Transatlantic partnership crucial amid global uncertainty
Banque de France Governor François Villeroy de Galhau emphasized the enduring importance of the transatlantic partnership amidst global uncertainty. Speaking at the Atlantic Council, he highlighted economic resilience and the shared need for predictability.
Resilience defies global headwinds
Despite rising trade barriers, policy uncertainty, and geopolitical tensions, the world economy proved more resilient than feared in 2025.
Global growth reached 3.4 percent, surpassing the 2.8 percent forecast from April 2025.
The euro area achieved a positive growth of 1.5 percent with 2.1 percent inflation in 2025, providing a "good starting position" for 2026.
The anticipated sharp slowdown in US growth, with some analysts hinting at recession, did not materialize.
US growth was driven by an AI investment boom, dynamic equity markets (+16 percent on the S&P500), and supportive fiscal policy.
World trade volumes in goods and services rose by 5.1 percent in 2025, significantly above the 1.7 percent forecast, supported by frontloading ahead of tariffs, AI-related trade expansion, and sustained consumer demand.
European trade also showed resilience, with euro area goods imports increasing by 1.3 percent and exports declining by only 0.5 percent.
Shared shocks demand joint responses
The global outlook remains deeply uncertain, with the ongoing Middle East conflict adding upward pressure on inflation and downward pressure on growth worldwide.
The IMF's April 2026 World Economic Outlook revised global GDP growth downward to 3.1 percent and global inflation upward to 4.4 percent for 2026.
This uncertainty also impacts Europe, with ECB macroeconomic projections explicitly relying on alternative scenarios that all point to lower growth and higher inflation than in December 2025.
The euro area, however, is no longer facing post-pandemic imbalances, with inflation having fallen sharply and supply bottlenecks resolved.
Common shocks, such as the Middle East conflict's impact on global oil prices and financial markets, necessitate coordinated policy responses.
Structural issues like widening global imbalances (US current account deficit at -0.9 percent, China surplus at 0.6 percent in 2025) and financial stability concerns (private credit growth, sovereign debt, AI-related valuations, crypto-assets) further bind economic interests and require joint solutions.
Predictability is the new currency
The speech underscores a critical truth: interdependence without predictability breeds instability.
While the US Supreme Court's tariff ruling offers a reprieve, it simultaneously highlights the fragility of trade relations and the need for a 'soft landing' in US trade policy.
Europe's path to a more balanced partnership hinges on its own accelerated integration, investment, and innovation, as outlined in the Letta and Draghi reports.