The 16-year-old lost 5-0 to Ukraine’s Iryna Romoldanova in the semi-finals of the -46kg weight division in Azerbaijan, informed the BBC in the digital editon.
“At first I was disappointed as I came here for gold,” said Bailey.
“But now I feel proud of what I’ve achieved. I felt I got better with each match.”
Bailey, a 2012 World Junior bronze medalist, had impressed on her way to the semi-finals, beating reigning European champion Ioanna Koutsou of Greece 6-3 in the first round.
She is part of a 14-strong British team in Baku that also includes Olympic champion Jade Jones.
The -57kg fighter from Wales, who came third at both the 2010 and 2012 Euros, competes on Saturday.