Europe facing unprecedented risk of being cut off from AI, Lagarde warns

European Central Bank President Christine Lagarde warns that Europe must develop its own artificial intelligence technology and data centers to avoid being cut off by the US or China. Lagarde argues that AI models are crucial to run AI tools, and that Europe needs "good enough" AI models to perform most tasks from domestic data centers.

If Europe invests in its own AI technology, the threat of being cut off diminishes. The US leads in AI development, with 59 notable models in 2020 and 35 in China, while France and the UK each produced one. The US hosts 75% of global AI computing capacity, compared to Europe's 5%. Lagarde presents a dilemma for Europe: either hold back on adopting AI to protect data and forgo growth, or adopt AI quickly and become highly dependent, risking the freedom to organize its economy according to its values.

Lagarde states that cutting Europe off from AI or changing access terms could have immediate and widespread economic impacts, affecting sectors such as trade, taxes, transportation, healthcare, and banking. She says this leverage is unprecedented in trade negotiations. Lagarde predicts that AI could boost EU productivity by up to 4% over a decade, which would significantly impact public finances.

She urges Europe to increase datacenter capacity, as the current shortfall is projected to grow over six times within a decade. US tech firms are borrowing in Europe, raising costs for everyone due to increased demand in the debt market. European pension funds also heavily invest in US tech stocks, so any market correction would affect European savings.