IMF Warns EU Ministers: AI May Spur Growth, Add Economic Strains

IMF: AI to Boost European Growth but Risks Inequality and Infrastructure Strain

By Jan Strupczewski

IMF Report Highlights Opportunities and Challenges of AI in Europe

AI’s Potential Impact on European Productivity

DUBLIN, Sept 19 (Reuters) – Artificial intelligence could lift European productivity by about 1% over five years, but risks widening inequality, straining power networks and increasing dependence on foreign technology unless governments deepen economic integration, an International Monetary Fund paper said.

Uneven Distribution of AI Benefits and Costs

The background note, prepared for an informal meeting of European Union finance ministers in Dublin on September 18-19, said the benefits and costs of AI were likely to be distributed unevenly across countries, regions and workers.

It said completing the EU single market would help spread AI adoption and its gains more evenly across the 27-nation bloc.

Concerns About Fragmented Markets

The paper echoes concerns raised by 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.

Labour Market Exposure to AI

The IMF estimated that around 60% of workers in advanced European economies are employed in occupations highly exposed to AI. While some could become more productive through AI tools, others faced displacement as routine tasks become automated, it said, particularly in jobs where AI is more likely to replace labour than complement it.

Infrastructure Strain from AI Expansion

The paper said Europe’s data centres already consume roughly 3% of the continent’s electricity and that demand would rise sharply as AI use expands. Major technology hubs such as Frankfurt, London, Amsterdam, Paris and Dublin are among the areas most exposed, with data-centre clusters already putting pressure on local power networks.

Recommendations for Energy and Grid Investment

To address that, the EU should invest in cross-border grid infrastructure and deepen integration o.f the European energy market, the IMF said.

Strategic Dependency Risks

The paper also warned that Europe risks developing another strategic dependency because the US and China dominate the development of AI models. It said Europe would need significant investment in its own AI industry to avoid becoming reliant on foreign technology.

Uneven Gains Across and Within the EU

Advanced Economies to Benefit Most

AI’s gains are also likely to be unevenly distributed across and within the EU, the paper said. More advanced economies are expected to benefit disproportionately because they are better prepared for and more exposed to the technology.

Conclusion

(Reporting by Jan Strupczewski. Editing by Mark Potter)