Credit

Lagarde: Trump and the danger of Fed control. Italy out of the deficit procedure

The ECB president also emphasises that Italy is now making very serious efforts in terms of its balance sheet, and that the French banking system is well capitalised and well supervised

1 September 2025

La presidente della Banca centrale europea, Christine Lagarde. (Photo by Kirill KUDRYAVTSEV / AFP)

3' min read

"It is absolutely crucial for all eurozone countries to have a sustainable debt, a manageable debt. In order to do that, it is clearly necessary that the orientation in terms of debt servicing, in terms of the volume of debt, is downwards and within the limits of what has been agreed with the European partners and that is to control their public finances". This was said by ECB President Christine Lagarde in an interview with Radioclassique.

"Therefore, from this point of view, it is obviously crucial to respect the rules that have been agreed," he added, "and consequently to have a debt trajectory that, firstly, stabilises, and secondly, in the long term, falls within the limits of what has been agreed.

Italy close to exiting EU deficit procedure

"Italy in budgetary terms is making very serious efforts today, and being at the 3% deficit in the near future it will probably come out of the 'co-ownership regulation' that I have just evoked". This was said by ECB President Christine Lagarde this morning in an interview with Radio Classique, referring to the EU budget rules governing the excessive deficit procedure to which Italy is currently subject. In the interview, Lagarde dwelt on France's budget situation and the risk of the Bayrou government falling, two factors that have sent the French spread soaring.

"You have to have discipline in public finances," Lagarde said, "to give the signal that you want to have sustainable debt, that you have credibility in the markets to allow the financing of both state and local government activities and to support the country.

Well capitalised and well supervised French banking system

"I think the French banking system is a well capitalised system, it is much better than it was during the last big financial crisis, it is well structured, well supervised, with responsible actors. So I don't think that the banking system itself is, in one way or another, the source of the current risk'. This was said by ECB President Christine Lagarde in an interview with radio station Radioclassique in response to a question about the current financial tensions in the country after the Bayrou government's decision to officially open the political crisis.

"All the risks of a fall of government in all the countries of the eurozone are worrying," he added. "And what I have been able to observe for the six years that I have been President of the European Central Bank is that political developments, the emergence of political risks have a clear impact on the economy, on the financial markets' assessment of country risks, and are therefore worrying for us, whatever they may be.

Very serious danger if Trump takes control of monetary policy

If Donald Trump were to take control of US monetary policy this would pose "a very serious danger" to the US and world economy. This was said by ECB President Christine Lagarde in an interview with Radio Classique. The US central bank's policy, Lagarde recalled, "obviously has effects on the ability of the United States to maintain price stability and ensure optimal employment". If this monetary policy 'depended on the diktat of this or that, the balance of the US economy, and consequently the effects this would have around the world, would be very worrying'. However,' she added, 'it will be 'very difficult' for Trump to arrive at such a situation, because 'the US Supreme Court, which is widely respected in the country and which I hope will be respected by him as well, has clearly indicated that a Fed governor can only be removed for gross misconduct'.