By David Barwick – FRANKFURT (Econostream) – Europe needs deeper integration in capital, energy and other markets if it is to become a major player in artificial intelligence and safeguard its economic sovereignty, European Central Bank Governing Council member Joachim Nagel said Wednesday.
"Europe is large on paper. It must become large in practice," Nagel, who heads the Deutsche Bundesbank, said in a speech at a Bundesbank gala dinner in Berlin on the occasion of the Governing Council's external meeting.
"If we unlock our single market’s full potential, Europe can catch up with the world’s technological leaders. I’m firmly convinced of that," he said.
Nagel said AI could become a "litmus test" of Europe's competitiveness and sovereignty, with implications for productivity, labor markets and inflation that warranted attention from central bankers.
Europe was heavily dependent on non-European providers for advanced chips, computing capacity and cloud infrastructure, while the most capable AI models currently came from the United States, followed by China, Nagel said.
But Europe had important advantages, including world-class universities, a significant share of global AI talent, large amounts of industrial data and substantial private savings that could finance innovation and infrastructure, he said.
Nagel identified three priorities for making Europe a leading AI center: more venture capital, greater computing capacity and more integrated markets.
Europe needed better channels to turn its savings into productive investment so that promising start-ups could grow into global companies without having to seek funding elsewhere, he said, pointing to the importance of the Savings and Investments Union.
It also needed investment in data centers, energy grids and secure electricity supplies at competitive prices, Nagel said.
"Europe benefits from an energy union," he said. "For example, more cross-border interconnections would allow clean and lower-cost electricity to flow freely."
Nagel also called for remaining barriers in services, digital markets and labor mobility to be reduced so that innovative companies could scale up and recruit talent across Europe.
"The three tasks point in the same direction: deeper integration where scale is decisive," he said.
National interests remained important, but national action was likely to be insufficient where scale was crucial, Nagel said.
"In such cases, national interests are best served through European action," he said.
The issue went beyond Europe's position in global technology rankings and concerned its ability to make its own choices, finance its social model and security, and preserve freedom and prosperity for future generations, Nagel said.
He cited the digital euro as one way in which the Eurosystem was contributing to greater European sovereignty.
"Our prosperity is no relic of past success that we can only preserve and administer. It is our launch pad for the future," Nagel said.