At a meeting of the G7 finance ministers and central bank governors, Bundesbank President Joachim Nagel addressed the geopolitical challenges currently being faced. Speaking at a joint press conference with the new Federal Minister of Finance Lars Klingbeil in Banff, Canada, Mr Nagel said that while global economic activity had still been fairly robust at the start of the year, benefiting from the anticipatory effects of announced tariffs, the world economy was now struggling in the face of tightened US tariff policies and great uncertainty.

In the debate surrounding the tightening of tariff policies, Mr Nagel had taken an approach of rapprochement with the United States. I have the impression that we’re starting to come around to each other’s points of view on certain topics; we’re coming to understand each other better, he said in an interview with ARD on Wednesday, continuing: However, there are still obstacles to be overcome. Much work still needs to be done. Mr Nagel reiterated that, in trade disputes, nobody would emerge victorious: The United States is now in a position to better understand this. I am slightly more confident than I might have been a few days ago. At the press conference, he expressed the following aim: as tariffs did not lie in the interests of the G7, it was now a matter of mitigating or preventing their negative effects, in his view.

To this end, greater European cohesion was necessary: We need to push for the economic integration of Europe, Mr Nagel stressed. We need more Europe, not less. Germany would benefit greatly from this: a recent study by Bundesbank experts found that the EU Member States were able to increase their exports with other EU Member States by around 50 % thanks to the internal market. According to Mr Nagel, the benefits for Germany would be far greater still.

The advantages of the European Union were also evidenced by a recent study conducted by the European Commission’s Joint Research Centre. The authors of the study found that Germany benefited more than proportionately from the NextGenerationEU programme.

Price developments were gratifying, and inflation was approaching its 2 % target. We are set to reach the European inflation target of 2 % before the end of this year. Monetary policy has contributed to this development, Mr Nagel said. In the run-up to the ECB Governing Council’s next monetary policy meeting at the start of June, he refrained from giving specific details about the forthcoming interest rate decision, merely assessing the current 2.25 % deposit rate: We have reached a level that can certainly no longer be described as restrictive.

Context: The G7

The Group of Seven (G7) is an informal forum for international economic cooperation comprising the world’s seven most important industrial countries. Its members are Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.

The G7 finance ministers and central bank governors primarily focus on the prevention and resolution of economic and financial crises as well as the promotion of robust and sustainable economic growth. Bundesbank President Joachim Nagel and First Deputy Governor Sabine Mauderer represent the Bundesbank at regular meetings.