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European Central Bank (ECB) President Christine Lagarde warned Friday that Europe is increasingly “vulnerable” to global shocks such as U.S. tariffs and is falling behind in key areas like artificial intelligence, calling for urgent reforms to strengthen the region’s resilience.
Speaking at a banking conference in Frankfurt, Lagarde said the European Union’s long-standing export-based growth model—built on industries such as cars, machinery, and pharmaceuticals—is no longer sufficient in a world marked by geopolitical instability and rising protectionism.
“Europe has become more vulnerable,” she said, citing the continent’s dependency on foreign suppliers for security and critical raw materials. “Global shocks have intensified, with rising U.S. tariffs, Russia's invasion of Ukraine, and stiffening competition from China.”
She emphasized that Europe’s domestic market “has stood still,” especially in sectors expected to drive future growth, including digital infrastructure and artificial intelligence.
Lagarde urged European leaders to accelerate regional integration and implement bold reforms to unlock growth potential, including greater financial sector unity, streamlined EU decision-making, and lowered trade barriers.
She warned that failure to act decisively would be “irresponsible.”
“More years of lost growth, lost productivity, would not just be disappointing for future generations—it would be irresponsible on our part,” Lagarde said.
The ECB chief also stressed that Europe’s inability to match the digital and AI advancements of the US and China threatens its global competitiveness.
She called for stronger internal demand to complement exports and for strategic autonomy in critical sectors.
“If we take radical steps now, we can ensure that Europe is strong and is not the victim of decisions being made outside this region,” Lagarde concluded.
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