Proud, 23, won gold at last year's world championships in Budapest but he struggled in the heats.
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He improved in the finals making a fantastic start and clocking a time of 22.78s but he was no match for Andriy Govorov.
The world record holder from Ukraine finished superbly and came in with a time of 22.48s, a new championship record.
Russia's Oleg Kostin finished in third.