Europe’s opportunity to harness AI for growth and sovereignty

In a speech at “Hofburg im Dialog – Economy, Europe, Resilience” in Vienna, ECB President Christine Lagarde discussed the significance of artificial intelligence (AI) for Europe’s future. She traced the history of capital flows and technological innovation, comparing the current AI surge to the “founders’ era” of the late 19th century.

Lagarde emphasized that Europe is investing in AI, with firms planning to allocate around 10% of total investment to AI by 2026, and over 50% of workers in the euro area now using AI tools. However, the pace of adoption lags behind the United States, which is investing twice as fast and has workers spending more time using AI.

She highlighted that AI could increase productivity by up to 4% over ten years, significantly impacting public finances and economic growth. Yet, Europe faces risks of dependency and losing strategic advantages if it relies solely on imports and foreign companies for AI technology.

Lagarde outlined three key reasons why AI is unique: data ownership concerns, access vulnerabilities, and the importance of technological frontier leadership. She argued that Europe must build its own capacity, develop open models, and secure access to critical components of the AI supply chain.

To achieve this, Europe needs more and different types of capital, including equity investments, to fund data centers, models, and supply chain links. She stressed that capital markets are essential to finance transformative projects like AI and that Europe’s savings should be channeled into domestic investments.

Lagarde concluded by urging policymakers to act on proposals to strengthen Europe’s capital markets, emphasizing that AI is the project to drive Europe’s future growth and sovereignty.