Europe is increasingly recognizing the need to develop its own artificial intelligence (AI) technology and expand its datacentre infrastructure to avoid becoming overly dependent on the United States or China, according to Christine Lagarde, president of the European Central Bank. In a recent speech in Vienna, Lagarde emphasized that Europe must create AI models—software that powers tools like chatbots—that are capable of handling most tasks and are hosted within local datacentres. She argued that by investing in its own AI capabilities, Europe could reduce the risk of being cut off from critical technologies. Currently, the majority of global AI development is concentrated in the U.S. and China. Last year, the U.S. produced 59 notable AI models, while China developed 35. In contrast, France and the UK each produced just one. Additionally, the U.S. hosts 75% of the world’s AI computing capacity, which is primarily housed in datacentres, while Europe accounts for only 5%. Lagarde warned that this imbalance gives other countries significant leverage over Europe, which could be used in trade negotiations or discussions over digital taxes. The president of the ECB highlighted the dilemma Europe faces: either slow down the adoption of AI due to concerns over data protection and lose economic growth, or embrace AI quickly and risk becoming too dependent on foreign technologies. She said that AI’s role in the economy would be widespread, from screening goods at borders and managing tax audits to controlling train schedules and monitoring patients in hospitals. A disruption in access to AI technology could impact every sector of the European economy almost immediately. Lagarde also noted that while the U.S. and EU remain key allies, recent actions by the Trump administration, such as imposing tariffs and withdrawing U.S. troops from Europe, have strained that relationship. She added that AI could boost Europe’s productivity by up to 4% over a decade, significantly impacting public finances. However, Europe currently lacks sufficient datacentre capacity to meet its needs, and this gap is expected to grow substantially in the next ten years. The growing demand for computing power has also led U.S. tech firms to borrow in Europe, increasing borrowing costs for others and affecting European pension funds that heavily invest in U.S. tech stocks.