Lagarde warns Europe faces unprecedented risk of AI cutoff
ECB President Christine Lagarde warns Europe must produce its own AI to avoid being cut off and to secure productivity gains.
European Central Bank President Christine Lagarde has warned that Europe faces an unprecedented risk of being cut off from artificial intelligence, urging the continent to become a producer of the technology rather than relying on imports.
In a speech in Vienna, Lagarde said European firms have been investing in AI but mostly importing it from overseas, especially the United States, leaving them vulnerable if access is withdrawn. She noted that AI will soon be used for tasks such as screening goods at borders, deciding tax audits, dispatching trains, monitoring patients, and clearing bank payments.
"A withdrawal of access, or a change in its terms, would then reach every sector at once," she said, adding that such leverage has never been held by any trade partner over Europe and could be used in negotiations on tariffs or digital taxes.
While the EU and the U.S. remain key allies, Lagarde said trust has been shaken by recent disputes over tariffs, U.S. demands regarding Greenland, and the withdrawal of U.S. troops from Europe.
She argued that the solution lies in building more European computing capacity. According to Lagarde, AI could raise productivity by up to 4% over a decade if adopted quickly, which would be transformative for public finances. However, she warned that Europe already lacks sufficient data centre capacity to meet its own demand, and that gap is projected to grow more than sixfold within a decade.
Lagarde also stressed the need for AI models that are "good enough" for most tasks and run on European infrastructure, so that the threat of being cut off loses its force. She pointed out that Europe is already paying for the technology, so it should embrace it more forcefully.
She further noted that U.S. technology firms' large investment needs are leading them to borrow in Europe, pushing up costs for others by crowding them out in debt markets. Additionally, European pension funds invest heavily in U.S. tech stocks, meaning any market correction would affect European savings.