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Christine Lagarde, President of the European Central Bank, told the World Economic Forum’s International Business Council meeting in Geneva on Wednesday that by eroding the post-World War II economic model, the U.S. withdrawal from the so-called “global order” poses a critically important threat to the factor that has built European economic prosperity for almost seven decades.

Lagarde explained that the post-war economic model that spurred European growth was founded on three pillars. The first was the expansion of global trade. The second was the energy supply and the manufacturing infrastructure built around it. The third was a stable, rules-based international order protected by the U.S., which enabled European firms to concentrate on the efficiency of their investments and supply chains to become more integrated, without the concerns of sovereignty and self-sufficiency.

Lagarde said that the global order that Europe relied on is no longer the case, citing geopolitical tensions and the reliance on critical supplies. The analysis is clear: for decades, European elites assumed that the U.S. would remain a steady and unwavering participant in the global order. They criticized American political values while relying on American consumers, American innovation, and American military might. They never addressed the situation where the U.S. would simply exit the post-war arrangement.

The Trump administration is resetting the global order and forcing Europe to confront its past and present failings. Lagarde urged Europe to innovate in defense and push for further integration. Without dismantling the barriers that slow the growth of young companies and the diffusion of technologies across the economy, Europe risks being left behind in the AI revolution.

“We have a world-class research and knowledge base,” Lagarde said. “The challenge lies in turning that knowledge into commercial success.” There is not enough commercial success because Europe has become too reliant on overregulation, high taxes, and industrial policies that cripple business formation at scale.

The WEF meeting in Geneva was much less of a spectacle than previous years with the lavish gatherings in Davos. The globalist agenda — championed openly during the pandemic years — has since gone conspicuously quiet. Lagarde’s speech, however diplomatically phrased, is the ECB chief admitting that the post-war order built on American power and European free-riding is finished. The question now is whether European governments can actually reform fast enough to build something that works on its own merits.

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