Research has shown that the EU’s digital competitiveness suffers from regulatory burdens and a lack of capital

Florence, ITALY – A major new study on strengthening the EU’s digital competitiveness explains why the EU has been less successful than the United States and China in growing its technology sector, and offers practical recommendations to close the widening gap.

The solutions proposed by the authors include, among others: a temporary pause in the application of new EU digital legislation and changes that will allow European pension and insurance funds to make tens of billions of new funds available to technology start-ups, which have been starved of financial resources.

An independent report by the Center for Digital Society of the European University Institute (EUI) will be presented this afternoon at the EUI State of the Union address in Florence, where the authors discuss their findings with Enrico Letta, former Prime Minister of Italy, who recently presented his landmark report on the future of the single market for EU Council.

In recent years, the European Union has increasingly sought to close the growing digital competitiveness gap vis-à-vis global trading partners. The 101-page report looks at the various steps the EU has taken so far and explains why they have not been effective enough.

The authors also propose solutions in six key areas, including how to address critical shortcomings such as scale-ups’ lack of access to capital and skills, the incomplete integration of the EU’s digital single market, and Europe’s need for better technology regulation.

According to the report, more technology start-ups are actually created annually in the EU than in the United States, but innovative companies in the EU fail to scale up their operations due to a lack of capital.

On the other hand, pension and insurance funds have a huge sum of EUR 13 trillion. Europe could unlock this potential by allowing funds to invest in higher-risk, higher-reward ventures – not only helping to rebalance portfolios, but also pumping tens of billions into the EU’s tech scene.

“This one reform could potentially be more than enough to fully address the serious, long-standing problem of insufficient capital for high-tech startups,” the authors emphasize.

At the same time, Europe is drowning in a patchwork of new digital regulations that limit its competitiveness. To stimulate the EU’s technology engine, the authors believe that “the next few years should instead reflect as much as possible a pause in the creation of new legislation and a focus on properly implementing the many provisions that have just been introduced.”

CCIA Europe’s Senior Vice President and Head of Office, Daniel Friedlaender, has the following qualities:

“Every industry tends to complain about new EU rules, but this report shows that the regulatory burden placed on Europe’s tech sector has become truly excessive and self-destructive, damaging the economy.”

“Addressing the EU’s declining competitiveness should be a top priority for the European Parliament and the Commission during their next five-year term, starting after the June elections. Today’s report clearly sets out the actions that need to be taken now.”

Notes for editors

The full study ‘Strengthening the EU’s Digital Competitiveness: Fueling the Engine’ by J. Scott Marcus and Maria Alessandra Rossi for the EUI Digital Society Center can be found here.

An 11-page executive summary highlighting the key recommendations and main findings of the study is available here.

This independent report has been financially supported by the Computer and Communications Industry Association (CCIA Europe), but the opinions and recommendations are solely those of the authors.