In a welcome address at an ECB conference on the economic implications of artificial intelligence, European Central Bank President Christine Lagarde argued that policymakers should plan on the basis that AI will trigger an economic revolution, and that Europe should avoid repeating the slower uptake seen in past digital shifts. She highlighted productivity and labour markets as the two main channels of change, and called for action to remove barriers to AI innovation and diffusion while preparing for distributional, climate and social impacts. On productivity, Lagarde cited estimates ranging from a euro area total factor productivity boost of around 0.3 percentage points per year over the next ten years to productivity growing 1.5 percentage points faster annually if AI is widely adopted. She pointed to constraints on funding and infrastructure, including EUR 33 billion invested in EU AI companies between 2018 and 2023 versus more than EUR 120 billion in the United States, and the EU having around four times fewer dedicated data centre sites than the US. Regulation and institutional quality were presented as key enablers, with ECB research indicating that raising average institutional delivery to best practice could lift the investment share of AI-intensive sectors by more than 10 percentage points. On energy, she warned that data centre power consumption is expected to triple in Europe by the end of the decade, adding to electricity demand pressures from the green transition. On labour markets, ECB research was cited estimating that 23% to 29% of European workers are highly exposed to AI, with outcomes depending on whether AI primarily automates tasks or augments work; ILO research was referenced estimating around 5% of jobs in advanced economies as highly automatable versus over 13% as highly augmentable. She also noted evidence that gains may accrue disproportionately to high performers, implying a need for large complementary investments in skills, particularly management and business skills rather than specialised AI training. Lagarde framed the discussion against a geopolitical backdrop of potentially less frictionless access to overseas technologies and pointed to an emerging European policy agenda focused on a savings and investment union, simpler digital regulation and faster permitting, and higher investment in data centres, fibre-optic networks and electricity grids.
European Central Bank 2025-04-01
European Central Bank President Lagarde urges Europe to accelerate AI adoption through more capital, smarter regulation and energy investment
European Central Bank President Christine Lagarde emphasized AI's transformative economic potential and urged Europe to avoid delays in digital adoption. She highlighted productivity and labor markets as key impact areas, stressing the need to remove barriers to AI innovation and prepare for its distributional, climate, and social effects. Lagarde also noted the importance of improving institutional quality and infrastructure to support AI investment and warned of increased energy demands from data centers.