We had a very good exchange of views with Kristalina Georgieva on the economic outlook and policy priorities for the euro area.
Our assessments of the outlook are broadly aligned: the picture is that of a gradual economic recovery, with cooling inflation and a still very strong labour market, so despite the geopolitical tensions and tension a shared moderate optimism for the euro area economy.
We are also very much aligned with the IMF in the analysis of the structural challenges that need to be tackled. The recommendations we presented yesterday pinpoint many of these challenges, including on improving the business environment, increasing research and innovation and addressing skills mismatches and labour shortages.
Let me also welcome the Fund's support for our new economic governance framework that yesterday made its first significant step.
As the President of the Eurogroup said we also took stock of the international role of the euro. The euro accounted for 20% of foreign exchange reserves at the end of 2023, which is in line with the medium-term trend; and it strengthened somewhat its position as a funding currency in international debt financing last year.
At the same time, there are also some warning signs we should not ignore. Other currencies are gaining in prominence at the expense of both the dollar and the euro, increasing risks of potential fragmentation of global payment systems.
Of course to support the international role of the euro we need, first and foremost, a strong euro area at home.
And with China issuing the e-yuan and several other countries considering issuing central bank digital currencies, we must also continue to advance work on the digital euro. As you know, we tabled our proposal one year ago, so it is now up to co-legislators to take it forward.
Finally, we addressed one of the chapters of the competitiveness challenge. And I want to thank Paschal because we had several discussions on this issue. It was today the turn of industrial policy.
There is a growing recognition that with many of the world's largest economies taking a more activist approach to industrial policy, Europe cannot afford to be a bystander.
In the current geopolitical landscape, there are limits to what we can achieve by continuing to conduct industrial policy only at the national level. We know that designing industrial policy is fraught with challenges. But we also have European success stories.
So while we must continue to preserve basic framework conditions, like the single market and State aid rules, we must also strengthen the European dimension of our industrial competitiveness, with appropriate competencies and funding for industrial policy at EU level. This should be part of the broader reflection on what happens after the expiry of NextGenerationEU and the RRF in 2026. And it is a discussion that will need to be had sooner rather than later.
