# Lagarde says Europe cannot afford to miss AI as its growth model erodes > Source: > Published: 2026-08-19 05:14:23+00:00 European Central Bank (ECB) President Christine Lagarde has said Europe’s post-war growth model is eroding and is unlikely to return in its old form, warning that the bloc cannot afford to sit out the artificial intelligence (AI) boom. Speaking to the World Economic Forum’s International Business Council in Geneva on August 19, Lagarde said the three pillars that carried European prosperity for decades were weakening at once. The first was expanding global trade, which left Europe roughly twice as open as the United States. More than 2,500 trade restrictions were imposed worldwide last year, she said. The second was mid-tech manufacturing supported by cheap energy. China now competes directly with the euro area in close to 40 per cent of the sectors where it holds a comparative advantage, compared with around 25 per cent in the early 2000s. EU electricity prices for energy-intensive industry ran at more than twice US levels last year and around 50 per cent above those in China, a gap the European Commission’s [spring forecast](https://brusselssignal.eu/2026/05/eus-spring-2026-economic-forecast-sees-growth-down-inflation-up/) treated as structural rather than cyclical. The third pillar was a rules-based global order underpinned by a US security umbrella, which let firms invest for efficiency rather than resilience. That order is now under pressure, Lagarde said. Europe largely missed the first digital revolution because the commercial gains from information technology were captured disproportionately elsewhere, she told the meeting. “We cannot afford to repeat that experience with artificial intelligence,” she said in [remarks published by the ECB](https://www.ecb.europa.eu/press/key/date/2026/html/ecb.sp260819~98ddf24b7b.en.html). Two barriers stand in the way, according to Lagarde. Firms still compete largely within national borders, which weakens the pressure to adopt new technology, and fragmented capital markets make expansion harder to finance. European Investment Bank figures showed EU and San Francisco scale-ups raise broadly similar sums in their first five years, though by the tenth year the EU firms have raised roughly 50 per cent less. Some 12 per cent of EU scale-ups have relocated outside the bloc, most often to the United States. Set against that, Lagarde said, the EU holds the world’s largest network of trade agreements and an integrated market of 450 million consumers in 27 member states. It accounts for about 6 per cent of the world’s population and 15 per cent of its researchers.