Mario Draghi, former Italian premier and European central banker, presented a report this week outlining Europe’s urgent need for a new industrial strategy to tackle an existential challenge. His report was critical on the EU’s stance regarding AI.
According to Draghi’s report on the future of EU competitiveness, Europe faces two choices: reverse course or endure a slow decline. The first pillar of Draghi’s blueprint is innovation. The report calls for a meaningful acceleration in productivity, especially through the digital revolution driven by artificial intelligence, which it describes as a “window” of opportunities for Europe. The report notes, “We made an experiment – we removed the US high tech sector and compared again the economy of the United States and of the EU. We saw that, in that case, they could be compared and, actually, EU productivity would be slightly better.”
However, conditions for a fresh start are not ideal. The report highlights how the EU lags behind in technologies essential for future growth, starting with artificial intelligence. Since 2017, 73% of foundational AI models have been developed in the United States. Of global funding for AI start-ups, 61% goes to US companies, 17% to Chinese companies, and only 6% to businesses in the EU.
The few European leaders in generative AI, like Germany’s Aleph Alpha and France’s Mistral, require significant investment to compete with US companies. This funding gap often drives European firms to seek support abroad. The report warns that this weak position could harm the EU economy, causing industries to lose market share by failing to leverage AI’s competitive advantages.
AI and privacy legislation strangling innovation
Draghi strongly criticises European legislation on privacy and AI, such as the GDPR and the AI Act. “With this legislation that we have given ourselves, we are self-destructing, we are killing our companies,” he warned, highlighting how complex regulations and overlapping rules could stifle innovation.
The report also notes the EU currently has around 100 laws on technologies and over 270 regulatory authorities for digital networks across member states. Draghi’s recommendations for the EU to lead in AI include proposals for “vertical integration” of AI within European industries. The report states, “In order to prosper in an increasingly heated global technological race, the EU needs to exploit the development and implementation of ‘vertical AI’, or cases of innovative use of AI technologies in key industrial sectors like automotive, robotics, and pharmaceuticals.”
