US Treasuries Have Become Unappetizing for Foreign Central Banks and Governments

US Treasuries Have Become Unappetizing for Foreign Central Banks and Governments. The head of the continent’s central bank, Christine Lagarde, said Europeans have two options: shun the technology and lose out on growth; or embrace it and become dependent on tools developed by the US and China.

What happened

It comes as major central banks around the world are hiking rates as higher energy prices caused by the Iran war are helping to push up inflation. When a central bank raises rates, known as tightening monetary policy, the country's currency usually becomes stronger as it makes the it more attractive to traders. Solutions to this, according to the report, include building more datacentres – the central nervous systems of AI – and also to ensure the continent is resilient enough to withstand “AI crises” like a powerful model slipping out of control.

1%ByPeter HoskinsBusiness reporterPublished18 September 2026Japan's central bank has raised its main interest rate to a fresh 31-year high as it continues to move away from decades of ultra-low borrowing costs and as the country faces increasing economic pressures. On Wednesday, the US Federal Reserve raised its benchmark interest rate for the first time in over three years, while the European Central Bank also increased its borrowing costs earlier this month. Skip to main contentSkip to navigation Christine Lagarde asserted that Europe must develop its own AI technology and build more datacentres in order to nullify the threat of being cut off by the US or China.

Photograph: Bryan Meade/EPAAnalysisWhy Europe has been absent from the great AI safety debateDan Milmo and Aisha DownThough Europe has measures that address how consumers might encounter AI, technology will impact them if the worst scenarios bearEurope’s dilemma over AI was rendered in stark terms this week.

The wider picture

The great debate over AI safety that has erupted in recent days threatens to make the choice moot. If the worst scenarios come to bear – and experts have differing views on this – then the technology will impact the continent regardless. While it is a powerhouse in regulation, much to the White House’s chagrin, its lack of an Anthropic or Nvidia-sized frontrunner in the AI race has diminished its voice in the safety debate. Ursula von der Leyen, a powerful political figure on the continent as president of the European Commission, the EU’s executive arm, addressed the issue this week by saying she will “invite the main frontier labs for a discussion on how we can support ongoing industry efforts to pace the frontier”.

Her remarks gained nowhere as much traction as Donald Trump and China’s dismissal of a slowdown. Without the support of Washington or Beijing, any sort of pacing is impossible – with our without Europe’s input. Lagarde’s speech on Monday underlined the continent’s relative weakness. If Europe invests in its own AI tech, said Lagarde, “the threat of being cut off loses its force. ” Self-sufficiency would also give Europe a chance to develop its own answer to the AI safety crisis.

What has been reported

Margrethe Vestager, who clashed with the US tech industry as the EU’s former competition commissioner, co-authored a report this week – A Transformative AI Strategy for Europe – that echoed Lagarde’s warning. AI threatens to accelerate a development already affecting Europe, where citizens “are already bearing the economic and social consequences of decisions taken elsewhere”, she says. Vestager said that Europe does have a voice in the safety debate through its EU AI Act, the rare piece of AI legislation that sets out requirements for developers of “high-risk” AI systems to report safety incidents and address risks like a cutting-edge model evading control.

But she adds: “Europe must … build its own AI to strengthen the ecosystem, retain talent, and inspire innovation. ”Vestager acknowledges that if there is an existential threat, it requires a global solution; one that does not hand power to the US and China. And that requires a different kind of supranational body. “As for existential threats to humanity, we must first assess the actual level of threat – then act with urgency. The UN general assembly is an opportunity to address this.

It is vital to move beyond the US-China rivalry narrative.

What happens next

There must be space for humanity between the egos of leaders like President Xi and President Trump. ”Frederike Kaltheuner, an adviser to the AI Now Institute, a research body, says that Europe is dependent on US technology in ways that will be hard to undo, from search engines to chips to datacentres. But the narrative that Europe is grievously behind in the race depends on a particular view of artificial intelligence aggressively promoted by American tech bosses. skip past newsletter promotionafter newsletter promotionBecause of their doomsday warnings, “we are exclusively talking about AI in a very narrow, specific kind of way – namely, the idea that there is such a thing as the AI frontier, which is getting better and better, and that access to the frontier is the most important thing that Europe needs for its security and economy. ”The reality of the market points at something else, she says: many companies are not adopting so-called “frontier models” – like ChatGPT and Anthropic – because of high costs and fears over what might happen to their data.

If this trend continues, Europe may not be so terribly positioned: the EU AI Act has a number of pragmatic measures which address how consumers might encounter AI on a day-to-day basis, legislating over matters such as labelling AI content, and the use of AI in medicine and hiring. “Europe has a competitiveness problem, that’s true,” says Itxaso Dominguez de Olazabal, a policy adviser at EDRI, a European digital rights organisation. But US tech boosters are “blaming it on laws and protections, and have promised that deregulation will make European companies more competitive … in a race to the bottom to see if we can catch big tech”.

Nonetheless, the EU AI act is not viewed as model legislation for other countries or a vehicle for a global slowdown. Georgina Kon, a partner at law firm Linklaters, says the act is unlikely to be adopted as a global benchmark for several reasons, including criticisms of the heavy compliance burden, which has led to delays in parts of the act becoming active, and a narrow territorial focus on Europe.

The report has been compiled by The Daily Waves using information reported across theguardian.com, bbc.co.uk. Details are presented according to the information available at the time of publication and may change as authorities, organisers or other relevant parties provide updates.