Europe pushes to reduce tech dependence as funding and policy gaps persist

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Europe pushes to reduce tech dependence

Highlights

European Commission prioritizes technology sovereignty to reduce dependence on foreign AI, semiconductors, quantum tech, satellites, and cloud suppliers, per Henna Virkkunen.
EU's new scale-up fund and push for public-sector equity seek to address capital shortages, but investment remains small compared to U.S. tech's hundreds of billions annually.
Legislative progress on pan-EU corporate entities and digital service localization is slow, as member states dilute and delay reforms despite budget negotiations affecting digital priorities.

Brussels sets out strategic technology priorities

As reported by Financial Times, the European Commission is pursuing a broader technology sovereignty agenda as concerns grow over the bloc's reliance on foreign software, chips and hardware suppliers. Henna Virkkunen, the Commission vice-president responsible for tech sovereignty, says Europe needs productive capacity in AI models, semiconductors, quantum technology, satellites and cloud services, while stopping short of calling for full self-sufficiency.

Virkkunen argues the goal is to avoid risky dependencies on a single company or one third country rather than to cut Europe off from foreign technology. She also suggests the trade-off between backing domestic providers and losing access to better services is not always as stark as critics claim, saying some European alternatives are less visible or smaller rather than clearly weaker on quality or price.

That view puts added weight on public procurement. Smaller EU digital companies often say government buyers continue to favor large established providers, and Virkkunen acknowledges there is inertia in the system. She says public authorities need to be more creative in helping smaller companies form consortiums capable of delivering at the scale governments require.

Capital constraints and member state caution limit progress

Access to financing remains the biggest structural challenge for EU technology companies, despite the region's large pool of savings. EU institutions and member states are beginning to respond, with a new scale-up fund now operational and Brussels seeking more strategic public-sector anchor equity to attract private investors.

Even so, the sums being mobilized remain modest against the hundreds of billions invested in U.S. technology each year. At the same time, negotiations over the EU's next multiyear budget are cutting into amounts that Brussels had initially proposed for new priorities including digital industrial policy.

Legislative reforms are also advancing slowly. Proposals such as a pan-EU corporate entity and localization rules for sensitive digital services are being delayed or diluted by member states, even though the Commission's initial approach is already relatively cautious.

Virkkunen does not directly criticize national governments, but she says it is important that member states maintain ambition in budget talks for new technologies and defense. The broader political challenge for Europe is that Brussels appears to be positioning itself between stronger voter demands for control and the more limited appetite among national capitals to move faster.

Our earlier article on Mario Draghi’s warning about the risks of overly restrictive policy explained how fighting inflation and controlling debt can unintentionally squeeze the investment needed for long-term growth. He argued central banks should keep rates no higher than necessary for price stability, while Europe should complement monetary policy with market integration, industrial policy and targeted EU budget support to de-risk investment in areas such as AI.

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