GoKawiilChristine Lagarde, president of the European Central Bank (ECB), during a rates decision news conference in Frankfurt, Germany, on Thursday, June 11, 2026. Alex Kraus | Bloomberg | Getty Images
Europe is facing an erosion of the conditions that historically drove the continent's growth, its top central banker warned Wednesday, as she called on leaders not to repeat mistakes made during the dotcom boom in the age of AI. Speaking at the World Economic Forum's International Business Council in Geneva, Switzerland, on Wednesday, European Central Bank President Christine Lagarde warned that the continent's post-war growth model is "eroding" and "unlikely to return to the form we once knew." This economic growth, Lagarde told an audience, rested on three pillars: expanding global trade, manufacturing supported by access to cheap energy, and "a stable, rules-based global order, underpinned by a U.S. security umbrella." All three of those pillars are weakening today, Lagarde said. Last year alone, she said, more than 2,500 trade restrictions were implemented globally. Shortly after his return to the White House, President Donald Trump unveiled a raft of targeted tariffs, including a 20% baseline levy on goods imported to the U.S. from the European Union. That tariff rate was later reduced to 15% when the two sides agreed on a trade deal, but uncertainty remains about the stability of that agreement and how imports of certain European goods, such as steel, will be taxed by Washington.
U.S. retreat from the post-war world order
More broadly, Lagarde said in Wednesday's speech, America's pullback from leading Western security was adding further pressures to the European economy. "That [past] environment allowed European supply chains to deepen, and enabled firms to organize investment around efficiency rather than resilience," she said. "Today, that global order is under pressure. Geopolitical tensions are bringing critical dependencies and chokepoints into sharper focus, while Europe faces growing security threats on its doorstep." Trump has long rebuked America's European allies for not spending enough on defense, with his administration issuing threats to withdraw from the military alliance and even bring NATO territory under Washington's control by force. Meanwhile, Russian aircraft have increasingly encroached on European airspace, and the U.S.-Iran war has weighed on the continent's economy and raised new security threats for the region. As the world has become less secure, Lagarde said on Wednesday, capital flows into Europe have been put at risk. "When economic dependencies can be weaponized or when perceptions of deterrence weaken, concerns about resilience enter economic decisions directly. Firms invest less when capital is seen as less safe, weighing on output and consumption," she said. "Taken together, these shifts suggest that Europe's post-war growth model is eroding. And it is unlikely to return to the form we once knew."
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