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EU’s Digital Competitiveness Suffers From Regulatory Burden and Lack of Capital, Research Finds

May 2024 by CCIA Europe

A major new study on strengthening EU digital competitiveness explains why the EU has been less successful than the United States and China in growing its tech sector, and proposes actionable recommendations to close the widening gap.

Solutions proposed by the authors include, among other things, a temporary pause on new EU digital legislation and changes that would allow European pension and insurance funds to make tens of billions in new funding available to cash-strapped tech startups.

The independent report by the European University Institute’s (EUI) Centre for a Digital Society will be launched this afternoon at the EUI’s State of the Union in Florence, where the authors discuss their findings with Enrico Letta, the former Italian prime minister who recently presented his landmark report on the future of the Single Market to the Council of the EU.
In recent years, the European Union increasingly has been struggling to get a grip on its growing gap in digital competitiveness with global trade partners. The 101-page report looks at the different steps the EU has taken so far, and why they haven’t been effective enough.
The authors also put forward solutions in six major areas, including ways to address critical shortcomings such as scale-ups’ lack of access to capital and skills, incomplete integration of the EU Digital Single Market, and the need for Europe to create better tech laws.
According to the report, the EU actually produces more tech start-ups than the United States per year, but innovative EU firms subsequently fail to scale up due to a lack of capital.
Pension and insurance funds, on the other hand, hold a massive €13 trillion. Europe could unlock this potential by allowing funds to invest in higher-risk, higher-reward ventures – not only helping to balance portfolios, but also injecting tens of billions into the EU tech scene.

“This one reform alone could potentially be more than adequate to fully solve the serious, long-standing problem of inadequate capital for high tech start-ups,” the authors underline.
At the same time, Europe is drowning in a patchwork of new digital rules that hamper its competitiveness. To jumpstart the EU’s tech engine, the authors believe that “the next few years should reflect as much as possible a pause in new legislation, and a focus on correct implementation of the many laws that were just put in place” instead.

The following can be attributed to CCIA Europe’s Senior Vice President & Head of Office, Daniel Friedlaender:
“Any industry tends to complain about new EU rules, but this report reveals that the regulatory burden on Europe’s tech sector has become truly excessive and self-defeating, hurting the economy.”
“Addressing the EU’s sliding competitiveness should be the top priority of the European Parliament and Commission during their next five-year term, starting after the June elections. Today’s report puts forward clear actions that should be taken now.”

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