Europe in the Intelligent Age 2025

Driving commercialization. Procurement by the public sector and large private sector firms can create demand signals and remuneration potential for early-stage and sub-scale innovations, and thus much needed confidence in riskier innovation investments. In a discussion with more than 50 CEOs of scale-up firms and unicorns, this emerged as one of their biggest requests. 6. Creating markets: Government as at-scale anchor customer. Governments reallocating certain public spending to serve as first buyers of technology at scale could potentially create new markets and revenue streams. For instance, public payors could redirect a portion of European annual healthcare spending to become the first at-scale customer of AI- based diagnostic and treatment pathways. In defence, governments could procure quantum technology-based secure communication channels that still need to be developed.45 To make a meaningful impact, levels of innovation procurement funding may need to be comparable to private sector investment budgets – in AI, that could mean double- or triple-digit billions. Concerns may arise about Europe’s limited fiscal room to manoeuvre. But in the long run, Europe may not be able to afford to not make such investments, since they may ultimately save rather than add cost. To that end, Europe may want to consider adjustments to public accounting rules so that some portion of such outlays can be depreciated over time rather than treated as one-off expenses.Strengthening research and talent. Increasing tech skills can help create a positive feedback loop, where greater innovation and productivity lead to higher returns on investment in skills development, which in turn encourages further demand for skilled workers. This could help Europe address some of its significant talent gaps. One-third of top AI researchers46 are leaving Europe and tech professionals in the EU earn less than half of what their US counterparts do for similar roles.47 Moreover, 37% of those in the workforce lack basic digitals skills.48 7. Building talent magnets: Developing tech “CERNs” for all priority technology areas. Pan-European research hubs funded at the EU level could provide attractive co-investment incentive mechanisms for companies via tax reductions and strengthened IP protection (somewhat similar in concept to CERN, the European Organization for Nuclear Research). These hubs could offer competitive packages for global top researchers to win back talent; provide leading infrastructure like high- performance computing; and offer streamlined IP rights treatment and technology transfers for faster commercialization in prioritized technology arenas. State-of-the-art facilities and equipment and a strong talent ecosystem could additionally recruit and nurture STEM talent who could eventually move into the industry through close ties with leading tech companies. Europe in the Intelligent Age: From Ideas to Action 18