Lagarde Warns Europe's AI Dependence Threatens Unprecedented Leverage

European Central Bank President Christine Lagarde warned that Europe's reliance on imported artificial intelligence (AI) has created a vulnerability so severe that a cutoff in access would give outside powers unprecedented leverage over the continent. Speaking in Vienna, she emphasized that becoming a producer of AI technology is no longer optional for Europe, but essential for preserving autonomy and unlocking productivity gains.

Lagarde noted that most of the technology itself is imported from the United States, with European companies pouring money into AI development without having control over its production. This arrangement has become harder to justify as transatlantic trust erodes over tariffs, territorial claims in the Arctic, and military posture.

The continent's computing backbone is already stretched thin, with Europe lacking enough data center capacity to satisfy its own demand. Lagarde predicted that this shortfall will expand more than sixfold within a decade if left unchecked. To address this issue, she outlined two key strategies: building domestic computing capacity and developing AI models that can run on European infrastructure.

Lagarde's warning carries significant economic stakes, as the adoption of AI could lift productivity by up to 4% over ten years. She also highlighted that Europe is already bearing costs due to its reliance on imported technology, including higher financing costs for other issuers in the debt market and heavy investment in U.S. tech stocks.