Article by Mario Draghi: “…Europe has different routes to raise growth, such as removing the high barriers in its internal market. But widely adopting AI is perhaps the most promising one today. According to ECB scenarios, fast adoption of AI would add 0.3 to 0.4 percentage points a year to total factor productivity growth — the gains that come from working more efficiently rather than adding labour or capital — which has been roughly zero since 2022.
AI-led growth, however, creates a tension with Europe’s bid for sovereignty, because Europe controls little of the AI value chain. The technology is set to become completely pervasive: in the economy, in health systems, in education, in energy, in defence, to name just a few areas. This is no ordinary dependency. Being cut off from AI, once the economy runs on it, would be more like being cut off from the US financial system. The effects would be catastrophic.
That changes the terms of Europe’s relationship with partners it can no longer always rely on. Europe is not to the United States as Texas is to California. It is possible to imagine a future US administration making access to frontier AI models conditional on changes to Europe’s digital rules or digital taxes, or China using the licences on its open-weight models as leverage in a tariff dispute. Unless Europe controls some part of the value chain, growth through AI and sovereignty will pull against each other.
Europe’s potential zone of AI sovereignty is narrow. Its frontier labs cannot at present compete financially with their American and Chinese competitors, and leading-edge chip production is far behind. But data is the one area where Europe can still be sovereign, and it is also the area with the greatest potential to generate growth.
The continent sits on a wealth of public-sector data, such as decades of health records and data collection by statistical offices. Its highly automated manufacturing sector generates a deep well of machine-readable industrial information. European Commission estimates put Europe’s data economy at over €800bn, or more than 5 per cent of GDP, by 2030.
But this creates the next tension. To exploit these assets, Europe needs to have control over their storage and processing. This means it needs large-scale AI data centres.
Data centres, however, are fiercely contested. Local communities worry about their environmental costs and rising energy bills. It does not help that much of the capacity now being built in Europe is for the American tech giants.
Yet Europe also has to be realistic. The debate about overbuilding data centres is a US one. Europe’s problem is the opposite. The EU hosts under 5 per cent of the world’s AI compute versus 75 per cent for the US. Even for ordinary data centre capacity, the gap between demand and installed supply in Europe is estimated at around 3GW, roughly a quarter of what Europe currently has, and is expected to widen to 14GW by 2030.
As sovereignty comes to matter more, this lack of domestic capacity will start to bite. Compute could stop being fully fungible, and a large part of the infrastructure that processes and stores European data will have to sit on European soil. American operators can provide much of that capacity through what they market as sovereign cloud services, run from Europe but still under American ownership. The most sensitive uses, however, will have to run under European control, which is the tiered approach the Commission has proposed in its Cloud and AI Development Act…(More)”.
