European Central Bank President Christine Lagarde said artificial intelligence may undermine the region's social model if countries don't nurture the skills to harness such technology.
Speaking at an
"Even if AI augments more than it automates, we are likely to see an increase in labor-market inequality," she said in Frankfurt. "Demand for higher-skilled workers who can use AI most effectively will rise, while those less able to learn new skills could suffer."
The remarks hint at the headache faced by central bankers in assessing how AI will impact economies already struggling to adapt to multiple long-term transitions, ranging from demographics to climate change.
Lagarde cited a 2025 analysis revealing that a range of 23% to 29% of jobs in European countries are highly exposed to AI-enabled automation.
"Our social model and traditionally high levels of job protection make it hard to see how a transition that leads to massive job reallocations could avoid a major backlash," she said. "All told, I do see a path for Europe to adopt AI without fracturing its social model. But it will require massive complementary investments in skills to prevent a rise in inequality."
Touching on a recurring theme of hers about the need for Europe to establish greater autonomy in an increasingly fragmented world, Lagarde observed that AI too poses questions in that regard.
"We are facing a new geopolitical environment in which we can no longer be sure that we will have frictionless access to new technologies developed overseas," she said. "This new reality strengthens the case for Europe to establish itself at the technological frontier."
As with other counterparts, the ECB is closely monitoring such developments that according to officials could also affect inflation, monetary policy transmission and the neutral level of interest rates. It may also pose new risks to financial stability.
Last year, the Bank for International Settlements said central banks must get a better grip on the issue both to gauge its economic impact and to harness the technology for themselves.
"We must remove all the barriers that will prevent us from being at the forefront of this revolution," Lagarde said in conclusion. "But we must also prepare for the human and climate impacts of this transition, and we need to start now."
