- 25 minutes ago
Europe is moving toward what policymakers call “digital sovereignty” — reducing dependence on major U.S. tech firms such as Microsoft, Google, Amazon, Meta, and Palantir Technologies.
The idea is not necessarily to “ban” American companies, but to make Europe less dependent on them in critical areas like:
cloud computing
AI infrastructure
government software
semiconductors
cybersecurity
payments and digital identity
The idea is not necessarily to “ban” American companies, but to make Europe less dependent on them in critical areas like:
cloud computing
AI infrastructure
government software
semiconductors
cybersecurity
payments and digital identity
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LifestyleTranscript
00:00It's probably fair to say that most European leaders are let's say rethinking their relationship
00:05with the United States at the moment. Europe has to be very careful. Certain places in Europe are
00:10not even recognisable. Europe is not doing a good job in many ways. Your countries are going to hell.
00:17This net has been cast far and wide from restarting a European arms boom to the EU
00:21imposing tariffs on Americans. But perhaps most importantly of all is bringing an end
00:27to America's tech dominance over Europe. It's not exactly a secret that America dominates the world
00:32of tech but it can be surprisingly easy to forget that the device you're watching this on, the software
00:37it uses and the apps you're consuming it on are almost all certainly owned by an American tech
00:42company. This has always made European governments a little uncomfortable but today it's become
00:47impossible to ignore. And over the past year governments across Europe have been quietly
00:52launching alternatives. A pan-European payments network to rival Mastercard and Visa. An open
00:58messaging infrastructure to challenge WhatsApp. Even a homegrown AI model built in Paris. All of it
01:04part of what would be the most ambitious technological transformation the continent has attempted since
01:09the dot-com boom. If it works it's an opportunity to finally take back control of the very infrastructure
01:14that sits at the heart of their economies and save hundreds of billions of dollars in the process.
01:19But it's also a massive gamble. Tech has become such a staple in modern life that it's easy to forget
01:25that it has deep roots. And these roots go far deeper than anybody in Brussels has fully reckoned with.
01:31Hospital records, bank transfers, surveillance, even the command system behind Europe's nuclear weapons.
01:37All of it runs on American technology. It's a system that took decades to build and now Europe is
01:43trying to undo it all in a matter of months. The only question is, are they already too late?
01:50Okay, given the recent rift that's been emerging between Europe and the United States, it's quite easy to
01:55imagine them as fundamentally different places. But at the most basic level, the US and Europe are
02:01actually remarkably similar. Both have similar populations, similar sized economies, and most
02:06crucially, are some of the wealthiest places in the world. However, with all of that said, when it
02:10comes to technology, they couldn't be more different. If you were to combine the total value of the four
02:15biggest tech companies in Europe, they wouldn't even be worth half of Amazon. And while that may
02:20seem abstract, this gap shows up in basically every aspect of people's everyday lives. Take
02:26something as mundane as paying for your morning coffee. When a European taps their card at a till,
02:31in a split second, that transaction travels to a server in the United States, gets authorized by either
02:37Visa or Mastercard, and then travels back. Together, Visa and Mastercard process approximately $4.7
02:44trillion worth of transactions across Europe every year, meaning virtually all European card and
02:50mobile payments currently run through non-European infrastructure. That obviously creates a massive
02:55vulnerability, as if America wanted to, they could simply decline to authorize European transactions,
03:01effectively shutting down the European economy overnight.
03:03Europe is all too aware of this, but wanting to do something about it and actually doing something
03:09about it are two very different things. Think of it like this. Imagine you're trying to set up a new
03:14social media company, which you want to compete with YouTube. The main barrier to success here isn't
03:19really that YouTube is an overwhelmingly great product. I mean, any disgruntled creator will probably
03:24tell you that. Instead, YouTube's main advantage is just the fact that everyone's already on it.
03:29Viewers know that anytime they go onto the site, their favorite creator will be there. And equally,
03:34creators know that if they want to build an audience, YouTube is the best place to do it.
03:38In effect, the value of the service comes from the fact that everyone else has agreed to use it.
03:43Now, it's a bit less obvious, but the exact same thing happens when you've got payment systems,
03:47like Visa or Mastercard. When you go to pay for something, you want to use a card that every shop
03:52accepts. And every shop wants to accept a card that every customer carries. So,
03:57Visa and Mastercard became the default. Not necessarily because it was the best product,
04:02but because it got there first. As arbitrary as that might sound, the EU is quickly starting to
04:07find out just how hard these systems are to dislodge. Their first real attempt to do this came in 2024,
04:13when 16 major European banks pulled together and launched an alternative payment system called
04:18Wero. The idea was straightforward. A European-owned network that could do almost everything
04:24Visa and Mastercard could, without the data and the dollars flowing back to America. And to be fair,
04:29technically, it was an impressive product. The only problem is that basically nobody uses it.
04:34Since its launch, the app has processed around 7.5 billion euros in transfers. Visa and Mastercard,
04:40meanwhile, process over 7 trillion dollars in European payments every year. Around 10,000 times more.
04:46And that's just one example of a network monopoly dominating the European market. Online messaging,
04:52social media, the app store. In all of these cases, we see the exact same dynamic playing out. And in
04:58each of them, it's the American companies which are winning. Now, to be fair, in the case of Wero,
05:03the EU never really forced anyone's hand. Adoption was essentially voluntary. And unsurprisingly,
05:08most people just didn't bother. But that approach seems to be changing. Earlier this year,
05:13European government signed a memorandum of understanding to build a fully pan-European
05:18payment system. In theory, it would automatically connect existing national payment networks across
05:24the continent into a single system, which would then allow transfers to happen across the continent
05:29without any need for American involvement. And payments isn't the only area where the EU is
05:34becoming more aggressive. Apple, for example, has been forced to allow app distribution outside of
05:39the app store on iOS for the first time in the iPhone's history, which means that European
05:43developers can now sell software directly to users without paying Apple's commission,
05:48saving companies billions of dollars. At the same time, WhatsApp was required to open up to third-party
05:54messaging apps, meaning for the first time, European users can now message people on entirely different
05:59platforms without switching apps. This is all effectively the first part of Europe's plan,
06:04create new laws and regulation specifically designed to break the American network monopolies
06:10which dominate European markets. It's one of the most aggressive regulatory moves any major economy
06:15has made against big tech, the kind of thing which would have seemed completely unimaginable even five
06:20years ago. But with that said, even if they do manage to pull it off, the truth is that it
06:24only
06:24really scratches the surface of European tech dependency. A good way of thinking of all the technology that
06:30runs the world today is a bit like an iceberg. At the top sits apps like Gmail, Chrome and Maps,
06:36things that we use every day. Just below that sits operating systems, developer platforms and content
06:42delivery networks. But right at the bottom of the iceberg and taking up pretty much all the space is
06:48cloud computing. Every time you use the internet to send an email, look something up or pay for
06:53something, you're creating digital data which needs to be stored and processed somewhere. Today that almost
06:58entirely happens in what is known as a data center. Enormous warehouse buildings, sometimes covering
07:03the area of several football pitches, packed floor to ceiling with computer hardware running around
07:09the clock. Building and maintaining infrastructure at that scale obviously requires a lot of money.
07:14So the industry is basically dominated by the three players who can afford it, Amazon, Google and
07:20Microsoft. Together these companies own and operate around 70% of the cloud capacity running across
07:26Europe. Now that obviously means that Europe is missing out on a huge amount of money, all of
07:31which gets sent to American businesses and shareholders instead. But there's actually a much more
07:35significant risk that comes with this dependency. In 2018, America passed a law called the Cloud Act,
07:42which gives US authorities the power to demand data stored on American owned servers, regardless of
07:47where they are in the world. This isn't just imaginary leverage either, as America has used this power
07:52before. After Russia annexed Crimea in 2014, the US blocked Visa and Mastercard from processing Russian
07:59payments, effectively stopping their customers processing payments overnight. This left hundreds
08:04of thousands of Russians with credit cards that now simply didn't work, freezing massive portions of
08:10the economy overnight. Now, nobody is seriously suggesting that America would do that to Europe,
08:15but either way it's still a fairly significant negotiating chip to hand to anyone,
08:19even someone you thought was a close ally. It's also important to remember that cloud infrastructure
08:24is just one example. Computer chips, nuclear capabilities, even nuclear defense capabilities,
08:30are all heavily dependent on US technology. Even if Europe were able to create alternatives to things
08:36like WhatsApp, Mastercard or Gmail, it wouldn't change the fact that the infrastructure they all rely on
08:41is still controlled by the United States. Now, as wise as YouTubers like to think they are,
08:46this isn't some groundbreaking fact that we've just unearthed. In fact, the EU has known about this
08:51for a while, and there's actually already been a couple of high-profile attempts to try and build
08:56Europe's own tech infrastructure. The most prominent of these was something called Gaia-Ext,
09:01launched in 2019 as a joint Franco-German initiative to build a sovereign European cloud infrastructure
09:07that European businesses and governments could use without routing their data through American servers.
09:12However, five years on, it had produced almost no actual infrastructure, and one of its founding
09:17members described it as a crushing failure and a colossal waste of time. Now, it's easy to blame EU
09:23bureaucracy, and that does play a role, but the more fundamental problem is far more simple. Each year,
09:29Europe invests around 700 billion euros less than the US on tech, roughly double what the entire EU spends on
09:37defense. Even projects like Gaia-X, which were meant to be groundbreaking, never saw more than 200
09:42million dollars in funding, practical pennies compared to what American firms spend. However,
09:47what's a bit more surprising about this is that both blocks actually invest roughly similar amounts
09:51of public money into tech research. And the difference only really emerges when you take a
09:56look at private investment. At pretty much every level of fundraising, European companies raise around
10:0180% less than their American counterparts. Which means two tech startups can come out of equally
10:07good universities with equally talented engineers, but within a few years, the American ones would
10:12have 10 times the budget. This creates a self-reinforcing cycle. The lack of capital means European
10:17companies can't grow fast enough to prove themselves. And because they haven't historically grown to global
10:22scale, investors never believe that they will. And so that capital never comes. This is only made worse
10:28by the fact that unlike in America, the huge amounts of capital and wealth which would be used to invest
10:34in these companies comes from inherited money. Wealthy families who have passed their money on for
10:39generations. And because of that, European investors tend to be a lot more focused on preserving wealth
10:44rather than taking on big risky bets. The kind of bets which you need in order to get tech companies
10:50off
10:50the ground. If Europe is really serious about catching up with American tech, then building a few
10:55alternative apps was never going to be enough. The real problem is that European companies simply
10:59can't raise the money they need to grow, or more importantly, build the infrastructure Europe needs
11:04to be truly independent. It's a problem that the continent has been trying to tackle for years,
11:09with very little progress to show for it. So in September 2023, the EU got Mario Draghi,
11:15the former president of the European Central Bank and one of the most respected economists in the world,
11:19to write a report diagnosing what he thought was exactly wrong with the European economy,
11:25and what it would take to fix it. Today it basically stands as the union's blueprint for
11:29closing the gap with America, and getting off American tech in the process. And this plan
11:33effectively breaks down into three main parts. The first, and in some ways the most fundamental,
11:39is to finally make Europe into a single unified market. Something it has claimed it has done for decades,
11:45but never quite managed in practice. To understand why that matters, think about what actually made
11:50Google and Amazon into the giants they are today. Before either company ever thought about going
11:55global, they had the entire United States to grow into. A single market of 330 million people,
12:01all operating under the same laws. That home market is what gave them the space to build the
12:06infrastructure needed to eventually take on the world. Now, you might expect that European companies
12:11would have the same thing. After all, it is called a free trade zone. But the reality,
12:16especially for tech companies, is very different. Because each country maintains its own data
12:21protection regulations, its own customer law, and its own rules around digital contracts,
12:26a startup trying to operate across all 27 member states faces a different legal reality in each one.
12:32That means a European company building, say, a healthcare data platform, has to hire separate legal
12:37teams from Germany, France, Poland, all before it has a single paying customer inside its home country.
12:44That means the actual costs of these barriers are inevitably hard to calculate. But the best
12:49estimates that we have so far suggest that it could be equivalent to a tariff rate of around 45%
12:54between EU countries. And for businesses trying to scale, that is a huge additional cost that
13:00American companies simply don't face. Of course, given that each member state is still also their own
13:05country, it's extremely hard for the EU to actually force everyone to adopt the same rules. So to get
13:10around this, Draghi proposed the 28th regime. The idea is basically to give companies the option to
13:16opt out of national regulatory schemes and operate under a single EU-wide rulebook instead. In doing so,
13:23European tech companies would finally have a home market big enough to actually grow and compete with
13:28their American counterparts in. If they could get it passed, it would be a massive free win. The trouble
13:34is that it requires every member of state to voluntarily hand over some of their regulatory
13:38power to Brussels, which is unsurprisingly not something they are very keen to do. But regardless of
13:44whether or not the idea actually gets implemented, the whole process reveals a much bigger issue facing
13:49tech companies in Europe. They are insanely regulated. Now, don't get me wrong, a lot of the
13:54regulations that they've passed do sound reasonable on paper. Things like the universal charging port,
14:00which makes all phones and tablets use a USB-C charger, a very convenient for day-to-day consumers.
14:06But even Apple, whose lightning connector was directly targeted by the law, still had to redesign
14:11its entire iPhone product line for the European market, which is at a compliance cost running into
14:16hundreds of millions of dollars. Given that they're one of the most profitable companies in history,
14:21they were able to absorb this without too much issue. But for a smaller European startup,
14:25those costs would be crushing. So a big part of Draghi's plan to help European tech is, bluntly,
14:31for the government just to do less. The report explicitly called for a 25% reduction in reporting
14:38requirements for businesses, which if implemented, would make it far more easy for European companies
14:43to compete with their American counterparts. And that brings us to the last and possibly most
14:48radical proposal to get more money invested into European tech companies, to fundamentally change how the
14:53retirement system works. In the United States, when people save for their retirement, that money
14:58typically goes into a fund, which then gets invested back into companies' stocks. That means that the
15:03entire tech ecosystem is constantly being flooded with money from everyday people saving for their
15:09retirement. But in Europe, it's totally different. Governments collect money from workers today,
15:13and use it to pay for retirees today, a system known as pay-as-you-go pensions. Because of this,
15:19the total amount of pension money in the EU which is invested into the stock market is equivalent to
15:24just 32% of the bloc's GDP, compared to 142% in the US. That gap is a large part
15:31of the reason why
15:31American tech companies are able to raise so much more money. It's not just that Americans are more
15:36entrepreneurial, or willing to take more risks, it's also that there is an enormous reservoir of
15:41long-standing cash savings in the US that needs to be invested somewhere. The Draghi report effectively
15:46proposes two things to change this. Firstly, making workplace pension savings the default for
15:52European workers. That would mean, rather than having to actively choose to save, you'd have to
15:57actively choose not to. In theory, boosting the amount of money that could be injected into EU tech
16:02companies. And secondly, stronger tax relief on pension contributions. Right now, the incentive to
16:08save into an invested pension fund varies wildly across Europe, but generally they are pretty weak.
16:13The proposal is to make it consistently attractive everywhere, in the same way that a 401k works in
16:19the US, so that ordinary workers across the continent are actually putting money into these
16:23funds which get invested into companies. I get that these might not be the most headline-grabbing ideas,
16:29but the reality is that actually replacing American tech requires a lot more than just building
16:34alternatives. Whether any of it actually happens though is a different question. One year on from its
16:40publication, only around 11% of the report's recommendations had been fully implemented.
16:45The larger member states have dragged their feet on regulatory harmonization,
16:48and the pension proposals remain deeply contentious. And the 28th regime idea only reached the commission
16:54in early 2026. And that's really the deeper problem running through all of this. From the Draghi report,
17:00to Gaia X, to Wero, getting anything through the EU's web of regulations is very tough. On paper,
17:07there are perfect circumstances to finally get the continent off American tech. The only question
17:11is whether the political will is strong enough to actually make it happen.
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