Europe’s Digital Future:
Strengthening Competitiveness and Security

Leveraging the potential of the European Digital Market

Security, prosperity and democracy are the key words that define European Union’s direction over the upcoming years according to the EU Commission’s priority. However, while the ‘digital’ transformation does not appear as a separate priority, it will be crucial for the EU to achieve many of the goals it sets forth. A successful digital transition is the key to increase European competitiveness vis-à-vis major powers such as the US and China, ensure a clean transition, address economic security and defence, and ultimately secure the prosperity and strategic independence of the Union. Building on the goals outlined in the 2020 EU Digital Strategy, this report explores the EU’s digital outlook, underlining current challenges and policies to address them, focusing on key technologies and unique European strengths within the current geopolitical landscape.

Around 80% of the technologies and services that are needed for Europe’s digital transformation are designed and manufactured outside of the EU.

In the past few years, the European Commission has launched initiatives tailored to increase the EU’s economic security through technological development. These policies allocate funding to research and pan-European cross-sectoral partnerships and invest in SMEs with high potential to create a business environment that can develop and deploy key technologies. Semiconductors, quantum computing and AI are examples of critical technologies in which the EU is investing significant funds to increase competitiveness.

Critical technologies—such as semiconductors, AI, energy and health technologies, and quantum computing—alongside data governance, online platform regulations, and cybersecurity, are priority areas for the EU to achieve its goals.”

EUROPE Hosts

Only 13%

of high-value startups

Strengthening European competitiveness through investment in technologies

Over the past 10 years, the growth-stage funding gap between the US and the EU was equal to €343 billion and European startups were half as likely as US counterparts to secure large funding. European SMEs tend to scale-up less than their counterparts and often relocate to the US where market size and funding at the growth-stage – such as venture capital – is more easily available.

In 2024, the European Union has contributed €15 billion from across various fund to support advancement in technologies.

Member States have also contributed with key investments, in particular:

for semiconductors

€ 0 billion

for connectivity

€ 0 billion

measures for competitiveness

€ 0 billion

for cybersecurity

€ 0 billion

technological leadership

€ 0 billion

Simplification for EU's digital future

Investment is not the only challenge for EU companies. Research has shown that a fragmented and complex regulatory system is still a key obstacle to the development of competitive technological industries. This fragmentation can increase administrative burdens for smaller companies, hinder growth and the scale-up that European industries need to become strong international actors in the digital future.

One of the foundations of responsible digitalisation lies in a transparent and fair collection and use of data, a cornerstone of digital future societies. EU data is still largely collected and processed outside the EU: In 2021, 90% of EU data was managed by US companies. ”

Technologies for the future of European security

With heightened security challenges at its borders, the EU’s digital transition inevitable encounters security questions. This is expected to take the central stage in the digital future of the EU.

European resilience can be achieved by advancing European technologies. In the past years, the EU has repeatedly experienced the effects of cybersecurity attacks ad disinformation on its democratic resilience, underlining the importance of securing technologies for strong democracies.

As the EU and its Member States are increasingly committing to boost security, there is a potential for increase investment allocation in critical technologies linked to defence as well, such as quantum computing, AI and big data, cloud computing and edge computing.

The EU is now at the turning point in its digital future. As global competition intensifies and technological advancements accelerate, the European Union must make strategic decisions to strengthen its digital sovereignty, enhance cybersecurity, and foster innovation in key sectors.

Europe’s Digital Future:
Strengthening Competitiveness and Security

Leveraging the potential of the European Digital Market