Welcome to ICYMI – a weekly snapshot of European news stories that have given me pause for thought. ICYMI is a chance for you to go beyond the front-page headlines and find out what other stories may be worthy of your attention.
The future of European competitiveness was thrust into the spotlight last week.
Mario Draghi, the former European Central Bank President, published his long-awaited report looking at the current challenges that businesses and industries are facing .
Despite an incredibly turbulent few years, including the COVID-19 pandemic, Russia’s war again Ukraine, and the UK’s historic departure from the single market, Draghi concludes that Europe remains one of the most world’s competitive and innovative regions.
However, these challenges combined with macro issues like climate change, artificial intelligence, and international politics, have taken their toll on Europe’s global standing.
Nowhere is this more keenly felt than in Europe’s tech sector. Just four of the world’s 50 largest tech companies are European, and the gap with China and the US is growing further.
According to the 400-page report, no European company has achieved a market capitalisation of more than €100 billion in the last 50 years. Whereas six companies in the States are currently valued at more than €1 trillion. So, what’s the reason for this?
In short, Draghi argues that an excessive amount of complex legislation is hampering tech innovation in Europe. As a case in point, the EU has passed more than 100 tech-focused laws, including the AI Act which came into force at the beginning of August.
Although legislation is intended to protect companies and consumers from anti-competitive activity, unsafe products, and unethical behaviour, in doing so it can create burdens for businesses, stalling innovation, and putting the brakes on progress.
What’s more, in a global marketplace, a tight net of strict legislation can potentially put tech companies in Europe at a disadvantage against those trading overseas in China or the US.
It’s not just start-ups and scale-ups that are affected. Many of the world’s largest technology companies have encountered legal challenges upon entering the European market.
One company that is well-versed in the EU’s legislative landscape is Google.
La Tribune reported this week that the search giant lost its fight to appeal a €2.4 billion fine issued by the European Commission for anti-competitive practices in 2017.
At the time, it was the largest fine ever issued by the European Commission, but that has since been surpassed by a €4.3 billion penalty, which was issued in 2018 to Google.
In total, Google has been fined €8.2 billion by the European Commission for uncompetitive behaviour in the last 17 years. This includes blocking rivals from using Google Search Ads, altering Google Shopping results to feature its own products more prominently, and making unfair use of Android software to promote Google’s apps to consumers.
However, this pales in comparison against the amount of additional investment that Draghi believes will be required to strengthen European competitiveness.
He has called on EU nations to increase their spending. He advocates for increasing investment to its highest level in more than 50 years, with an additional €800 billion a year. This equates to around 5 percent of GDPacross the whole of the EU.
Yet while a huge injection in funding would surely be welcomed by tech companies across the continent, many of Draghi’s recommendations may never come to fruition unless all 27 governments in the EU bloc are able to agree.
For now, at least, it seems tech companies will have to continue to navigate the complex web of rules and legislation to pursue innovation and scale across the region.
