EU’s Digital Lag: Urgent Reforms Needed to Compete with US and China
(Bloomberg) —The European Union (EU) is facing significant challenges in maintaining its economic competitiveness, particularly in the digital sector, where it lags behind the United States and China. According to a draft report cited by Bloomberg, the EU’s executive arm highlights mounting risks stemming from geopolitical tensions, strategic dependencies, and unfair trade practices that disproportionately impact the bloc’s open economy.
Digital Sector Lag: A Growing Concern
The report builds on earlier findings by former European Central Bank President Mario Draghi, emphasizing that the EU is falling behind its global counterparts in critical areas of digital innovation:
Unicorn Companies: The EU is home to just 263 unicorn companies, compared to 1,539 in the US and 387 in China. This disparity reflects broader challenges in scaling European tech businesses.
Artificial Intelligence (AI): Europe lags significantly in AI deployment, where the US and China are already “way ahead,” according to the report.
Structural Challenges Hampering Growth
Beyond the digital sector, the EU faces other key hurdles:
High Energy Costs: Electricity and energy prices in Europe remain two to three times higher than in the US, undermining competitiveness and complicating climate neutrality goals.
Trade Pressures from China: Subsidized Chinese exports continue to threaten EU manufacturing, exacerbating the bloc’s strategic dependencies and trade imbalances.
Limited Progress and No New Policies
While the draft report reiterates Draghi’s earlier warnings, it does not propose new policy measures. Instead, it highlights the urgency of addressing structural inefficiencies to remain competitive.
Calls for Action
Draghi’s recommendations call for annual investments of €750–800 billion—equivalent to 5% of the EU’s GDP—to strengthen the bloc’s competitiveness. These investments would focus on industrial coordination, digital innovation, and regulatory simplification.
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