The growth pattern of Europe in recent decades, supported by globalization, cheap energy, and an international system based on rules, "is eroding" and is unlikely to regain its previous configuration, according to the President of the European Central Bank (ECB), Christine Lagarde. In her view, the continent cannot afford to be left out of the new revolution represented by artificial intelligence (AI), which is why she sees it as essential to reduce the fragmentation of the European market so that investment and companies can gain size and compete.
During her speech at a meeting of the World Economic Forum, the French leader recalled that Europe was practically sidelined in the first digital revolution, as the economic benefits linked to the expansion of information and communication technologies were "disproportionately captured by other countries."
"We cannot afford to repeat that experience with AI, the second digital revolution," Lagarde emphasized, insisting that the community bloc must learn from what happened then.
The President of the ECB has pointed out that Europe has significant assets, including "the largest network of trade agreements in the world," a benchmark industrial capacity, and a highly skilled workforce. This is complemented by an integrated market made up of 27 member states and 450 million consumers, "the largest among advanced economies."
For this reason, Lagarde believes that "the challenge is to turn that internal resilience into a more sustainable source of long-term growth," which involves better leveraging the dimension of the European single market. To achieve this, she has argued that it is necessary to facilitate companies' ability to expand throughout the EU and invest more efficiently, in order to boost innovation and raise productivity.
"Scale is particularly important," the ECB head has emphasized, noting that new technologies are changing the engines of productivity and that, too often, the barriers preventing companies from growing also hinder the dissemination of those advances.
In this context, Lagarde has asked: "The question is whether Europe can create the conditions for that investment to spread and grow." In her view, the two major brakes are the fragmentation of the Single Market, where companies continue to compete mainly within their national borders, which reduces the pressure to adopt new technologies, and the fragmentation of capital markets, which can end up pushing young and innovative firms to seek funding and opportunities outside the EU.
As the Frenchwoman has lamented, "these two barriers reinforce each other," as divided markets decrease the profitability of growing in Europe, while also fragmented funding complicates that growth. The result is "a smaller number of companies reaching a global dimension" and a slower adoption of new technologies across the European economy.