to support convergence, growth and the efficient allocation of resources. in many euro area countries, however, the labour tax wedge, in particular for low and second earners, remains too high, discouraging both labour supply and demand. many euro area countries have space to reduce the distortionary impact of their tax systems in a revenueneutral way, by shifting taxes away from labour and towards environmental externalities or property. such national efforts should be complemented by closer tax cooperation. agreeing and enforcing minimum tax rates for capital income at the eu level would help countries to regain space to reduce labour income taxes, thereby fostering employment growth. supporting growth also means spending more wisely. public investment in the euro area fell from 3. 7 % of gdp in 2009 to 2. 7 % in 2018. at the same time, large parts of the public infrastructure, including schools, hospitals and roads, are in urgent need of repair and modernisation. the current interest rate environment provides a unique opportunity to close public investment gaps and to strengthen europe ’ s capacity to innovate by mobilising investment to support digitalisation and to accelerate the transition to a low - carbon economy. this also entails reviewing and boosting spending in intangible assets. for the past 20 years or so, spending on research and development ( r & d ) in the eu has stagnated at around 2 % of gdp. in the largest euro area countries, public expenditure on r & d, education and transport accounts for around 15 % or less of total primary expenditure. equally concerning is that environment - related public r & d spending accounts for just 1. 6 % of total r & d spending across oecd countries. given that the market does not invest sufficiently in environmental r & d, and that climate change is a deepening emergency, the public sector urgently needs to step in. the second role of fiscal policy in a currency union relates to stabilisation and resilience. the stability and growth pact has largely failed on both counts. it proved toothless in good times when the need to build up sufficient fiscal buffers for bad times was ignored. and it amplified procyclicality in bad times. from 2009 to 2018, the average cyclically adjusted government primary balance was - 5. 7 % for japan and - 3. 6 % for the united states, but 0. 5 % for the euro area. and even when the euro area aggregate fiscal stance was considered broadly appropriate, such

marja nykanen : opportunities and challenges of ai in the economy, finance and supervision opening remarks by ms marja nykanen, deputy governor of the bank of finland, at the seminar on the impact of ai on economy, finance and supervision, helsinki, 13 november 2024. * * * good morning, ladies and gentlemen. it is my great pleasure to warmly welcome you all to this very topical seminar. whether you are physically here in helsinki or online, thank you for giving us your time. the aim of this seminar is to explore the potential impact of artificial intelligence, ai, on the economy, the financial sector and financial supervision. like you, i am curious to know more about the potentially transformative effects of ai on our sector and industry in the near and more distant future. the opportunities are and will be innumerable. i probably also share with many of you a feeling of slight unease, perhaps a fear of the unknown. there are, after all, many things we have yet to learn, not least how we will best be able to benefit from the innovations brought by ai. but above all, i share the excitement that something big is happening. something that can give us a much greater understanding about different circumstances in the financial sector, something that may bring completely new products that will help us and inspire us. i'm sure a great many of you who have gathered here today want to be at the forefront, among the first, actively shaping what ai will look like in our sector. many of us have backgrounds in economics - or law, like myself. ai will obviously bring great benefits to other sectors too, beyond finance. healthcare is perhaps the sector where people's expectations of ai are at their highest. even so, there is concern whether human contact will disappear from healthcare when machines take over. after all, when we are vulnerable, we want the care and comfort of human contact. for some reason though, i don't hear this same yearning for human contact in the financial sector. maybe we should be offended by this? but seriously, returning to the matter at hand - let me start by elaborating somewhat on the concept of ai and its potential effects on the economy, the topic of the first session. the significance of ai has been compared with breakthrough advances in other generalpurpose technologies, such as electricity and the internet. what these have in common is that they offer applications across countless fields and have substantially transformed societies and economies. ai,