The target, announced by research minister Bettina Stark-Watzinger on Wednesday, is modest compared with the $3.3 billion that the U.S. government spent on AI research in 2022 according to a Stanford University report.

The AI push comes as Germany attempts to turn around its economy from a recession while the country's key autos and chemicals industries face stiff competition from upstart electric-vehicle makers and high energy costs.

Germany envisages creating 150 new university labs for AI research, expanding data centres and making accessible the kind of complex public data sets from which AI techniques can tease out new insights: a major undertaking in a country where cash transactions are common and the fax is not yet extinct.

It is dwarfed by private AI spending in the U.S., which reached $47.4 billion in 2022, almost double Europe's total spend, and well ahead of China's $13.4 billion, the Stanford report found.

But Stark-Watzinger said that Europe's emerging regulatory framework, which places greater weight on privacy and personal safety than those in other regions, could attract players to Germany, as could cooperation within the European Union.

"We have AI that is explainable, trustworthy and transparent," she said. "That's a competitive advantage."

Simpler regulations would promote private research spending, she added.

Even though Germany has nothing to compare with the U.S.'s tech behemoths, its number of AI startups has doubled in 2023, but that still only puts Germany in ninth place globally, Stark-Watzinger acknowledged.

Reporting by Thomas Escritt; Editing by Devika Syamnath

REUTERS