On Friday, European Central Bank (ECB) President Christine Lagarde warned that the deglobalization process in the world could be rapidly accelerated by the growing geopolitical tensions.

According to Lagarde, Europe now sits at a critical juncture, facing a series of challenges ranging from deglobalization, to demographics decline, to the need for decarbonization.

In a speech to the European Banking Congress, she said, “There are increasing signs that the global economy is fragmenting into competing blocs.”

Adding to the strain, she pointed out that in the European Union, as early as 2025 there will begin a continuous decline in the working age population.

She said, “As new trade barriers appear, we will need to reassess supply chains and invest in new ones that are safer, more efficient, and closer to home. As our societies age, we will need to deploy new technologies so that we can produce greater output with fewer workers.”

Lagarde went on to bemoan that presently governments have the highest debt levels since World War II, and the recovery funding in Europe will end in 2026. She said, “Banks will have a central role to play, but we cannot expect them to take on so much risk on their balance sheets.”

The ECB has previously warned that the global economy is about to begin a period of “transformative change.” The ECB has noted that as the world gets more fragmented, it will produce a more inflationary environment with far more economic uncertainty.