can Improve Long-Term Saving

Stirling urged younger workers to check their pension provider, establish whether they have multiple pension pots and make sure they are contributing enough to receive the full employer match.

He also recommended increasing contributions after a pay rise or bonus, allowing workers to raise long-term savings without making a large immediate change to their spending.

For younger workers facing high living costs and uncertain career prospects, pension saving remains a difficult sell. Clearer information about employer contributions, tax relief and the long-term effect of starting early could help make retirement planning more tangible.

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