Europe plans for a digital economic recovery

Will €11 billion create a digital renaissance in Europe? Its leaders think so.


Europe's NextGeneration EU Recovery Plan includes €11.5 billion of digital investment and is therefore dubbed a Marshall Plan for Covid-19 economic recovery across the European Union. With the recovery plan, Europe states high ambitions for digitisation, sustainability and solutions to the supply chain challenges. Its backers believe the EU has the money and the ideas to become a digital leader.

The plan has seven investment areas, including innovation to the single market, digitisation, increased cohesion and resilience, the environment, border management, defence, neighbourhoods and public administration; together they amount to €806 billion of investment.

"The 20220s will be Europe's digital decade," Ursula Von der Leyen, President of the European Commission, told the Masters of Digital Conference of the investment programme. "These funds will be matched by private investment," she added.

"Europe is becoming more attractive for foreign giants like Intel," Von der Leyen said of the announcement that the semiconductor company picked Germany for a new chip fabrication plant.

Role of law

Riding on the success of the EU General Data Protection Regulation (GDPR), which has set the standards for data and privacy regulations in parts of the USA, Asia-Pacific and, very soon, India, the European Union believes a set of strong regulations will boost technology opportunities. "We must protect people and their rights with clear rules," Von der Leyen said.

Amongst the new regulations, which will impact business technology leaders, are the EU Digital Markets Act, which targets the technology giants of the USA and China. The Act focuses on organisations with a market capitalisation of at least €75 billion, 45,000 users, and that provides a platform for social networking and web browsing. Under the Act, technology firms will have defined guidelines for how they trade within the 27 member states of the European Union. Whilst the Digital Services Act, which gained approval recently, forces social media platforms to reveal how they are tackling disinformation.

"Our digital sovereignty in Europe depends on our data sovereignty, and we have to protect the data of our citizens, so we have an opportunity to be a leader," adds Carme Artigas, Spain's Secretary of State for Digitization and Artificial Intelligence. "Protecting the citizens is not patronage; it is about enabling them, so they can master their own data," says Roberto Viola, director-general of the Communications Networks, Content and Technology at the European Commission, a department that develops and implements digital policy.

An Act to regulate artificial intelligence (AI) was revealed a year ago and as yet has not become enshrined in law. Von der Leyen said a cyber resilience act was on the cards; in 2021, the European Council, which is the civil service of the EU, adopted the recommendations of the EU Cybersecurity Strategy. The strategy advises greater cooperation through a network of security operation centres, adoption of the latest security standards and an increase in encryption.

With supply chain issues being yet further exacerbated by the zero Covid strategy in Shanghai, China and the war in Ukraine, the EU also wants to create the European Chips Act, which the Commission says will ensure the security of supply.

"We need production capacity. These come with a huge up-front cost, and we are adapting our state aid rules to allow public support for European production facilities that will benefit all of Europe," Von der Leyen said. She added that as important as it was to increase Europe's share of the fabrication landscape, this would not remove the Union from both the benefits and challenges of a global supply chain. "No country or continent can be entirely self-sufficient. Being connected is in everyone's interests, but we need to tackle the bottlenecks."

Good legislation and regulations strengthen markets. Detractors of the EU believe the political body creates excessive red tape. The challenge for the EU will be to create regulations that enable growth and set the standard for regulating the digital economy.

Historic problems

The region faces a number of challenges if it is to become a serious competitor with the digital leaders of the USA and Asia, not least a shortage in digital skills. "We need to invest more into talent," says Mathieu Weill, Head of Digital Economy Department at the French Ministry of Economy. Weill adds that, in particular, Europe needs chip fabrication skills. "We need to go from lab to fab, and I think that is where we have a deficiency. In the digital world, we have forgotten about fabrication, and this is particularly important in terms of sustainability." ​​

Florence Verzelen, a marketing leader with Dassault Systèmes, a technology and arms firm headquartered in France, adds: "We don't have enough software and data engineers, and if we want to stay innovative, then we need these people. So we need to form new partnerships with schools and universities." Weill agrees: "It is about creating young talent, but also reskilling. There are a lot of jobs, and we have to be very mindful to transform all parts of the economy." Many European countries, both within the EU and outside of it, have communities that suffer from a belief that the technology industry has left behind them and their communities. "We have 40% of the nation without digital skills; we need to invest in skills and academia," adds Spain's Artigas.

Europe has not embraced digital technology with the fervour of the States and Asia. "We need to help industry to move to a data economy," Artigas says. "The pandemic has helped remove some barriers.

"Europe has to be a leader in AI; we must not just be a consumer," Artigas says of societal change. "We are good at startups, but not scale-ups. Spain has a Next Technology Plan, and we have started a startup alliance with Italy and Portugal; Artigas says of a common European problem of being able to scale a tech firm to global competitors.

Much of Europe has poor connectivity too, according to Nokia, a European technology success story, which claims that only 70% of the region has broadband connectivity of 100 megabytes and that regular use of the internet lags China.

New ideas

"The key to our success lies in European innovators. The people of Europe are where the industrial revolution started, so let's join forces and make it happen," Von der Leyen said of how Europe needs to get back to being a region that fostered new thinking. "We need to look at how we are producing products. Digital can be an enabler through digital twins, remote working and a more sustainable economy," says Weill of the French Ministry of Economy. "There is no magic trick to innovation. The success comes from teamwork," says Viola.

Dealing with climate change is also a priority for the NextGeneration EU Recovery Plan, with digital methods seen as key to meeting Europe's sustainability ambitions. "We are trying to coordinate the investment at a European scale to meet our sustainability responsibilities," Weil says, adding that this will not only impact organisations within the EU, but also those seeking to trade with the 27 nations. "We want to make firms in and outside of the EU accountable for how they impact the planet." Rainer Brehm, CEO Factory Automation at Siemens Digital Industries, says. "Only 10 to 15% of the energy consumption is in our factory, the rest is in our supply chain and we have no transparency over that."

Not only must Europe make the supply chain more sustainable, it needs global supply chains to become less disruptive. In the first quarter of 2022, the Euro zone recorded economic stagnation as a result of rising energy prices and supply chain issues. Brehm says productivity days are being lost due to shortages, which exacerbates low levels of confidence in the global economy. Von der Leyen, as president, strikes a positive note; she wants 20% of global chip production to emanate from Europe, and the recent announcement that Intel will build a new plant in Germany will help. "Reliance on two production centres in East Asia is not economically sustainable, so we will work with partners in Japan and the USA so that we can avoid single points of failure," she said.

The scale of the challenges that the world and European economy face require coordinated efforts. Federated decisions to counter supply chain challenges could create short term answers, but longer-term, a more economically and environmentally sustainable solution is required. The funds seem to be in place; digital has a clear opportunity to improve European competitiveness, public services and sustainability. It will be interesting to see if the community really can act in union.