The European Union lags behind the United States and China in terms of innovation and digitalization. The European digital landscape is constrained by a complex legislative framework and non-competitive investment profiles, both public and private. Small and medium-sized enterprises, the heart of European industry, could receive new life through professional retraining and updating initiatives, and the development of sectoral data spaces. The transition from a regulatory approach to one more focused on industrial policy, public intervention and competitiveness must be at the center of the next European mandate.
This is what emerges from the study entitled “A Blueprint For The Digital Priorities Of The New EU Mandate”, carried out by PromethEUs, the network of think tanks in Southern Europe made up of I-Com Istituto per la Competività (Italy), Elcano Royal Institute (Spain), the Foundation for Economic and Industrial Research IOBE (Greece) and the Institute of Public Policy (Portugal).
The document illustrates the intricate web of laws that European companies are forced to navigate to comply with digital obligations, including the Digital Market Act, the Digital Services Act, the Data Governance Act, the Cybersecurity Act and more. However, there are some first signs that this second half of the Digital Decade will focus on initiatives for better regulation, as reported by Steffen Hoerning (IPP), Alessio Caramitti and Alessandro D’Amato (I-Com), authors of the first chapter of the publication . Indeed, as proposed by Enrico Letta and Mario Draghi in their reports, the new Commission is committed to reviewing an important part of European legislation, paying particular attention to innovation and security in the digital sector, while reducing bureaucracy and burdens administrative. A key objective is in fact the reduction of the reporting obligation by at least 35% for SMEs and 25% for the remaining companies.
However, the regulatory framework is only one piece of the puzzle hindering Europe’s digital competitiveness. Stefano da Empoli and Maria Rosaria Della Porta (I-Com) provide a precise insight into investments within the Union and dependence on other countries. What emerges is that Europe depends on third countries for more than 80% of its digital products, services, infrastructure and intellectual property and that the AI investment gap between the US and the EU has widened in time. For example, in 2023, venture capital investments in AI amounted to $7.9 billion in the Old Continent and $54.8 billion in the USA. A substantial difference is also found in funding for AI and quantum technology startups. But Europe is also lagging behind in the diffusion of technologies, as evidenced by a cloud services market that is only a third of the American one.
Small and medium-sized enterprises constitute the European industrial fabric. They represent an important share of Southern Europe’s employment and GDP and are key to economic growth, resilience and innovation, while embodying the territory’s rich cultural and industrial diversity. SMEs, however, are increasingly facing challenges arising from the twin transitions of digitalisation and sustainability, as described in the third chapter of the publication, edited by Valaskas Konstantinos and Aggelos Tsakanikas (IOBE). Southern Europe is experiencing significant digital infrastructure lag, with limited access to high-speed internet and advanced technologies in many areas. Furthermore, there are significant financial barriers and a lack of digital knowledge and skills. The authors therefore highlight the fundamental role of upskilling and reskilling programs, as well as sectoral data spaces, in addressing these challenges. Indeed, the European SME Strategy for a Sustainable and Digital Europe foresees digital resources, networks and hubs to address the lack of digital literacy, to accelerate the slow adoption of digital tools and improve productivity and innovation.
If since 2019 the European Union’s perspective has focused on sovereignty and strategic autonomy, the new mandate of 2024 opens with a paradigm shift towards economic security, with an approach oriented towards industrial policy, public intervention and to competitiveness. These new policies are analyzed by Raquel Jorge Ricart (Elcano) in the final chapter of the document. The author underlines the importance of further strengthening and coordinating digital diplomacy, as well as emphasizing the technological dimension in enlargement policies and the priority to be given to the application of the Economic Security Strategy.
