European Central Bank President Christine Lagarde said that the post‑war model of Europe's economic growth, which had delivered decades of prosperity to the region, is breaking down and is unlikely to be revitalized in its previous form. CNBC reports that she referred to the erosion of three fundamental supports of the European economy: global free trade, a developed manufacturing industry, and a stable world order backed by the American "security umbrella."
Despite these structural challenges, the ECB chief pinpointed the eurozone’s strengths — an extensive network of trade agreements, an advanced industrial base, and a sizable single market. Lagarde also stressed that Europe must learn the lessons of the dot‑com era and avoid falling behind in artificial intelligence. She argued that if other countries largely captured the commercial benefits of the first wave of digitalization, the EU cannot afford to cede ground in the second digital revolution.
Christine Lagarde’s warnings come against the backdrop of mounting pressure on European businesses. In the second quarter of 2026, corporate bankruptcies in the European Union rose by 5.7%, with adverse closure trends recorded in five of the seven major sectors of the economy.