Artificial intelligence could lift European productivity by about 1% over 5 years, however risks broadening inequality, straining power networks and increasing reliance on foreign technology unless governments deepen economic incorporation, an International Monetary Fund paper said.
The background note, ready for an informal meeting of European Union finance ministers in Dublin on September 18-19, stated the benefits and costs of AI were likely to be allotted unevenly across countries, regions and employees.
It said completing the EU single market would support spread AI adoption and its gains more evenly across the 27-nation bloc.
The paper echoes concerns raised by of former European Central Bank President Mario Draghi and the European Commission that Europe’s fragmented capital, labour and energy markets are holding back investment and innovation.
The IMF expected that around 60% of employees in advanced European economies are employed in occupations highly exposed to AI. While some could become more productive by AI tools, others faced displacement as routine tasks become automated, it said, in mainly in jobs where AI is much more likely to replace labour than complement it.
The paper said Europe’s data centres already consume around 3% of the continent’s electricity and that demand for rise significantly as AI use expands. Major technology hubs such as Frankfurt, London, Amsterdam, Paris and Dublin are many of the areas most exposed, with data-centre clusters already putting pressure on local power networks.
To deal with that, the EU should invest in cross-border grid infrastructure and deepen incorporation of the European energy market, the IMF said.
The paper also warned that Europe risks growing another strategic dependency due to the USA and China dominate the development of AI models. It said Europe would require significant investment in its own AI industry to keep away from becoming reliant on foreign technology.
AI’s gains are also likely to be unevenly disbursed across and within the EU, the paper said. More advanced economies are anticipated to benefit disproportionately because they’re better prepared for and more exposed to the technology.
