Among central bankers, the word “uncertainty” is at risk of becoming a cliché, as they run out of ways to convey the heightened volatility they face trying to set interest rates, from trade policies to escalating conflicts in the Middle East. They’ve reached for “exceptional uncertainty” and “unpredictability.”
Despite these worries, the policymakers and other economists who gathered this week in Sintra, Portugal, for the European Central Bank’s annual conference had an air of calm.
It helped that as the main day of the conference got underway on Tuesday, data showed that inflation in the euro area averaged 2 percent in June, matching the central bank’s target. For the three previous years, inflation was firmly above the target and the European Central Bank had engaged in an aggressive campaign to bring it down.
“We are at 2 percent,” Christine Lagarde, the E.C.B. president, said. “I’m not saying mission accomplished, but I say target reached.”
Rather than fret more about inflation, the attendees focused on the steps that the region should take to improve its competitiveness with both the United States and China, like making it easier for people to move jobs and gain access capital across borders. Many of the ideas have circulated for years, but this time there was hope that European lawmakers would follow through with action.
Underpinning the discussion was a belief that President Trump’s economic policies have created an opportunity for Europe to bolster its own position in the global economy.
“As Europeans, and particularly in Germany, we are quite good at analyzing issues,” said Joachim Nagel, the president of the Bundesbank, Germany’s central bank. “However, when it comes to implementing solutions, we tend to be quite risk-adverse and thus sluggish in our reaction time.”
But, he added, “I am increasingly getting the impression — also from the discussions here in Sintra — that we are now on the move.“
The confident tone had been established at the outset of the conference on Monday, when the central bank said its monetary policy had held up well in the past few years, despite an unexpected surge in inflation. The bank made only small tweaks to its approach to setting policy and said the 2 percent target would remain. “It’s a strategy for all circumstances,” Ms. Lagarde said.
The European Central Bank’s policymakers have increasingly tried to convince colleagues at the European Commission, the executive branch of the European Union, and other lawmaking institutions to make structural changes. Their goal is to strengthen the region’s internal market, so that Europe’s size could be properly used to compete with the United States and China.
Early on, the conference included an exploration into Europe’s labor market by Benjamin Schoefer at University of California, Berkeley. He argued that though European unemployment was historically low at about 6 percent, there was much less productivity growth than in the United States, where wage growth has been slower. That’s because people stayed in their jobs for a long time, partly because pension systems and severance protections discouraged people from switching.
The presentation raised fierce defenses of the European labor market and questions about whether the U.S. labor market was the best aspirational model. But scrutiny of the strengths and weaknesses in Europe and firm recommendations for how the region can close the gap with more productive countries was repeated throughout the week.
The debate over competitiveness continued with the final paper. It exposed how China had become a rival to Europe by specializing in the sectors where the European Union had an advantage, like high-tech areas of machinery and robots. While the United States was decoupling from China, Europe was getting closer despite the technological competition.
“China is not just catching up to the euro area, it’s actually converging,” said Ana Maria Santacreu, an economist at the Federal Reserve Bank of Saint Louis. “It’s becoming a direct competitor.”
“The path forward is not new,” she added. “Deepening the single market can help Europe use its size to create more output and more innovation.”
For Piero Cipollone, an E.C.B. executive board member, the takeaway was: “Don’t blame others, don’t blame trade for your problems. Put in order your own house.”
These economists can agree on what needs to be done, but they are not wholly responsible for putting them in place nor convincing their citizens or local political parties that they are essential. Between sessions, many participants noted that the recommendations were familiar and that Europe had repeatedly failed to follow through.
Still, the conference ended on a buoyant note about the future, in which the European Union is bigger with strong economic growth. “It’s up to us to do it, we can do it,” Philippe Aghion, a professor at Collège de France and London School of Economics, said in the last session.
“I’m very optimistic,” he added, as the room filled with spontaneous applause.
Eshe Nelson is a Times reporter based in London, covering economics and business news.
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