The EU’s ‘Digital Decade’ faces challenges, including public sector delays, market overheating, and an additional price tag of at least €250 billion, which may hinder reform success across Europe. A more realistic and critical approach is needed, writes Eglė Markevičiūtė.

Eglė Markevičiūtė is the head of Digital & Innovation Policy for the Consumer Choice Center and the former Vice-Minister of Economy and Innovation of Lithuania.

The European Union is setting its sights on the future, one “five-year plan” at a time. Adopted in 2022, the EU’s “2030 Digital Compass: the European Way for the Digital Decade” has ignited discourse about Europe’s digital future and how to plan while not smothering technological innovation in the short term.

The European Commission has pledged a substantial commitment of over €165 billion toward these goals, but the European experience shows that money can’t buy a well-coordinated plan. The success of the Digital Decade hinges on unprecedented levels of coordination and reform at all levels between EU institutions and the Member States. Getting this right will prove to be anything but simple.

Member states had until October 2023 to craft businesses’ use of artificial intelligence strategic roadmaps for implementing the Commission’s plan, but most were already late. Hopes of a ten-year plan will likely be compressed into nearly half that, if not less.

The Commission states that the success of the Digital Decade relies on relevant political reforms, improvements in business environments, new financial incentives, and increased investments in digital technologies and infrastructure. From all estimates, that means at least an additional €250 billion to come close to these goals.

Key to all of this will be political reforms, which are far from easy. The Recovery and Resilience Facility (RRF) is a good illustration, with nearly twenty per cent of the €723 million allocated to digital reforms. Some countries, particularly smaller ones, are grappling with an overheated market response, where IT vendors are struggling to keep pace with the change. The current state of the EU’s single market regarding public procurement and complex procurement processes within member states prevents smooth cross-border business participation. This is all putting reform efforts at risk.

In the realm of compliance and public sector capacity, the Commission is aiming to implement a complicated set of regulations, including the Digital Services Act, Digital Markets Act, e-Privacy regulation, Artificial Intelligence Act, Data Governance Act, Data Act, Cybersecurity Act, the updated E-identity regulation (eIDAS 2), the updated Network and Information Security Directive (NIS2) and more. As exhaustive as this list may be for innovators and entrepreneurs, it also requires a significant expansion of public sector capacity, which some countries, especially the ones with smaller bureaucracies, have already been silently criticising.

One crucial point set in these plans is the EU’s digital sovereignty principle, including the need to foster EU-based business and apply digital sovereignty measures to high-risk suppliers for critical assets. The exclusion of technology from countries that pose a national security threat to the EU is long overdue. The experience of similar reforms in some member states demonstrates, however, that the exclusion process is problematic, given the global makeup of the ICT market. European alternatives like cloud computing are still minimal, and transitioning from existing solutions would impose financial, regulatory, and architectural burdens on EU countries.

As the plan suggests, doubling the number of European unicorns is daunting. The EU trails other economic areas significantly with just 249 unicorns in early 2023, while the US boasts 1,444 and China has 330. Baltic startups, in particular, face hurdles in complying with new EU regulations. Coupled with varying regulations across member states, this conspires to deter Eastern European and Baltic startups from pursuing opportunities and scaling within the bloc. Scaling tech startups relies heavily on access to talent, and while the European Commission wants to compete with Silicon Valley for talent, attracting digital talent from the Global South and other regions remains important and should be essential in addressing the continuous European brain drain to the United States.

The Digital Decade sets a high bar for innovation in quantum computing, AI, semiconductors, blockchain, and more. However, achieving technological breakthroughs means not just political support and financial incentives but also a profound shift in the mindset of European science institutions. Translating European academic excellence into commercialised, marketable products and services remains challenging. The European innovation ecosystem, designed to support the entire innovation lifecycle, is often characterised by fragmentation, politicisation, and a lack of accountability. Therefore, a heightened focus on education and science reforms is crucial for the Digital Decade’s ultimate success.

The EU’s Digital Decade is an ambitious vision for Europe’s future, with important targets in digital skills, business, infrastructure, and public e-services. Planning big and being ambitious has benefits, but given Europe’s grim experience in designing big, allocating substantial finances, yet overestimating bureaucratic and technological capacity and not reaching the desired goals should teach Europe to be more realistic and critical. Only critical, practical and transparent evaluation of member states’ capacity and individual aspirations would help avoid the usual outcomes.

Originally published here



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