In short
- Europe overly depends on third countries for critical technology and lacks digital sovereignty
- This makes the EU vulnerable to threats such as coercion, espionage and reduced competitiveness
- Protection from effects like regulation and diversification, and support for European alternatives, are needed
This policy paper was published by IE University in Madrid.
The rapid adoption of digital technologies during the past decade has significantly transformed the realities of daily life, business interests and ultimately geopolitics.
Countries and companies define digitalisation goals and try to accommodate innovations, such as using artificial intelligence to summarise documents, while overcoming challenges brought about by technological developments, including privacy concerns. The European Union (EU), known for its regulatory-driven approach to technology and digitalisation, is certainly no exception. The goals set out by the EU in its ‘Europe’s Digital Decade’ communication of 2021 showcase the bloc’s ambition to accelerate and lead in digital transformation by working with Member States towards targets for digital adoption.1
The past decade has shown that technology is not a mere drive for positive change, however. As new breakthroughs emerge, technologies have become a geopolitical instrument of influence and coercion, as Russia’s disinformation campaigns or cyberattacks on Ukrainian power grids demonstrate.
Over the past half year, during the lead-up to and aftermath of the 2024 United States (US) elections, landmark publications such as Mario Draghi’s2 report on European competitiveness and the EuroStack initiative3 have identified a myriad of hurdles and emphasized the urgency for Europe to assert its digital sovereignty.
Acting on these challenges, the EU Competitiveness Compass, launched by the European Commission in January 2025, presents a policy roadmap to support the efforts required by European industry to meet these challenges.
Set against this backdrop, this policy paper sheds light on the geopolitics of technology and digitalisation, particularly in relation to the EU’s position vis-à-vis the US and China. It analyses the key building blocks that constitute the so-called technology stack, illustrated through the example of an AI chatbot. The building blocks range from critical raw materials (CRM) to knowledge and applications, and from hard infrastructure to data and algorithms. Furthermore, the paper situates the EU in the global technology playing field and considers vital steps to boost the bloc’s digital competitiveness. Ultimately, such steps should increase the bloc’s economic security—that is, the ability the EU has to make decisions and assert itself in the digital domain.4
The paper concludes by presenting actionable steps for the EU and its Member States on themes such as diversifying supply chains and advancing the development of European alternatives to critical dependencies. A crucial recommendation is to strategically focus funding on areas where the EU already competes—and especially in areas where the EU can control vital chokepoints of industries, sectors or the development of particular technologies, resulting in strategic indispensability. That indispensability implies co-dependency, reducing the risk of external coercion.
This paper was written within the framework of the Center for the Governance of Change (CGC) research project on the Geopolitics of the Digital Era, part of their program on the Digital Revolution and the New Social Contract. The CGC is an applied-research, educational institution based at IE University that studies the political, economic, and societal implications of the current technological revolution and advances governance solutions to overcome its unwanted effects.
