Europe’s Tech Reckoning: Can the Continent Reclaim Digital Sovereignty?

In the shadow of accelerating global technological change, Europe stands at a critical inflection point. Long hailed for its social stability, manufacturing prowess, and democratic resilience, the continent faces a stark reality: its economic model is losing ground, most evident in the digital realm.

A recent conversation between Dealroom’s Yoram Wijngaarde and Felix Ullmer and Andrii Degeler of Unzip Media highlighted these issues, building on Mario Draghi’s urgency regarding the future of European competitiveness. Together, they present a picture not of inevitable decline but of a region on the brink of a profound transformation — if the right choices are made now.

Diagnosing the Innovation Gap

At first glance, the narrative of Europe falling behind the United States (US) seems straightforward. GDP per capita gaps have widened, and American tech giants — from AWS to Google — dominate the digital economy and the infrastructure upon which Europe’s future innovation will rely.

However, a closer examination reveals a more nuanced story. As highlighted in the discussion, two-thirds of Europe’s apparent economic underperformance can be attributed to factors largely outside the innovation economy: currency fluctuations, demographic shifts, America’s aggressive post-crisis stimulus, and the shale energy boom. These are significant factors, but they are not fatal flaws.

The true long-term risk lies elsewhere: in Europe’s stagnant productivity growth. As productivity compounds over time, even a slight lag can create a significant gap. Without revitalising its innovation engine, Europe risks becoming structurally uncompetitive, economically weaker, and strategically vulnerable.

This is not just a numbers issue. It relates to agency. Europe’s significant reliance on foreign technology providers, at every level from computing infrastructure to consumer applications, undermines its ability to shape its digital future.

Encouragingly, the evidence shows that Europe’s entrepreneurs are as capable as their American counterparts. When adequately funded, European startups achieve unicorn status at approximately the same rate as US companies. Dealroom’s data highlights that over 1,000 “champions” — defined as unicorns or revenue-strong “thoroughbreds” — have emerged from Europe’s venture ecosystem.

Companies like Spotify, Adyen, Klarna, and Revolut exemplify the ability to build world-class, globally scaled enterprises — proof that Europe’s innovation engine is driven by talent and ambition, not by limitation.

The real bottleneck lies elsewhere: in capital, cohesion, and the ability to scale. Europe’s challenge is not to ignite entrepreneurship, but to sustain and accelerate it.

The Draghi Prescription: A New Agenda for Competitiveness

Mario Draghi did not mince words. He calls for a decisive shift: a substantial increase in investment, a reconfiguration of financial markets, and a cultural embrace of growth and innovation.

First, Europe must commit to investing an additional €750–800 billion annually, channelling resources into frontier research, technological infrastructure, and industrial modernisation. Meeting — and exceeding — the long-promised 3% of GDP target for R&D is not optional; it is the price of relevance in a world increasingly defined by technological leadership.

Second, Draghi emphasises the urgent need for a genuine Capital Markets Union. Europe’s venture ecosystem, although significantly improved, still operates in silos, fragmented by national borders and regulatory differences. As a result, promising startups face challenges in scaling, leading the continent to lose much of its innovative potential to American and Asian investors.

Third, regulation must evolve. Europe’s leadership in setting global standards has often come at the expense of dynamism. Streamlining technology transfer policies, updating competition laws to encourage scale, and adjusting frameworks like GDPR to promote innovation instead of hindering it are essential steps forward.

Finally, Europe must launch an unyielding campaign for talent. Establishing a “Tech Skills Acquisition Programme,” as the Draghi report suggests, would signal a commitment to cultivating the engineers, scientists, and entrepreneurs needed to thrive in the coming decades.

Three Potential Futures for Europe

Looking ahead, three broad scenarios emerge for Europe’s technological trajectory.

In the most optimistic future — a Digital Renaissance — Europe fully embraces Draghi’s recommendations. Investment flows into deep tech, capital markets become unified, and a new generation of globally relevant tech champions emerges. Europe’s share of global tech value creation increases, establishing the continent as a genuine sovereign digital power.

Imagine a Europe in 2035 where Paris and Berlin rival San Francisco and Shenzhen as global innovation hubs, where quantum computing breakthroughs, green hydrogen startups, and AI-driven public services form the foundation of a new era of prosperity. Europe’s share of global tech value creation increases, and the continent establishes itself as a true sovereign digital power.

A more sobering outcome would lead to status quo stagnation. In this scenario, partial reforms yield incremental progress, yet entrenched fragmentation and risk aversion persist. Europe remains a prosperous but second-tier digital player, increasingly reliant on foreign innovation for essential infrastructure.

The darkest possibility, Fragmented Futures, envisions political divisions, protectionism, and bureaucratic inertia undermining efforts to rejuvenate the continent’s competitiveness. In this scenario, Europe’s digital sovereignty and broader geopolitical influence would diminish even further.

Seizing the Moment

Europe’s history is a testament to resilience and reinvention. Rising from the ashes of war, it has evolved into one of the most stable and prosperous regions in the world. However, past successes do not guarantee future relevance.

The opportunity before Europe today is extraordinary. For the first time in decades, policymakers, investors, and innovators are aligned regarding the need for a growth-first agenda. Initiatives like “EU Inc,” efforts to ease GDPR burdens, and significant investments in industrial tech and AI indicate that momentum is building.

But time is not on Europe’s side. Competitors are not staying idle. The world is entering a new era of AI-driven productivity, green industrialisation, and quantum technology, where gaining a first-mover advantage is crucial.

To thrive, Europe must think bigger, act faster, and dare to lead. This requires bold investments, smarter regulations, patient capital, and a political commitment to technology as a cornerstone of sovereignty and prosperity.

A Call to Action

The road ahead will not be easy. Establishing a new era of European tech leadership will demand risk-taking, perseverance, and an unwavering belief that innovation and competitiveness are necessities, not luxuries.

Policymakers must accelerate capital market integration and create regulatory environments that incentivise ambition. Investors should support European founders with vision and patience. Entrepreneurs must adopt a global mindset from day one, confident that Europe is a launch pad, not just a satellite.

Above all, Europe must acknowledge that the age of digital dependency can — and must — give way to an era of digital sovereignty.

The opportunity window is narrow. The time to act is now.