A Year After The Competitiveness Compass, Europe Remains Far from Tech Independence

One year after the European Commission unveiled its Competitiveness Compass, the gap between Europe’s ambitions for technological sovereignty and its reality remains wide. Across the bloc, member states continue to heavily depend on foreign digital infrastructure, capital, and supply chains.

The issue returned to the fore this week as European competitiveness ministers gathered in Cyprus on Tuesday to take stock of the Compass’s first year and assess how far Europe has moved from strategy to structural change.

The discussion focused on mobilizing “€1 trillion across innovation, clean technology and security.” These include the AI Continent Action Plan, the Clean Industrial Deal, and the Critical Raw Materials Act, alongside the first batch of “Omnibus” simplification packages.

During a press conference after the meeting on Tuesday, Cyprus’ Minister of Energy, Commerce and Industry, Michael Damianou, acknowledged both results and obstacles. “While progress has been made, challenges persist, notably AI uptake among SMEs, financing constraints for start-ups, and regulatory and administrative burdens”.

Commissioner Michael McGrath insisted that “in just 12 months, over half of the initiatives under the Competitiveness Compass have already been delivered.” McGrath called this “real progress”, while stressing that “under the gravity of the situation, we must now accelerate.”

McGrath pointed in particular to regulatory simplification efforts, noting that Brussels has now presented 10 Omnibus packages. According to the Commisioner the measures will save around €15 billion per year in administrative burdens, with one third of the savings benefiting medium and small-sized companies.

However, not all are convinced of its impact. Claire Godfrey, Executive Director of the Balanced Economy Project, warned that the initiative risks reinforcing existing dependence on Big Tech players. “So far feels more like a narrative shift rather than concrete progress,” she told Tech Policy Press.

EU’s digital dependence by the numbers

Concerns raised around the Compass are reinforced by a recent European Parliament report on technological sovereignty and digital infrastructure, approved by a large majority at the end of January. The document maps the level of European dependence on foreign players, specially US and China, and proposes strategic actions to improve the bloc's competitiveness as the Trump administration announced a $500 billion investment in AI until 2029.

According to the file drafted by the European Parliament’s Committee on Industry, Research and Energy, 92% of Western data is stored in the United States, largely on US-owned infrastructure. Also, 69% of Europe’s cloud market is controlled by US providers such as Amazon Web Services, Microsoft Azure, and Google Cloud, while European providers account for only around 13%.

In Artificial Intelligence, the scenario is no different. EU attracts just 7% of global investment, compared with 40% in the United States and 32% in China. And in semiconductors, Europe produces around 10% of global output, while consuming roughly 16%, leaving it exposed to supply disruptions. That impact was already felt by different member states when shortages affected European automotive and industrial manufacturers, forcing temporary production slowdowns and delays.

The file rapporteur and member of the European Parliament, Sarah Knafo, argued that the parliament's approval reflects a broader shift in mindset. “The EU has finally realized that it has become dependent in strategic sectors such as data, AI, and semiconductors,” she said, calling the shared diagnosis “a first major step.”

In a simplification exercise to fight regulatory burdens, claimed to be the greatest challenge by “over 60 % of EU companies, and 55 % of SMEs,” the European Parliament proposes a controversial measure that mirrors US law. A “one-in, two-out” regulatory approach, implemented by US President Donald Trump in 2017, under which two existing regulations would be removed for every new one introduced.

However, this measure is among the proposals that MEP Knafo considered diluted in the final text after parliamentary negotiations. “Several proposals were softened during negotiations. I supported the ‘one-in, two-out’ rule to reduce regulatory burden, but this approach was significantly diluted in the final text,” she told Tech Policy Press.

However, previous studies carried out by the European Parliament Committee on Legal Affairs in 2023 warned that while the mechanisms might reduce regulatory volume, they do not improve quality. Besides that, research says it might undermine the EU’s ability to design effective safeguards in complex and strategically sensitive sectors such as digital infrastructure and emerging technologies.

Tech sovereignty is also a legal question

Dependence on foreign providers raises risks that extend beyond competitiveness, like data protection and legal control. Under US laws such as the Foreign Intelligence Surveillance Act and the US Cloud Act, American authorities can compel access to data held by US companies, even when physically hosted in Europe. In practice, this means that if a European ministry relies on a US-based cloud or communication tool, the exchanges may still fall under US jurisdiction.

Industry figures argue that this legal reality is often underestimated. “Software has become political”, said Frank Karlitschek, founder and CEO of Nextcloud, a German open-source content collaboration platform, stressing that sovereignty depends less on where data is stored than on which legal system governs it. Under the Cloud Act, he noted, US authorities can access data held by American companies regardless of whether it is located in Europe or handled by European staff.

Claire Godfrey shares that assessment, dependence on non-European firms increases the risk that data and services are exposed to foreign political and legal dynamics. It’s “not a hypothetical risk,” she argued, but a reason why digital sovereignty has moved firmly into the policy mainstream.

These concerns are already shaping national choices. France has moved to restrict the use of US-based video-conferencing tools such as Zoom by public officials, favoring domestically controlled alternatives. The Dutch government has also made efforts to reduce reliance on US services by urging parliament to move away from American cloud providers.

Enforcement and investment gaps

With the Competitiveness Compass entering its second year, critics argue that addressing Europe’s digital dependence will require more than new strategies or funding instruments. In their view, competition enforcement remains a missing pillar of the EU’s sovereignty agenda.

Godfrey contends that without tougher enforcement, efforts to reduce dependence risk will stall. “What the Commission should be doing is robust enforcement in cloud, platforms, and adtech,” she said, warning of “deep concern that DG COMP may wave through the Google/Wiz deal, given the structural risks this poses for cloud concentration and cloud security.”

From an industrial perspective, Karlitschek goes further, arguing that Europe has normalized levels of dependence that would be unthinkable in other sectors. “Around €360 billion is sent every year to Silicon Valley, instead of being spent on European innovators,” he said. “This would never be acceptable if it happened in food, cars, or any other strategic industry.”

Beyond enforcement, Nicolas Petit, Legal Professor at European University Institute, argues that Europe’s merger policy is the "weakest link in Europe’s push for technological independence,” particularly in sectors such as cloud and digital infrastructure, where consolidation risks locking in reliance on non-European firms.