Europe's Growth Model Weakening as Trade Fragmentation and Security Risks Rise

Europe's long-standing growth model is weakening due to trade fragmentation, rising security risks, and shifting global alliances. Christine Lagarde warns that Europe must integrate more effectively and avoid missing the artificial intelligence wave as it did during the dotcom era.

Lagarde states that Europe's historic growth pillars, expanding global trade, cheap energy, and U.S.-backed security, are eroding and unlikely to return. More than 2,500 trade restrictions imposed globally last year and rising geopolitical tensions have increased European firms' focus on resilience over efficiency.

Lagarde highlights the need for Europe to rapidly scale artificial intelligence investment, citing strong manufacturing and trade networks as existing strengths. However, failure to do so could erode competitiveness and repeat past technology investment mistakes, she warns.