Artificial intelligence could increase productivity and support economic growth across Europe, but the technology could also widen inequality, put pressure on energy infrastructure and increase the European Union’s reliance on foreign technology, the International Monetary Fund has warned.
The IMF presented its assessment in a paper prepared for an informal meeting of EU finance ministers in Dublin on September 18–19. The discussion included the potential economic impact of AI on productivity, labour markets, energy demand and Europe’s strategic position.
According to the IMF, AI could raise European productivity by about 1% over the next five years. However, the gains are unlikely to be distributed evenly among countries, regions and workers.
The fund estimates that around 60% of workers in advanced European economies are employed in occupations that are highly exposed to AI. While some workers could become more productive by using AI tools, others could face job displacement as companies automate routine tasks.
The impact could vary depending on whether AI complements workers or replaces some of the tasks they currently perform. The IMF therefore warned that policymakers will need to consider how the benefits of higher productivity are shared across the economy.
Energy infrastructure is another concern. The IMF said data centres already account for roughly 3% of Europe’s electricity consumption, with demand expected to increase as AI applications expand.
Major data-centre hubs, including Frankfurt, London, Amsterdam, Paris and Dublin, could face additional pressure on electricity networks. The IMF said greater investment in cross-border power infrastructure and deeper integration of Europe’s energy market could help address the challenge.
The IMF also raised concerns about Europe’s dependence on technology developed outside the region. The United States and China currently dominate the development of major AI models, leaving Europe exposed to strategic and technological dependencies.
To reduce that risk, the fund said Europe would need greater investment in its own AI industry while also addressing fragmentation in its capital, labour and energy markets.
The IMF argued that completing the EU single market could help countries adopt AI more effectively and spread its economic benefits more evenly. More advanced economies may otherwise gain disproportionately because they are generally better prepared to adopt the technology.
The assessment highlights the balancing act facing European policymakers: encouraging AI investment and productivity growth while preparing workers, strengthening energy infrastructure and developing a stronger domestic technology sector.