European Central Bank President Christine Lagarde at Le Monde’s headquarters in Paris on October 28, 2024. LéA CRESPI FOR LE MONDEOne by one, European leaders are sounding the alarm about the poor structural economic situation on the Old Continent, and even more so in France. In an interview with Le Monde on Monday, October 28, Christine Lagarde, president of the European Central Bank (ECB) since November 2019, spoke of why Europe is “falling behind.” She criticized European red tape, the tendency to rely on systematic regulation and the weakness of the financing system. She also confirmed that interest rates will continue to fall.
Mario Draghi, a former president of the ECB, published an alarmist report in September on Europe’s economic decline. Do you share this diagnosis?
It is a reality that Europe is falling behind, and France too. The Draghi report highlights this falling behind in terms of productivity, which is essentially due to the tech sector. Tech players in Europe and the United States see it as having taken root with the new technologies revolution, which began in the mid-1990s.
The question now is whether this springboard, from which the United States has benefited since the mid-1990s, will continue with artificial intelligence, the building up of data centers and their utilization. This is a fundamental issue, and it’s important for Europeans to mobilize and make efforts to keep in Europe the companies that start here and then develop elsewhere. We must try to keep them here.
And what’s the solution? Do you think the drop-off will continue?
We need to look at the causes of this falling behind. The energy factor is fundamental, particularly for data centers. The labor factor also comes into play, with mobility being much higher in the US. The issue of regulation is also essential. To oversimplify things, the US is developing artificial intelligence very rapidly and is already starting to see a number of major champions. Meanwhile, Europe not only has no major champions, but it is a pioneer in the regulation of artificial intelligence. This is making players in this sector to tell themselves: “Let’s do this somewhere else, it’ll be simpler and we’ll have fewer barriers and constraints.”
What about the public subsidies the US gives to its companies?
The fourth factor in Europe’s falling behind is the US’s “light” industrial policy, with few constraints. It’s not “light” financially, because the IRA [the Inflation Reduction Act, enacted in August 2022] is very generous, but there are relatively few criteria to qualify for aid to set up in American territory. When I interview manufacturers, they are virtually unanimous in saying that in Europe, the process is cumbersome and complicated. The multiple European administrative layers are topped with the regulations of the member states.
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