IMF: AI Could Lift EU Growth by 1% in Five Years Amid Rising Inequality

The International Monetary Fund has projected that artificial intelligence could raise productivity across European economies by approximately 1% over a five-year horizon. However, the IMF cautioned in a paper prepared for European Union finance ministers that this potential gain carries significant countervailing risks — including heightened income inequality, mounting stress on continental electricity networks, and an intensified dependency on foreign technology, unless EU governments accelerate economic integration.

Uneven Distribution of AI Benefits and Risks

The paper, drafted ahead of an informal meeting of EU finance ministers held in Dublin on 18–19 September, emphasized that both the advantages and costs associated with AI are likely to be distributed unevenly — across member states, regional economies, and individual workers. The IMF noted that completing the EU’s single market would expand AI adoption and help distribute its gains more equitably among the bloc’s 27 member countries.

This assessment aligns with earlier concerns raised by former European Central Bank President Mario Draghi and the European Commission regarding how fragmentation in Europe’s capital markets, labour markets, and energy systems impedes investment and innovation.

60% of Jobs Exposed to AI Impact

The IMF estimated that roughly 60% of workers in advanced European economies hold positions highly exposed to AI’s influence. While some of these workers may benefit from productivity gains enabled by AI tools, others face job displacement as routine tasks become increasingly automated — particularly in roles where AI is expected to substitute for human labour rather than complement it.

The paper also warned that data centres across Europe already consume about 3% of the continent’s total electricity supply. Demand is projected to surge sharply as AI deployment expands. Major technology hubs — including Frankfurt, London, Amsterdam, Paris, and Dublin — are especially vulnerable due to the concentrated impact of existing data centre clusters on local power grids.

Call for Cross-Border Energy Infrastructure and Tech Sovereignty

The IMF urged the European Union to invest in transnational electricity infrastructure and deepen integration of its internal energy market to manage growing power demands. It further cautioned that Europe risks entering a new strategic dependency, given the dominance of the United States and China in developing foundational AI models. To avoid overreliance on foreign technology, the IMF stressed the need for substantial investment in Europe’s domestic AI sector.

The fund added that AI-driven gains are expected to be distributed unevenly not only between EU member states but also within individual countries. Economies with higher levels of technological readiness and greater exposure to AI’s effects are anticipated to benefit most.