Artificial intelligence could raise Europe’s productivity by around 1% over five years, but it also carries risks of widening inequality, putting pressure on power grids and increasing reliance on foreign technology unless governments deepen economic integration, according to an International Monetary Fund paper.
The paper, prepared for an informal meeting of European Union finance ministers in Dublin on September 18 and 19, said the benefits and costs of AI are likely to be distributed unevenly across countries, regions and workers.
It added that completing the European single market could help spread AI adoption and its benefits more evenly across the EU’s 27 member states.
The paper reflects concerns previously raised by former European Central Bank President Mario Draghi and the European Commission that fragmented capital, labor and energy markets in Europe are limiting investment and innovation.
The IMF estimated that around 60% of workers in advanced European economies are employed in occupations highly exposed to AI.
While some workers may be able to increase their productivity through AI tools, others face the risk of displacement as routine tasks become automated, particularly in jobs where AI is more likely to replace workers than complement them.
The paper said data centers in Europe already account for around 3% of the continent’s electricity consumption, with demand expected to rise sharply as AI use expands. Major technology hubs such as Frankfurt, London, Amsterdam, Paris and Dublin are particularly exposed, as clusters of data centers are placing pressure on local power grids.
The IMF said the EU should invest in cross-border electricity grid infrastructure and deepen integration of the European energy market to address these pressures.
The paper also warned that Europe risks developing a new form of strategic dependency, as the United States and China dominate the development of AI models. It said Europe would need significant investment in its own AI sector to avoid reliance on foreign technology.
AI gains are also likely to be distributed unevenly among EU countries and within individual economies, the paper added, with more advanced economies expected to benefit more because they are better prepared for the technology and more exposed to it.
Source: Reuters
