ECB’s Lagarde: Europe Risks Losing Competitiveness Without Faster AI Adoption

24 November 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Monday warned that Europe could face weaker productivity and declining competitiveness unless it accelerates the diffusion of artificial intelligence across the economy.

Speaking at the BratislavAI Forum in the Slovakian capital, Lagarde said that AI’s potential to raise productivity may arrive “sooner than our institutions and regulations are prepared for,” and she urged governments to remove barriers that slow the spread of new technologies.

She argued that earlier technology waves showed disruption before benefits, but that AI may break this pattern. Recursive learning systems, she said, can speed up innovation by using their own output to improve performance, lowering the cost of generating new ideas. “AI achieved over 200 million protein structure predictions in about one year,” she noted, contrasting this with decades of traditional scientific work.

Lagarde also said that diffusion could be faster than in past technology cycles, because AI “runs on existing internet devices and communicates with users through human language,” even if compute capacity remains a bottleneck. She pointed to rapid advances in model development, with compute power doubling every six months.

For Europe, she said, the stakes are high. After falling behind the United States and China in earlier digital waves, the continent “cannot afford to make the same mistake again,” she said. European firms are already adopting generative AI at a rate similar to that in the United States, she said, but Europe must ensure that data spaces and infrastructure reduce rather than deepen strategic dependencies.

Lagarde said initiatives such as Manufacturing-X, Catena-X and the European Health Data Space show the potential for collaboration across sectors. But high energy costs, fragmented regulation and underdeveloped capital markets could slow adoption, with consequences extending “beyond losing the race in AI models,” she warned.

She argued that Europe should maintain minimum compute capacity, enforce interoperability in the application layer and diversify critical parts of the AI supply chain. If not, European industries could face further losses in competitiveness, she said.

Lagarde closed by stressing the urgency of the moment, citing AI researcher Demis Hassabis’ view that the coming technological shift would be “ten times bigger than the Industrial Revolution.”