Christine Lagarde's biggest challenge is Germany

CHRISTINE Lagarde is still to be confirmed as the European Central Bank’s next president, but work is already piling up on her desk. The euro zone is in danger of becoming the biggest collateral victim of the U.S.-China trade war and Lagarde will need all her political skills to plot an escape route from the threat of recession.

The euro zone is uniquely vulnerable to any blockages in international trade. In 2017, exports of goods and services amounted to 27.9% of its gross domestic product compared to 12.1% for the U.S., according to the ECB. The monetary union had a current account surplus of 323 billion euros ($362 billion), or 2.8% of GDP, in the year to May. While countries such as Germany and Italy might be very different in their commitment to fiscal rectitude - and in how they’re viewed by the bond market - they both share the same export-led model of economic growth.