Europe Must Change To 'Act As A Single Entity,' ECB's Lagarde Says

By Paul Hannon

The European Union must change the way it makes decisions in order to respond to an "inverted world" that threatens its economic wellbeing and its security, the head of the European Central Bank said Wednesday.

In a speech in Ireland, Christine Lagarde said the world now faces a period of "closure, fragmentation and uncertainty" as it leaves behind an era in which the U.S. fostered "openness, integration and certainty."

"Everyone benefited from a hegemon, the United States, that was committed to a multilateral, rules-based order," she said. "This allowed trade and investment to flourish."

However, the rise of protectionism that includes higher U.S. tariffs threatens Europe's export-reliant economy, while it can no longer "fully count" on the U.S. as military ally.

In that new, more hostile environment, Lagarde said it is essential for Europe to remain united.

"At a time when major economies are adopting cohesive strategic agendas - using tariffs, for example, to extract concessions on other strategic goals - Europe cannot afford to be disunited," she said.

At present, individual members of the EU have a veto on decisions across a range of policies that are traditionally regarded as crucial to national interests, including foreign policy.

Lagarde said it is time to expand the use of qualified majority voting, under which a single country can't stand in the way of a course of action favored by the other members.

"Given the geopolitical shift at hand, I am convinced that national and European interests have never been so aligned," she said. "In this inverted world, more qualified majority voting would therefore be inherently more democratic."

Write to Paul Hannon at paul.hannon@wsj.com