Christine Lagarde has called for European governments to boost innovation and growth with higher rates of public investment, in her first major speech as president of the European Central Bank.

Speaking to an audience of bankers in Frankfurt, Lagarde said that rising trade barriers triggered by the US/China tariff war should be grasped by European governments as an opportunity to build a stronger internal market.

“More dynamic internal growth offers a way to improve the functioning of the euro area and to accelerate crisis recovery,” she said, adding that “there is a case for investment in a common future that is more productive, more digital and greener”.

Lagarde, who also called on governments to deepen the single market for services, banking and capital markets, said Europe must create a healthier internal market to accelerate private sector investment.

“Public investment in the euro area remains some way below its pre-crisis levels. The share of productive expenditure in total primary expenditure – which in addition to infrastructure includes R&D and education – has also dropped in nearly all euro area economies since the crisis,” she said.

“We face a global environment that is marked by uncertainty. But I believe that, if we approach this challenge in the right way, it can also be a moment of opportunity.”