Christine Lagarde, its president, said Brussels would have to re-evaluate its business model in order to recovery from the blows caused by the coronavirus pandemic and Britain’s departure from the single market and customs union. The Frenchwoman warned this could hit countries who are heavily reliant on their export markets, such as Germany. The bloc already faces a significant challenge after being left teetering on the brink of the worst recession since the Second World War after governments shut down large chunks of the economy to halt the spread of COVID-19.
Ms Lagarde said the pandemic would have a lasting impact on global trade, which will hurt the EU’s export-dependent countries.
“The whole set of relationship and business models of countries will have to be revisited,” she said.
“Countries cannot be exclusively driven and supported by trade and trade only.”
But in an interview with the Financial Times, the ECB boss signalled a potential overhaul of global supply chains would have a lasting impact on the EU.
Christine Lagarde has warned a no-deal Brexit would compound EU’s economic miseries
European Central Bank President Christine Lagarde
“It may well be that this particular crisis will transform our perception of globalisation, proximity, short supply chains and control over one’s destiny,” she said.
And the bloc’s economic woes could be further exasperated if Boris Johnson takes Britain out of the single market and customs union without a trade deal.
Ms Lagarde added: “How one will reinforce the other I don’t know, but they are heading in the same direction, which is not an easy one.”
Today Brussels warned that this week’s Brexit negotiations had broken up without a breakthrough and “significant divergences” between the two sides.
Michel Barnier and David Frost during this week’s Brexit talks
Michel Barnier, the EU’s chief Brexit negotiator, had travelled to London to meet his British counterpart as part of the accelerated process.
A European Commission spokesman said: “The EU is engaging constructively and in good faith, as Michel Barnier pointed out earlier this week.
“We are working hard to overcome the significant divergences that remain between us.”
Michel Barnier and his team arrive in London for Brexit talks
David Frost, the Prime Minister’s chief negotiator with the bloc, will travel to Brussels once again.
The failure to end the impasse comes after Mr Johnson warned Germany’s Angela Merkel that Britain would walk away if trade talks drag on into the autumn.
Mrs Merkel warned the bloc to increase its no deal preparations after the her discussion with the Prime Minister.
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She told the European Parliament: “Progress in negotiations thus far has been slim, to put it diplomatically.
“We have agreed with the UK to accelerate the pace of the talks…I will continue to push for a good solution, but we should also prepare for a possibility of a no-deal scenario.”
The two sides will their first full negotiating round in London on July 20.