Christine Lagarde, President of the European Central Bank, has issued a blunt warning that Europe cannot afford to be left behind by artificial intelligence after missing out on the commercial rewards of the first digital wave.
Speaking at a World Economic Forum event, Lagarde argued that the European growth model built on globalisation, cheap energy, and a stable geopolitical order is visibly eroding, and that a return to pre-crisis growth rates looks unlikely. Against that backdrop, she presented AI as a critical lever for long-term prosperity, while making clear that capturing its benefits would require structural reform rather than goodwill alone.
Lagarde pointed out that the commercial gains from the spread of information and communications technology were captured disproportionately by other regions, leaving Europe largely on the margins of the first digital revolution. A repetition of that outcome with AI, she made clear, would be unacceptable.
The ECB President acknowledged that Europe enters this contest with genuine strengths: the world’s largest network of trade agreements, high-quality manufacturing capacity, and a well-qualified workforce. The challenge, she argued, is converting that internal resilience into durable long-term growth, and that demands unlocking the full scale of the European single market so that companies can expand across the EU rather than being confined by national borders.
She identified two interlocking obstacles. The first is the fragmentation of the single market itself, where competition remains too concentrated within national boundaries, weakening the pressure on firms to adopt new technologies. The second is the fragmentation of European capital markets, which can push young, innovative companies to seek financing outside the EU. Both problems reinforce each other: fragmented markets reduce the returns from scaling up in Europe, while fragmented financing makes that scaling harder, resulting in fewer European companies reaching global size and a slower spread of new technologies across the broader economy.
Lagarde also set her remarks against a sharper competitive backdrop. China now competes directly with the eurozone in close to 40 per cent of the sectors where Europe holds a comparative advantage, up from roughly 25 per cent at the start of the century. High-energy industries in the EU are paying more than double the electricity costs faced by American counterparts, and around 50 per cent more than those in China. More than 2,500 trade restriction measures were introduced globally last year alone, adding further pressure to an already strained external environment.
Europe has the assets, Lagarde’s message implied. The architecture, however, needs urgent attention.
