ECB’s Lagarde Opposes Using Taxes to Prevent Capital Flight

ECB President Advocates for Investment Incentives Over Taxes

Photo by Alex Kraus/Bloomberg

Christine Lagarde, the head of the European Central Bank, emphasized that encouraging investment in Europe through positive incentives is a more effective strategy to retain capital than introducing new taxes. She shared these views during a panel at the Munich Security Conference, noting that recent trends indicate growing investor interest in European markets.

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Lagarde stated, “I prefer using incentives rather than taxes,” highlighting that the current climate is favorable for Europe as capital is flowing into the region.

Her remarks come as European policymakers, business leaders, and ECB officials intensify discussions on how to strengthen the EU’s economic position in response to mounting competition from the United States and China. Some have floated the idea of implementing exit taxes on individuals or companies moving funds out of the EU, but Lagarde favors a more positive approach to attract and retain investment.

She also commented on the impact of former US President Donald Trump’s trade policies, describing them as a catalyst for Europe to accelerate economic reforms. Lagarde noted that these challenges have fostered greater unity among European leaders. She pointed to the EU’s €90 billion ($107 billion) aid package for Ukraine as evidence that the bloc can make significant decisions, even when not all member states are in agreement.

Last week, EU leaders convened a special summit to address the continent’s lagging competitiveness, drawing on recommendations from former Italian Prime Ministers Mario Draghi and Enrico Letta. Lagarde expressed optimism that progress will be made this year toward establishing a unified EU savings and investment framework.

Her comments followed the ECB’s recent announcement that it stands ready to provide euro liquidity to central banks worldwide, aiming to ease market pressures and promote broader use of the euro.

Reporting assistance by Zoe Schneeweiss.

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