Lagarde warns AI dependency gives foreign powers leverage over Europe

US hosts 75% of global AI computing capacity, Europe 5%

Christine Lagarde, president of the European Central Bank, told an audience in Vienna on Monday that Europe faces what she called “an awkward choice.” “Either it holds back on adopting, because it cannot protect its data, and forgoes the growth. Or it adopts AI quickly, becomes highly dependent, and risks losing the freedom to organise its economy according to its own values,” she said.

If Europe invests in domestic AI technology and infrastructure, “the threat of being cut off loses its force,” Lagarde said. She argued the continent needs AI models — the technology that powers AI tools such as chatbots — that are “good enough” to carry out most tasks and that run from datacentres located within Europe.

Cutting Europe off from AI or changing the terms of its access would have a widespread and immediate economic impact, she said. “Within a few years it will be screening goods at the border, deciding which tax returns are audited, dispatching trains, watching patients on wards and clearing payments at banks. A withdrawal of access, or a change in its terms, would then reach every sector at once,” Lagarde said.

This represents leverage that “no trade partner has ever held over Europe, and it could be used in any negotiation, on tariffs or on digital taxes, for example,” she said.

Lagarde said that if adopted quickly, AI could lift productivity — a measure of economic performance — by up to 4% over a decade, which she described as “transformative for public finances.”

She urged European governments to expand computing capacity, saying the continent “already has too little datacentre capacity to meet its own demand, and on current trends, that gap is projected to grow more than sixfold within a decade.”

Lagarde also pointed to financial-market exposure: US technology firms’ investment needs are so large that they are doing some of their borrowing in Europe, pushing up costs for everyone else as they crowd out others in the debt market. European pension funds also invest heavily in US tech stocks, meaning any market correction would affect European savings.

Context reported alongside her speech described the current transatlantic relationship as one in which the EU and the US remain key allies but where trust has been shaken by recent episodes, including the imposition of US tariffs, demands to take over Greenland — a largely autonomous territory that is part of the Danish commonwealth — and the withdrawal of US troops from Europe over political disagreements.

Lagarde cited figures showing that the US hosts 75% of the world’s AI computing capacity while Europe holds just 5%. The US produced 59 notable AI models last year, China 35, and France and the United Kingdom each produced one, she said.