It is believed that the US and China are leading the AI race, with companies developing the most advanced large language models and rapidly building huge new data centers.
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“Europe largely missed the first digital revolution because the commercial benefits of the spread of information and communication technologies disproportionately went to other countries,” said Ch. Lagarde at the World Economic Forum event in Geneva. “We cannot afford to repeat that experience in AI, the second digital revolution.”
Although European companies invest heavily in AI, obstacles in the eurozone hinder their expansion, she said.
The fragmentation of EU markets means that companies do not compete enough across the eurozone and also face difficulties raising funds, especially compared to US competitors, said the ECB chief.
“As a result, fewer companies grow to a global scale, and new technologies spread more slowly in the economy,” she noted.
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According to her, scale is especially important for Europe to compete in AI and other new technologies, especially now as the post-war European growth model faces major challenges.
She noted that Europe has long benefited from the “three pillars” – a rules-based world order supported by US security guarantees, cheap energy, and expanding global trade.
“All three pillars are weakening as the international environment changes,” said Ch. Lagarde. “These changes show that the post-war European growth model is weakening. And it is unlikely to return to the form we once knew.”
The return of US President Donald Trump to the White House shook US-European relations after he imposed large tariffs on EU imports and questioned the long-term US commitments to the continent’s security.
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