Global trade, cheap energy and international stability: the three pillars that have supported European growth for decades are weakening. Christine Lagarde warns that that model is unlikely to return and indicates the new path for Europe: single market, investments, artificial intelligence and capital.
The economic model that supported Europe’s growth in the post-war period is crumbling and is unlikely to return to the form we have known. This is the message launched by the President of the European Central Bank Christine Lagarde in her speech at the World Economic Forum in Geneva.
It is not just an alarm about the current phase of the economy. Lagarde describes a much deeper change: the conditions that have favored European industry, exports and growth for decades are disappearing.
Three pillars are weakening at the same time: the expansion of world trade, relatively cheap energy and a stable international order. According to the president of the ECB, Europe must therefore find new engines of development.
Europe’s old growth model is in crisis
The first change concerns world trade.
Europe has built an important part of its prosperity on openness to international trade, becoming an economy about twice as open to trade as the United States, but that phase can no longer be taken for granted.
Last year alone, over 2,500 new trade restrictions were introduced around the world. Tariffs, geopolitical tensions and protectionist policies therefore make it more difficult to entrust exports with the same role played in the past.
The second pillar in difficulty is that of European industry, traditionally strong in manufacturing and also supported for years by the availability of relatively cheap energy.
And this is where the numbers cited by Lagarde become particularly significant.
Energy, producing in Europe costs much more than in the USA
In 2025, electricity prices paid by Europe’s energy-intensive industries averaged more than double that of the United States and about 50% higher than that of China.
The advantage of low-cost energy, also fueled in the past by Russian gas, has now disappeared.
The problem is even more current, while the price of oil remains above 91 dollars a barrel and Europe continues to deal with the effects of the energy shock.
Higher costs mean, in fact, lower competitiveness for many European companies, even as international competition increases.
China increasingly competes with European industry
And China is precisely the other big change highlighted by Lagarde.
Beijing is no longer just a large producer of low-cost goods. Over the years it has progressively strengthened its presence in sectors with greater added value.
Today, China competes directly with the Eurozone in almost 40% of the sectors in which Europe has a competitive advantage. At the beginning of the 2000s the share was around 25%.
For European industry it means facing more expensive energy and stronger competitors at the same time.
Added to all this is the third pillar indicated by the ECB president: geopolitical stability. Wars, trade tensions and risks on supply chains today force companies to evaluate not only the efficiency of investments, but also their security.
However, Europe continues to grow
Lagarde’s message, however, is not that of a Europe inevitably destined to decline.
The Eurozone economy grew by 1.5% in 2025, thanks entirely to domestic demand and in the second quarter of 2026 GDP increased by 0.4% compared to the previous three months, despite the energy shock.
It is precisely from this capacity for resistance that, according to the president of the ECB, the new European model must start.
The Union has a market of 450 million consumers, an important industrial and scientific base and skills that remain among the best in the world.
The challenge is to transform these dimensions into a truly common economic force.
Artificial intelligence and capital, the new European challenge
One of the decisive games will be that of artificial intelligence.
Eurozone companies plan to allocate on average around 9% of their investments to AI, but the European problem emerges when innovative companies need to grow.
In the first years, European startups manage to raise capital to a similar extent to San Francisco companies. After ten years, however, European companies have raised around 50% less capital.
Some choose to leave: around 12% of European scale-ups have moved their headquarters outside the Union, mostly to the United States.
For Lagarde the problem is, therefore, double: the European market remains too fragmented and the same goes for the financial markets.
New growth must start from Europe
The solution indicated by the ECB president involves a more integrated single market, the possibility for companies to grow more easily beyond national borders and a European capital market capable of financing innovation and investments.
The objective is to transform domestic demand from a simple element of resistance to crises to a new stable engine of European growth.
The message coming from Geneva is therefore broader than the ECB’s next rate decisions.
Europe can no longer wait for the conditions that have supported its economy in recent decades to return. Cheap energy, ever-expanding global trade and geopolitical stability are no longer certainties.
The game now is to build a model capable of growing even without them.
