Earlier this week, Mario Draghi presented his long-awaited report on the future of European competitiveness. The report adopts an alarmist tone as it issues a stark warning to the European Commission: without urgent action, the EU faces an “existential challenge” that could lead to a “slow agony”. In his report, Draghi calls for an €800 billion investment boost and argues that the EU must implement an ambitious industrial strategy to remain competitive on the global stage. He calls for a fundamental change in the way the EU coordinates regulatory, trade and industrial policies, including a major reform of the EU budget and the ability to issue new common debt to finance technological investment. Draghi even questions the EU’s historic focus on competition, suggesting that future growth will require facilitating mergers and acquisitions of European market leaders. The report argues that improving competitiveness and productivity gains cannot rely on structural adjustments such as easier access to capital or lower labor costs alone: real progress will also come from substantial investment in technology and a coordinated, long-term vision for Europe’s future.
Draghi’s report offers a mix of familiar ideas and fresh ambitions for Europe’s tech industrial strategy. There’s the usual call for an overhaul of the Digital Single Market – lighter, harmonized regulations to help EU companies scale. And, of course, there’s the dream of creating “world-class innovation hubs” inspired by Silicon Valley. But the report also makes some bold recommendations, including a call for €150 billion in public-private investment in the tech sector.
Draghi’s Plans for Tech Development: Funding with a Focus?
Draghi’s report highlights the need to improve how Europe finances disruptive innovation. It suggests that the EU’s research and innovation programme Horizon 2020 should be reformed with a focus on a few key priorities, and a larger share of its budget should go toward high-risk projects with the potential for breakthrough technologies. To achieve this, the report recommends transforming the European Innovation Council (EIC) into an “DARPA-type agency,” modeled after the U.S. agency that supports high-risk, high-reward innovation. The new framework would be managed by experts in the field, streamline application processes, and focus on outcomes. The report also calls for doubling the programme’s budget to €200 billion over seven years.
While the ambition of such a new agency is welcome, past initiatives show the importance of combining such investments in research with long-term support for deployment and scaling. Ophélie Coelho’s recent book on digital geopolitics provides an overview of past European projects aimed at achieving “digital sovereignty” that did not succeed. The example of the Franco-German initiative Quaero, which she cites in her book, offers an important lesson for public investment in technology. The project was one of many political efforts to create a European competitor to Google’s search engine. In fact, Quaero was launched in 2006 with the goal of “creating an ecosystem conducive to research in digital computing for industrial applications,” but it lacked a strategy for bringing its innovations to market. Like other short-lived initiatives, Quaero’s failure underscores the critical need for sustained investment and a long-term vision to ensure that research translates into real-world success.
Compared to existing EU instruments, one can imagine how a new European agency could serve the purpose of creating long-term institutions, overcoming national competition and enabling top-down funding of large-scale initiatives. As expressed in Draghi’s report, it could reduce the current disconnect between research and innovation programs and their industrial applications. However, such long-term investment needs to be underpinned by a political vision and cannot simply rely on a techno-solutionist approach to innovation. Such a vision should aim to maximize the public interest of Europeans and address the governance and political economy of the sector. At Open Future, we have emphasized in the past the need to go beyond regulation and to invest in Public Digital Infrastructures that could support a vision for a Shared Digital Europe. Implementing such a vision requires an ambitious industrial policy that goes beyond an “arms race” around specific digital systems or tools that are currently hyped as the next disruptive technologies. It must ensure the development, deployment and maintenance of technologies that not only increase Europe’s competitiveness, but also promote greater technological empowerment, enabling its citizens, businesses and public institutions to reduce their political and economic dependence on the current digital landscape, which is characterized by centralization, surveillance, and extractivism.
Public Foundations for European AI Leadership?
Draghi’s report provides an interesting example of how public investment can indeed help generate economic activity and returns, but also play a role in the political economy of a sector. While the report argues that it is too late for Europe to catch up in some technology areas, such as cloud computing, it supports the idea that the EU still has a chance to become a global leader in “future waves of digital innovation,” especially in artificial intelligence (AI).
According to the report, this opportunity comes from past European public investments through the European High Performance Computing Joint Undertaking. Since 2018, the Euro-HPC Joint Undertaking has built a unique computing infrastructure, with several of its supercomputers ranking among the top ten worldwide. While this capacity has been used primarily for research, the report recommends expanding access to AI startups, SMEs, and the broader AI community. It also suggests increasing AI-focused computing capacity and adding cloud and storage capabilities. To fund this, the EU should create a “federated AI” framework where public computing resources can be offered to SMEs in exchange for financial returns, helping to boost Europe’s AI competitiveness. Such a mechanism, which returns revenues from successful initiatives to the public, can help legitimize public investment in the sector.
Replacing Giants: Satisfying Telcos’ Appetite for the Cloud
As mentioned above, Draghi’s report acknowledges that EU companies can no longer compete with US hyperscalers in the cloud computing market due to massive investments and economies of scale. However, it stresses that Europe should focus on building alternative sovereign cloud solutions for critical areas such as security and encryption. The report also suggests the adoption of EU-wide data security policies and the implementation of mandatory public procurement standards to support a competitive domestic industry in these critical segments.
But Draghi’s priorities for Europe’s digital infrastructure investment are largely based on mobilizing private investment from the European telecom sector. These ideas were already presented in the European Commission’s “How to master Europe’s digital infrastructure needs?” White Paper. Both documents argue for stronger deregulation and consolidation of the EU telecom sector to increase investment in connectivity and edge computing, which would allow European tech champions to emerge and compete with US and Chinese rivals. According to the report, fragmented markets are hindering the large-scale investment needed for the deployment of 5G and AI. The report proposes the creation of a true EU Digital Single Market for telecoms, by reducing national regulations and facilitating mergers. To fund these developments, the report recommends allowing “commercial investment sharing” between network operators and large technology platforms that make heavy use of EU networks.
As we already mentioned in our response to the European Commission’s public consultation on this topic in February 2024, we believe the EU’s goal should not be to replace one centralized and extractive model with another, not even a European one. Instead, decentralized and federated solutions should be co-developed, stewarded, and supported. Fostering a different architecture of the digital space requires engaging with a variety of actors, not only commercial but also public and civic in nature. Here again Coelho’s accounts of previous attempts to create a European cloud alternative are instructive. Indeed, the Andromeda project, launched in 2011 to create a French cloud platform, serves as a cautionary tale about the risks of industrial strategies that rely solely on existing large domestic companies. In her book, Coelho notes that in the early 2010s,
“some European companies had already developed cloud platforms and technologies. To name just a few, Lost Oasis and Gandi launched their own cloud in 2008, the same year Google Cloud, the online workspace, was released. Jamespot existed since 2004, and Nexedi (now Rapid.Space) had an infrastructure management platform from cloud to edge since 2009.”
Despite this emerging domestic expertise, the French government opted to entrust the Andromeda Project to industry giants Thales, Orange, and Dassault Systèmes—none of which had any real cloud experience. The project quickly unraveled, with Orange and Dassault splitting into two competing products that failed to meet market needs. As Coelho points out, this episode underscores the danger of prioritizing established big corporations over fostering true innovation, because of short-term political goals and corporate interests.
Beyond the Competitiveness Agenda
While the report makes some interesting recommendations for building an industrial strategy, such as mobilizing new sources of public funding and investing in shared public infrastructure, we believe that the proposals to deregulate and give a blank check to the European telecom sector are a mistake.
Inspired by Ophélie Coelho’s book and her review of the EU’s past industrial policy failures, we believe that such an industrial strategy should be based on a long-term political strategy, not on the techno-solutionist concepts promoted by consultancies or large corporations. For us, this means addressing Europeans’ demand for open, interoperable and non-extractive technologies beyond a mere “competitiveness agenda”. Industrial strategy should not serve particular technological outcomes in line with corporate interests, but should be mobilized for societal outcomes. Investments should ensure that democratic control and agency over the digital infrastructure on which we increasingly depend is strengthened.
