Cut, simplify and incentivize: Three steps to win the tech race

The tech race is on, and Europe is falling behind.

In seven of the eight critical technologies that will shape the future – from space tech to quantum computing – we lag other economies. Targets for big data, artificial intelligence (AI) and cloud adoption are slipping out of reach.

Our GDP growth has stagnated while others race ahead. According to Banco Santander, if we had grown at the same rate as the US since 2000 we would have added 11 million jobs and created €300 billion in tax revenue. Instead, we are 30% behind. As Mario Draghi noted, these two trends are connected; we are not competitive because we have not embraced digitalization.

We are overregulated. And we are not taking advantage of our single market, with investments and incentives divided 27 ways.

But we must not give up.

Europe trains 20% of the world’s AI talent and still has leading companies in green tech, manufacturing, healthcare and more, even if increasingly they are investing elsewhere.

We have what it takes to beat the odds and win the tech race.  Here are my three steps to succeed:

1. Cut regulatory burden

At the starting line, when European businesses look up, they see hurdles that their competitors don’t have.

One issue is the volume of rules: in the past five years alone, we’ve seen nearly 50 new laws touching digital. DIGITALEUROPE members tell us that they are spending 15% more on compliance each year compared with 2019. That’s money spent on lawyers, not coders and innovators.

Another is the complexity: the rules on data sharing in the EU are dizzying for even the largest companies, never mind the smaller ones.

Certain cyber-attacks might have to be reported as many as five times (possibly more) to different EU and national authorities. More time spent on reporting is time that’s not spent fixing the issue.

The AI Act must also be discussed. What started as a law to protect us from the worst possible abuses has expanded to possibly include even washing machines and vacuum cleaners as ‘high risk.’ This was nobody’s original intent, and we must avoid it before it is too late. Our industries can’t be crippled by unrealistic interpretations of our own rules.

Let’s not also forget that the easiest burden to remove is one that isn’t in place yet. The European Commission should withdraw the AI liability directive and halt plans for a Digital Fairness Act. These issues are already covered elsewhere, they just need to be better enforced. The new data union strategy should not be about adding more rules, but making sense of what’s already there.

2. Simplify the single market

Thirty years into our single market, only 8% of European small and medium-sized enterprises trade across borders. As Letta argued, this is largely due to inconsistent regulations and complex administrative requirements.

A European Business Code would provide businesses with clear and consistent rules for operating across the EU. This ‘28th regime’ would simplify cross-border company registration, taxation and transactions.

Take dual-use technology, which was originally developed for commercial uses but can also be applied to defense. European companies have an edge in things like advanced connectivity, energy and wind tech, and digital twins. Yet companies are struggling to scale because we are still thinking nationally, so defense and other public funding is chopped into 27 pieces.

The prize is a large one — government contracts make up 14% of GDP. Common EU procurement with simple rules would support huge innovation in this area.

3. Invest and incentivize

The EU is a world champion in legislation. But that won’t win us the tech race.

The amount we need to find each year to compete with the best stands at €800 billion. This is about companies in Europe creating future technologies and businesses of all kinds adopting them.

To start, at least a quarter of the EU budget should be dedicated to digital, not only for research and development (R&D) but for deployment. Tech companies are already good at R&D — but they need contracts.

The money should focus on digital skills, disruptive technologies and protecting our critical infrastructure, which is increasingly under attack.

Beyond government spending, we must mobilize the trillions in savings accounts and pension funds in Europe with common rules.

Finally, EU countries should come together to coordinate tax incentives for businesses investing in digitalization and critical technologies in Europe.

Europe can

In her hearing, Executive Vice-President-designate Henna Virkkunen said she would ask her staff to map the reporting burden on companies on her first day in office. Our new gameplan details exactly that. It is full of actionable ideas that can be put in place immediately.

Some will say it cannot be done. Our message is this: Europe can. Tough times call for bold solutions. We need the Commission, member states and the European Parliament working together as one Europe.

In history no civilization has ever survived on vision and ideas alone. Only by creating value can we sustain our values.

The tech race started 25 years ago and we are already behind. We do not have another decade to fix it: our economy is in a slump, unicorns are leaving and war is at our doorstep.

Europe can be a competitive digital powerhouse. The time has to be now.

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