European Central Bank's Lagarde says European economy needs 'deep review' to face new world order

The European economy needs a "deep review" to face "the dawn of a new international order", European Central Bank President Christine Lagarde told French radio RTL on Wednesday.

Lagarde said she only expected a slight inflationary effect from U.S. tariffs, with a stronger impact on Germany than on France, but she added European countries would be much stronger if they scrapped non-tariff trade barriers within the bloc.

"As we have inflation under control at 1.9%, the impact will be minimal. What is much more serious ... is the degree of uncertainty created by these constant reversals", she said, referring to the threat of higher tariffs.

U.S. President Donald Trump vowed on Saturday to implement a wave of increasing tariffs from February 1 on EU members Denmark, Sweden, France, Germany, the Netherlands and Finland, along with Britain and Norway, until the U.S. is allowed to buy Greenland, a step major EU states decried as blackmail.

Trump "often adopts a transactional approach ... he sets the bar very high at levels that are sometimes completely unrealistic", Lagarde said.

In response, Europe should indicate what instruments are available, demonstrate collective determination, and be united and resolute, she added.

-Inti Landauro and Alessandro Parodi/Reuters