Artificial intelligence could increase European productivity by about 1% over the next five years, but its benefits may be unevenly distributed and could come with significant economic and infrastructure challenges, according to an International Monetary Fund paper.
The background note, prepared for an informal meeting of European Union finance ministers in Dublin on September 18-19, warned that AI could widen inequality between countries, regions and workers while placing additional pressure on electricity networks and increasing Europe’s dependence on foreign technology.
The IMF argued that further integration of the EU single market would make it easier for AI technologies — and the economic gains associated with them — to spread more evenly across the 27-member bloc.
Its assessment reflects broader concerns that fragmentation in Europe’s capital, labour and energy markets is restricting investment and technological innovation.
The IMF estimated that around 60% of workers in advanced European economies are employed in occupations with high exposure to AI.
For some workers, AI could improve productivity by complementing their existing skills. Others, however, could face displacement as routine activities become automated, particularly in occupations where the technology is more capable of replacing rather than assisting human labour.
The expansion of AI also presents a major energy challenge. According to the paper, European data centres already consume about 3% of the continent’s electricity, with demand expected to increase substantially as AI adoption accelerates.
Major technology hubs including Frankfurt, London, Amsterdam, Paris and Dublin are particularly exposed, as concentrations of data centres are already putting pressure on local electricity networks.
The IMF called for greater investment in cross-border electricity-grid infrastructure and deeper integration of Europe’s energy market to help meet growing demand.
The paper also identified technological dependence as a strategic concern, noting that the United States and China dominate the development of leading AI models.
Without substantial investment in its own AI industry, the IMF warned, Europe could become increasingly dependent on foreign technology.
The Fund therefore presented deeper European economic integration, stronger energy infrastructure and domestic AI investment as important factors in determining whether the continent can capture AI’s productivity benefits while limiting its economic and social risks.