Lagarde warns Europe must build own AI models and datacentres to avoid US/China cut‑off

Europe must develop its own AI technology and build more datacentres in order to nullify the threat of being cut off by the US or China, according to the president of the European Central Bank.

Christine Lagarde said the continent needed AI models – the technology that powers AI tools such as chatbots – that were “good enough” to carry out most tasks and run from domestic datacentres. If Europe invests in its own AI tech, said Lagarde, “the threat of being cut off loses its force”.

AI is being built elsewhere, the ECB boss said in a speech in Vienna, with the US producing 59 notable models last year and China 35, while France and the UK produced one each. She added that the US hosts 75% of the world’s AI computing capacity – produced by datacentres – and Europe just 5%.

Lagarde said Europe faced “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.”

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,” she said.

Lagarde said this represented 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”.

While the EU and the US remain key allies, the Trump administration has shaken that trust in a range of episodes including the imposition of 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.

If adopted quickly, AI could lift the level of productivity – a measure of economic performance – by up to 4% over a decade, which would be transformative for public finances, Lagarde said.

Urging Europe to build more computing capacity, she said: “Europe 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.”

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, so any market correction would affect European savings, she added.

Reuters contributed to this report.