Lagarde urges EU to fix market gaps for AI push

Christine Lagarde warned that Europe cannot afford to miss the AI wave after losing much of the commercial upside from the first digital revolution to other regions. Speaking to the International Business Council of the World Economic Forum in Geneva, the European Central Bank president said the EU has the potential to compete globally but must complete its single market and integrate capital markets.

Access to capital remains a central constraint for European AI investment. Lagarde said EU businesses rely heavily on bank credit, while capital markets remain too limited at the national level. Legal fragmentation raises costs, slows expansion and makes cross-border operations harder, leaving European companies with more barriers to scale than US rivals and sometimes pushing them toward non-EU funding sources.

Lagarde pointed to Europe’s research base as a strength, noting that the EU accounts for around 6% of the world’s population but as many as 15% of its researchers, and produces almost one-fifth of the world’s most-cited scientific publications. She said euro area firms expect to allocate an average of around 9% of their total investment to AI this year, but warned that Europe must turn scientific strength into broader commercial success.

She urged faster progress on the Savings and Investment Union and EU Inc., two reform efforts intended to deepen capital markets and make it easier for startups and other companies to operate across the bloc.