Restoring European tech leadership

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Over the past few decades, the EU has been relegated from global technology player to passive consumer of technologies developed elsewhere. Today, 80 percent of the technologies and services Europe needs for its digital transformation are designed and manufactured beyond its borders, mostly in the US and China. So deep is this consumer mindset that it has even shaped the philosophy behind its laws: the goal of recent tech regulations like the Digital Services Act and the Digital Markets Act was to protect Europeans as consumers by keeping them safe online and ensuring fair competition.
To their credit, these laws offer strong protections for EU citizens and they have even served as blueprints for competition policy and online safety worldwide. Regulatory excellence has become Europe's trademark. But without a complementary innovation policy — and an assessment of whether the bloc's current rules promote or impede it — the EU risks becoming a mere spectator in the global tech race, particularly in the artificial intelligence domain.
Despite the deals announced during the AI Action Summit in Paris earlier this year, overall foreign direct investment into Europe fell to its lowest level in nine years in 2024, with France and Germany experiencing double-digit declines. And this decline is accompanied by other worrying figures: the EU's share of the global information and communications technology market fell from 21.8 percent in 2013 to 11.3 percent in 2022.
For too long, Europeans have passively benefited from Silicon Valley's risk-taking and Shenzhen's manufacturing prowess. But this was not a free lunch. As former European Central Bank President Mario Draghi, the author of a landmark 2024 report on European competitiveness, put it, Europeans have done 'everything we could to keep innovation at a low level.'
The EU risks becoming a mere spectator in the global tech race, particularly in the artificial intelligence domain
Eric Salobir
Europe must do much more than simply catch up to America and China. To reclaim a place in the global tech industry, it urgently needs to rethink its entire approach to autonomy, alliances, regulation and leadership.
This calls for a well-considered strategy. The aim is to ensure security by building its own core capabilities, not to achieve technological autarky or autonomy in isolation. It makes little sense to invest heavily in technologies that are hard to scale or export. Recent efforts to develop homegrown cloud computing and alternatives to Google Search were motivated mainly by the desire for technological independence — but they have not succeeded despite strong political backing. Looking ahead, such projects' commercial viability should be stress-tested before they consume too much time or resources.
One especially important issue is strategic interdependence, particularly when it comes to critical physical and digital infrastructures. At this point, no country could withstand an abrupt shutdown of digital payments, for example. That is why the payments sector has long relied on co-badging (multiple payment brands using the same payment instrument). And similar models of shared responsibility are found in the provision of submarine cables, low-orbit satellites, semiconductors, energy and nuclear fusion.
But expanding such partnerships requires a level playing field, so that all participants can use the available technological building blocks. For example, Helsing, the German-based drone startup, relies on open-source large language models developed by the French AI leader Mistral. Thanks to this synergistic arrangement, Helsing recently launched a factory with an initial monthly production capacity of more than 1,000 AI-enabled drones.
This is about creating a regulatory environment that both empowers and safeguards market participants
Eric Salobir
Europeans must also acknowledge their shortcomings. Draghi and former Italian Prime Minister Enrico Letta — the author of a major report on strengthening the European single market — have both warned that the current approach to enforcing the EU's digital laws is burdening small innovators. More clarity, simplicity and predictability in the legal framework for tech would bolster the single market and attract talent and investment back to Europe. This is not about watering down privacy or copyright laws. It is about creating a regulatory environment that both empowers and safeguards market participants.
At the same time, the work of protecting people in the digital realm is far from complete, considering that children around the world still lack comprehensive protections online. Harmonizing European innovation policies with protections for fundamental rights will remain a top priority. But Europe cannot leverage its diplomatic and regulatory power if it has no tech champions capable of shaping digital products, services and markets at the global level.
In this respect, a coalition of like-minded companies from across the EU and other countries that share its values could play an important advocacy role. The EU needs to show that generative AI could represent a major opportunity, but only if it is deployed in ways that respect human rights and workers. And it needs to create technological and legal frameworks that promote equity and pluralism across the bloc's many languages.
These are the big challenges and opportunities in front of us. To succeed, industry leaders and policymakers must collaborate closely with civil society, universities and trade unions. It is not too late to restore Europe's status as a global leader in technology and innovation. The most important step is a change of mindset.
Copyright: Project Syndicate

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