ECB warns growth model is “corroded” and asks for bet on AI

A Europe was largely outside the first digital revolution, since the commercial benefits of the dissemination of information and communication technologies were disproportionately applied by other countries, Christine Lagarde recalled during the intervention at a World Economic Forum event in Geneva.

“We cannot afford to repeat this experience with the AI, the second digital revolution”, warned the responsible.

In this regard, the President of the ECB considers that Europe has important strengths, including the world’s largest network of trade agreements, production capacity and a highly qualified workforce, in addition to an integrated market of 27 Member States and 450 million consumers, the largest among advanced economies.

In this way, for Lagarde, “the challenge is to turn this internal resilience into a longer-term source of growth”, which requires a better use of the size of the European internal market, facilitating business growth in the European Union (EU) and more efficient investment to boost innovation and production.

“The scale is particularly important,” said the ECB’s manager, as new technologies are transforming the sources of productivity growth and, too often, barriers preventing companies from growing also hinder the spread of these advances.

“ The question is whether Europe can create the necessary conditions for this investment to expand and grow,” Lagarde said.

For the President of the ECB, the main obstacles are the fragmentation of the Single Market, which keeps companies overly focused on competition within national borders and reduces the pressure for the adoption of new technologies as well as the fragmentation of capital markets, which can lead young and innovative companies to move outside the EU.

“ These two barriers reinforce each other,” she lamented, as fragmented markets reduce the profitability of growth in Europe, while fragmented funding hinders this expansion, resulting in a “lesser number of companies reaching a global dimension” and a slower spread of new technologies in the economy.