Europe finds itself at a strategic turning point in the fields of digital technology and artificial intelligence. A recent report by the Tony Blair Institute warns that the Old Continent is falling behind the United States and China, while the pace of geopolitical change demands urgent action
“The world is entering a new era in which leadership in frontier technologies determines not only economic success, but also state power and societal resilience,” the authors of the report stress. Meanwhile, Europe is lagging: the United States has “17 times more computing power than Europe,” and China is investing in AI infrastructure at an unprecedented pace.
“For Europe to prosper, it must undergo a deep and urgent transformation, becoming a strong, competitive, and global digital power,” the report’s authors warn.
Fragmentation, underinvestment, and regulation stifle innovation
The report points to key barriers undermining Europe’s competitiveness: “fragmented markets and complex regulations make it difficult for companies to scale,” compounded by “chronic underinvestment in infrastructure” and some of the “highest energy prices in the world.” As a result, European companies are forced to compete under significantly worse conditions than their counterparts in the US or China.
“One of Europe’s greatest strengths is its high quality of life and its social model. At the same time, Europe faces challenges such as an ageing population and overstretched healthcare systems. Artificial intelligence is already helping doctors diagnose faster and more accurately, freeing up time they can devote to patients,” notes Olivia de Hennin, a digital policy expert.
Europe’s innovation ecosystem also fails to produce global technology champions: in the US, “more than 240 technology companies valued at over $10 billion” have emerged, compared with just 14 in Europe.
“The Draghi report rightly points out that the EU is as competitive as the US if the technology sector is excluded. But the eight largest technology companies account for nearly 40% of the market capitalisation of the S&P 500, which shows that technology cannot be ignored in any analysis of economic growth,” de Hennin adds.
Technology as the foundation of security and resilience
New technologies — from AI to robotics and biotechnology — are redefining the continent’s security. The war in Ukraine has shown that technological superiority can be decisive: the rapid adoption of drones and data-driven command systems is transforming the modern battlefield.
“Today, software plays a critical role in delivering military advantage. New civilian and dual-use technologies are changing the cost equation of defence—a €1,000 drone can destroy a €3 million tank, and AI-based radar-jamming systems costing thousands can disable equipment worth millions,” de Hennin emphasises.
The report warns that without rapidly building its own technological sovereignty, Europe risks remaining “weak and isolated” on the global map of security and the economy.
A vision for a digital Europe: potential and a chance for a breakthrough
Despite its systemic weaknesses, Europe has solid foundations: “the largest integrated market in the world,” significant private capital, world-class universities, and a “high level of social trust” essential for trusted digital services. The report identifies four areas for reform: regulation, infrastructure, technology adoption, and promotion.
“Current EU digital regulations increase the cost of doing business, hinder innovation, and limit companies’ ability to scale. To change this, the EU should accelerate reforms that create a harmonised, innovation-friendly digital single market,” says de Hennin.
In terms of infrastructure, ensuring sufficient energy resources and computing power is critical:
“We recommend that Europe secure at least 10% of global computing power, complete the energy union, and accelerate the development of nuclear and renewable energy, as well as grids and energy storage,” the expert adds.
Europe must also speed up AI deployment and talent development:
“Open source will play a key role, and Europe should lead in building a trusted and interoperable AI ecosystem,” de Hennin stresses.
The final pillar of the vision is strengthening Europe’s technological position globally: creating regional technology hubs, exporting standards of digital governance, and attracting international investors.
“The world is changing, and Europe must keep pace with those changes,” the expert concludes.
The authors of the report also underline the need for a new political narrative: “technological competitiveness is not a priority for voters because leaders have failed to link it to what matters most to citizens—security, prosperity, and their children’s future.”
They call for the creation of a “political force capable of coordinating action across Europe,” encompassing the EU, the United Kingdom, Norway, Switzerland, and Ukraine.
