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At a time when the main indicators of the global economy, from growth to trade volume, appear more resilient than expected, a set of pressures are accumulating in the background that may test the ability of economies to continue this performance over the next year, with the rise in the cost of borrowing, increasing government debt burdens, and continuing pressures of living, in addition to the challenges related to artificial intelligence and escalating customs duties.

The World Economic Forum monitors five main files that are likely to remain at the forefront of the economic scene during the coming period, based on the results of its latest report, “Expectations of Leading Economists,” and what was reported by the International Monetary Fund in the “World Economic Outlook” report issued last October.

This analysis comes at a time when the International Monetary Fund has warned that the global economy, despite its demonstrated flexibility, may soon face a test of the ability of this flexibility to continue, in light of trade disruptions through the Strait of Hormuz, rising government bond yields, and increasing pressures on public finances in a number of major economies.

Higher borrowing costs

The high cost of borrowing is emerging as one of the main challenges facing governments, with government bond yields increasing in a number of major economies, indicating the high return that investors demand in exchange for financing governments and bearing the risks of their debts.

The yield on standard US government bonds had exceeded 5 percent, recording its highest levels since 2007, while Japanese bond yields reached their highest level since 1996, and their French counterpart reached levels not recorded since 2002, while the German yield approached 2009 levels.

The International Monetary Fund links the rise in returns to the return of inflationary pressures and concerns about the sustainability of public finances, noting that the repercussions of these developments are not limited to advanced economies, but rather extend to lower-income countries, which in turn face greater difficulty in obtaining financing.

Higher yields increase the cost of issuing new debt and refinancing existing obligations, which puts more pressure on government budgets and limits the resources available for spending on services and investments.

Accumulation of government debt

The problem is not related to the cost of borrowing alone, but rather to the amount of debt that governments have already accumulated, in light of the expansion of spending on multiple priorities, from defense and infrastructure to health care, pensions, and social welfare allocations.

Countries such as Poland and Germany have increased their defense spending in response to a more turbulent international environment, while Japan and China face increasing costs associated with aging populations. In Britain, health care expenditures and social welfare benefits have risen, while public debt has doubled since the global financial crisis to reach about 70 percent of GDP, before reaching 95 percent during the “Covid-19” pandemic, a level to which it is still close.

The International Monetary Fund warns that stabilizing public debt levels will likely not be achieved unless governments modify the policies they currently intend to implement, calling for any financial support necessary to avoid social unrest to be temporary and carefully targeted.

Expectations of senior economists at the forum indicate that highly indebted governments may not have the same ability to support their economies when a new global shock occurs, which increases the importance of achieving real productivity gains in the private sector, rather than increasing reliance on government spending.

The high cost of living puts pressure on families

The high cost of living represents a third challenge, which is not limited to the currently recorded inflation rates, but extends to the accumulated increases in the prices of goods and services over the past years, which continue to burden families, especially low-income ones.

The International Monetary Fund indicates that the sudden rises in the prices of basic needs in several regions of the world were more severe for the lowest-income families, while the Iranian war-related increases in the prices of food and the fuel used to transport it added more pressure.

The repercussions do not stop at the decline in purchasing power, as cost-of-living crises can lead to social unrest and push governments to adopt measures that are not necessarily consistent with traditional economic recommendations.

In this context, the forum’s report pointed out the impact of rising prices on real wages, that is, the value of income after accounting for inflation, noting that they have declined significantly during the current year in a number of advanced economies.

In the United States, real wages for workers in non-managerial jobs have remained almost stable; The average real hourly wage rose from $9.81 in August 2020 to $9.94 in August 2026, an increase of no more than 13 cents over 6 years.

Artificial intelligence...opportunities and risks

Artificial intelligence constitutes a fourth challenge, with increasing bets on its ability to raise productivity and stimulate economic growth, while there are questions about the amount of jobs that will be created by the huge investments in the infrastructure necessary to operate it, and the social and economic repercussions of expanding its use.

The forum's survey of senior economists showed expectations of an increase in the contribution of artificial intelligence to productivity during the coming period, but they expressed less optimism about the number of direct jobs that infrastructure projects, such as data centers, will create. They also expected an escalation in societal objections to the establishment of these facilities.

There are fears of over-reliance on artificial intelligence as a major driver of markets and growth, especially with a large portion of investments concentrated in technology-related sectors, at a time when the effects of these transformations on jobs are still unresolved.

The report also points out that the artificial intelligence boom itself contributes to increasing the cost of borrowing, as companies that issue bonds to finance their huge investments in electronic chips and data centers compete with governments to attract investor money, which may make financing governments more expensive.

Customs duties are an ongoing reality

The fifth challenge is that customs duties have become a continuous feature of trade policies, after the wave of tariffs announced by US President Donald Trump raised widespread concerns about their impact on global trade and supply chains.

Although the impact of the American measures was not as severe as some economists expected, companies redirected a large portion of their trade to alternative destinations, while the stated goals of these duties, most notably enhancing local production and reducing dependence on foreign goods, are still far from being fully achieved.

The International Monetary Fund indicates that the rollback of some of the high US tariffs announced last year, along with companies redirecting their trade routes, has limited some of the repercussions, but customs duties still constitute a burden on global trade. The Fund reduced its expectations for growth in global trade volume to 4.6 percent this year, compared to about 5 percent last year.

On the other hand, senior economists whose opinions were polled at the forum expect that customs duties in Europe will increase over the next year, coinciding with the expansion of the European Union’s trade deficit with China, approaching one billion euros per day.

They also expected tariffs to rise in the United States, in light of continuing trade tensions, including renewed disputes with Canada. Although the Trump administration views tariffs as a tool to reduce the trade deficit, the latest US data showed the widening of this deficit, reflecting the continued difficulty of achieving this goal.

These five files reveal overlapping pressures facing the global economy. The high cost of borrowing and the accumulation of debt limit the ability of governments to intervene, while the cost of living pressures families, the artificial intelligence boom raises questions about the distribution of its gains and costs, while tariffs continue to reshape international trade paths.

Christine Lagarde’s announcement of her departure from the presidency of the European Central Bank about 9 months before the end of her term was not merely an advance of the date for handing over the position; Setting February 7, 2027 as the departure date, instead of October of the same year, places the decision at the heart of a sensitive European political entitlement, before the French presidential elections scheduled for the spring of next year, and at a time when attempts by right-wing populist forces to redraw the relationship between national governments and European Union institutions are escalating.

While Lagarde said that her decision was linked to her desire to restore freedom of expression and engage in issues beyond monetary policy, the timing of her departure opened the door to a broader political reading: Are European leaders seeking to resolve the succession to the presidency of the Central Bank before the balance of power changes in France, which might allow forces more skeptical of European integration to influence the selection of one of the most important economic positions on the continent?

These questions gain their importance because the confrontation between the populist right and European institutions is no longer limited to calling for exit from the Union or rejecting joint action, but rather includes attempts to change the nature of these institutions and their powers from within, and redistribute influence between them and national governments.

In an interview with the French newspaper Les Echos on July 2, 2026, Lagarde hinted at her desire to play a role in the French presidential elections, saying: “A European voice should be heard in the French presidential debate.” She explained that she is not thinking about running in the elections as a candidate, but she prefers to contribute to the electoral debate and influence its course, noting that this may require her to leave the presidency of the European Central Bank before the end of her term.

From rejecting the union to trying to reshape it

Over the years, the rise of right-wing populist movements in Europe has been linked to positions rejecting European integration, and to calls for countries to regain powers that these parties say were transferred to Brussels. But the scene gradually developed; All of these forces no longer deal with the dismantling of the Union or exit from it as a main goal. Rather, some of them are now proposing a vision of a “Europe of Nations,” in which national governments will be the primary decision-makers, while reducing the powers of supranational institutions.

This means that the confrontation moved from objecting to the Union from outside it to trying to influence its work rules and institutions from within it. This approach appears in the positions of parties such as the French National Rally and the Alternative for Germany, which call for reformulating the relationship between member states and the Union’s institutions, even if their positions differ in the details of economic and financial policy and the limits of the required reform.

While this approach focuses on national sovereignty and limiting the powers of joint institutions, the European Union remains based on the principle of sharing some powers between member states, and on their being subject to common rules and decisions. Hence the confrontation arises over the role of the European Commission and the European Parliament, as well as institutions that enjoy legal independence from governments, most notably the European Central Bank.

This shift does not mean that the European right adopts a unified position on the future of the Union. There are differences between its parties regarding the extent of their desire to change institutions or reduce their powers, and their positions on monetary and financial policy also differ. But the common denominator among a number of them is the objection to the transfer of more powers to European institutions that are not directly subject to national electoral accountability.

The central bank is at the heart of the confrontation

The European Central Bank stands out as one of the most sensitive institutions in this conflict, given its independence from governments and the direct impact of its decisions on the economies of the eurozone countries. The institution is responsible for price stability, its monetary policy is determined collectively through the Board of Governors, and its decisions are not supposed to be subject to the financing needs or electoral priorities of any government.

But this independence puts it in the face of some demands of populist forces, especially when it comes to the rise in public debt and borrowing costs. In France, leaders in the National Rally put forward ideas calling on the European Central Bank to resume quantitative easing, including bond purchases and liquidity injections, to help deal with the debt burden.

These demands clash with the nature of the mandate granted to the bank, which focuses on price stability, and European rules that prohibit financing governments directly. The resumption of bond purchases for the purposes of alleviating debt burdens also raises questions about the boundaries separating monetary and fiscal policies, and the extent of the bank’s ability to maintain the independence of its decisions if the financial needs of governments become a factor pressuring its directions.

The French President, regardless of his political orientation, does not have the authority to direct the bank’s decisions or impose a change in its objectives. Monetary policy is decided by the Governing Council, which includes members of the Executive Board and governors of the national central banks in the euro area. But the arrival of a government more skeptical of European integration may change the nature of the political debate about the role of the bank, and increase pressure on the institution in the files of debt, spending, and monetary easing.

Why does the timing of Lagarde's departure matter?

Here the battle for the independence of institutions intersects with the Lagarde decision. Her departure in February allows European leaders to choose her successor before the French elections in April, at a time when President Emmanuel Macron cannot run for a third term, and when opinion polls raise the possibility of the National Rally rising to an advanced position in the presidential race.

If Lagarde had waited until the end of her term in October, the selection of the bank's new president would have coincided with a different French political phase, and perhaps with new leadership in the Elysee Palace. As for advancing the departure date, it gives Macron and his European partners an opportunity to participate in the succession process before the vote, although the final decision does not rest with Paris alone.

According to European Union rules, the European Council appoints the head of the Central Bank after a nomination process and consultations that include the relevant institutions, including the European Parliament and the Bank’s Board of Governors. Therefore, Macron cannot choose the next president alone, but he remains an influential party in the European negotiations that precede the appointment.

Media reports had linked the timing to the desire to ensure the selection of a pro-European integration figure before the French elections. However, Lagarde did not announce that this consideration was the reason for her departure, but rather confirmed that her decision was related to her desire to express her positions on issues that do not fall within the jurisdiction of the Central Bank.

She said, during a press conference on October 29, that she wants freedom of expression and engagement in matters that go beyond monetary policy, explaining that bank officials are obligated to be neutral, and that this commitment is “the price we pay for independence.” She added that she no longer feels comfortable remaining silent about broader developments in Europe and the world, and that she has something she wants to say based on her experience in international economic and financial institutions.

The independence of institutions faces a political test

The importance of succession is not limited to the identity of the next president, but extends to the message that the appointment will send regarding the European Union’s ability to protect the independence of its institutions in light of the changing balance of political power. The Central Bank is not the only institution facing objections from parties calling for reducing Brussels’ powers. This confrontation includes the European Commission, the European Parliament, and common policies on immigration, budget, and economic sovereignty.

On the other hand, the rise of the right does not mean that these institutions will automatically lose their independence. Appointments are subject to multilateral European procedures, and monetary policy decisions cannot be imposed by any national leader alone. The positions of the right-wing parties are not identical, and they cannot be treated as a single bloc with a unified program towards the Central Bank or the European Union.

But the expanding influence of these forces in parliaments and national governments makes them more able to influence European negotiations and common policy priorities, even without changing treaties or abolishing existing institutions. This makes the upcoming succession a political and institutional test that goes beyond choosing a new name to head the bank.

As for Lagarde, she says that she wants to leave her position because she believes that the bank is able to continue its work smoothly, and she confirmed that the process of identifying her successor has already begun. There were reports about the possibility of her moving to the presidency of the World Economic Forum in Geneva, but this possibility had not turned into an announced appointment or a final decision.

In conclusion, Lagarde's early departure does not prove that she came exclusively to prevent the right from influencing the choice of her successor, but it comes at a time that makes this dimension strongly present in the reading of the decision. The broader issue is whether European institutions are able to maintain their independence and operating rules at a stage in which political forces are advancing and demanding the return of powers to national capitals. From this perspective, the battle to succeed Lagarde appears to be one of the testing stations for the relationship between the future of European integration and the rise of the populist right.