Europe's AI Dependence Sparks Lagarde Warning: 'Vulnerability' to US Tech

European Central Bank President Christine Lagarde has warned that Europe's growing reliance on imported artificial intelligence technology poses significant risks to its economic autonomy and financial stability. Speaking in Vienna, Lagarde said that if Europe continues to rely mainly on AI systems from the US, it may be cut off from critical technology in key sectors such as border screening, tax audits, and bank payments.

Lagarde emphasized that any withdrawal of access or change in terms of access would have far-reaching consequences for every sector. She pointed out that Europe's dependence on imported AI systems gives suppliers leverage in future negotiations, including issues like tariffs and digital taxes. This vulnerability is particularly concerning given the current tensions between the EU and US.

The European Central Bank President also highlighted the potential benefits of AI adoption in Europe, estimating that faster AI adoption could increase productivity levels by up to 4% over a decade. However, she noted that Europe already lacks sufficient data centre capacity to meet its own demand, with a projected gap growing more than sixfold within a decade.

Lagarde urged the region to build more European computing capacity and develop AI models suitable for most tasks on European infrastructure. She also pointed out that heavy investments by European pension funds in US tech stocks expose European savers to market corrections, making Europe's AI dependence a financial stability concern.