AI Enhances Growth, Boosts Europe’s Competitive Edge

How AI Can Drive Economic Growth and Competitiveness in Europe

Governments across Europe are grappling with pressing questions about how to drive economic growth and make the region more competitive. One of the most critical ways to boost the EU’s competitiveness is by harnessing artificial intelligence (AI) for growth.

A new report by Implement Consulting Group, commissioned by Google, estimates that generative AI could add €1.2-1.4 trillion to the EU’s GDP over the next ten years. This figure represents an annual growth rate of 8%. The report also highlights how AI can significantly boost productivity across various sectors.

Generative AI, a subset of AI that can produce text, images, and other media, has the potential to revolutionize various industries by automating tasks, enhancing creativity, and improving decision-making processes. This capability to drive economic growth and competitiveness is especially crucial for Europe. According to a report from Mario Draghi, Europe’s competitiveness has significantly declined over the past few decades. The EU’s share of global GDP has dropped from over a quarter in 1980 to just 17% today. Meanwhile, the US has outpaced the EU in productivity by 20% as of 2022.

However, the report is about more than just economic metrics. It emphasizes how AI can help people be more productive, fuel growth, and support long-term sustainable jobs of the future. According to the report, 74% of workers in European countries see productivity-enhancing effects from generative AI, and 43% expect AI to positively impact their jobs. The report estimates that the majority (61%) of jobs will be augmented by generative AI, while around 7% of jobs face long-term transition to automation. As with previous technological shifts, such as the advent of commercial aviation or the internet, new industries and careers will be created by AI-powered breakthroughs. This transformation has the potential to impact society broadly—from enhancing the quality and efficiency of public services to unlocking scientific breakthroughs and alleviating labor shortages by freeing up resources and boosting productivity.

One of the key reasons for Europe’s productivity gap is its slower pace in technological development, innovation, and adoption. Mario Draghi states, "With the world on the cusp of an AI revolution, Europe cannot afford to remain stuck in the ‘middle technologies and industries’ of the previous century." To catch up, the EU must unlock its innovative potential.

A New Agenda for AI-Backed Growth

In addition to the economic report, Google and Implement Consulting Group have released an AI Opportunity Agenda. This document provides a series of recommendations for governments to maximize the economic and societal potential of AI. The agenda outlines the need to revisit Europe’s workforce strategy, invest in AI infrastructure and research, and promote AI adoption and accessibility.

1. Investing in Research and Development

For the EU to compete effectively in AI, it needs to prioritize research and development (R&D) and make funding more accessible. Without the right incentives to develop and commercialize AI innovations, Europe risks stifling its talent and its chances of launching more home-grown tech unicorns.

2. Building Infrastructure to Support Innovation

AI breakthroughs require robust high-performance computing technologies and data centers, supported by renewable energy. To enable AI innovation at scale, the EU must allocate more funding to such infrastructure and incentivize the private sector to do the same.

3. Improving Skills and Training Programs

Technological growth will not be effective if people are left behind. Given its diversity, the EU must ensure that technology benefits every business, economy, and individual. This requires accelerating digital skills transformation and placing AI skills and education at the center of a revitalized European Skills Agenda, including integrating these skills into school curriculums.

4. Promoting Widespread Adoption

It is crucial to ensure that AI is applied and deployed in a universally accessible and useful manner. For the private sector, EU policymakers and AI developers must collaborate to develop outreach strategies that target traditional industries and small businesses, which stand to gain significantly from AI adoption. For the public sector, member states must enhance existing initiatives to increase public procurement of AI and set ambitious AI adoption targets.

Taking Action

Developing sound policy and responsible AI requires close coordination between governments, the private sector, academia, and civil society. Through initiatives like the AI Opportunity Initiative and other partnerships, Google is committed to working with various stakeholders to get this right. However, as Mario Draghi highlighted, changes are also needed in the regulatory environment. Since 2019, the EU has introduced over 100 pieces of legislation impacting the digital economy and society. The challenge is not just the sheer number of regulations but their complexity. Moving away from a regulatory-first approach can help unlock the opportunities presented by AI.

In many ways, Europe is well-positioned to seize this moment. AI has the potential to help build a better, fairer, and healthier society while supporting competitiveness and inclusive growth. By adopting the recommendations in the AI Opportunity Agenda, Europe can harness the power of AI to drive economic growth, innovation, and societal well-being.

For more detailed insights, you can refer to the full reports linked above.

For more Information, Refer to this article.