Europe failed to produce globally competitive Internet companies during the early digital era, and the consequences now run deep. Amazon, Google, and Microsoft supply two-thirds of the continent's cloud market. Three quarters of European firms - and nearly all companies in Ireland and the Nordic countries - run on US software products. American firms also dominate cybersecurity, providing EU governments with crucial support against Russian cyberattacks and hybrid warfare.
In a Foreign Affairs essay, Bruegel senior fellow Jacob Kirkegaard warns that as artificial intelligence advances, "the EU may once again end up primarily a buyer, rather than a provider, of cutting-edge technology," "Hvylya" reports.
A political backlash is building. France recently ordered public servants to stop using Zoom and Microsoft Teams in favor of a domestic alternative. Other European public institutions have shifted to cheaper, non-American, open-source software. EU regulators have adopted bans on children's social media use and imposed digital platform rules covering liability, content moderation, transparency, anti-bundling, and fair competition. These regulatory crackdowns are popular with European voters and likely to continue.
But regulation is not the same as independence. Kirkegaard writes that "the vast majority of public and private consumers will not be willing or able to pay the higher fees charged by European tech companies for the sake of such independence." For businesses, switching could compromise commercial viability and integration with customers that rely on US products. The incumbent firms' economies of scale, large user bases, and widespread familiarity among European workers create formidable barriers to entry.
Individual European players like French AI company Mistral may find a niche with customers who put a premium on technological autonomy. But for European tech firms to achieve broad commercial success, their products must be demonstrably better than existing ones - a technical feat that the European Commission's upcoming tech sovereignty package will struggle to deliver without tradeoffs in economic growth and competitiveness.
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