Europe has woken up. Or so it says. After years settled in the comfort of the single market, the welfare state and regulation as a hallmark of identity, the European Union has assumed that the world has changed. The war in Ukraine, the rivalry between the United States and China and the global technological race have left an uncomfortable reality: Europe depends too much on others.

Now European leaders speak of “strategic sovereignty,” industrial autonomy and digitalization. But the question is inevitable: can Europe transform its economic model or will it arrive late to the new global game?

For decades, Europe prospered thanks to a system based on cheap Russian energy, American defense and technology developed in Silicon Valley or Shenzhen. Now, that balance has been broken.

According to Eurostat data, before the war in Ukraine, more than 40% of the gas imported by the EU came from Russia. In this way, energy dependence was structural. On a technological scale, the situation was no better, since in 2023 more than 65% of the global cloud computing market was in the hands of American companies such as Amazon, Microsoft and Google.

Meanwhile, the United States was promoting the Inflation Reduction Act, with more than 369 billion dollars in green subsidies, while China consolidated a model of technological state capitalism with direct industrial planning. As a result, Europe has come to understand that globalization is no longer cooperation, but rather a matter of geopolitical competition.

From regulatory power to productive power?

The European response has been dressed in an ambitious name: open strategic autonomy. An expression that sounds technical, but which hides a deep concern — the fear of being trapped in a world where technology, energy and money are decided outside its own borders.

Europe has understood that it cannot continue depending on Asian chips to manufacture its cars, nor on American servers to host its data. For this reason, it has put billions on the table to reactivate the semiconductor industry and regain weight in a value chain that it barely controls today. The objective is clear: to stop being a spectator in the great technological race.

At the same time, the European Union has decided to mark its territory in another decisive field, artificial intelligence, not only to use it but also to define its rules. And while large platforms compete to dominate algorithms, the European Central Bank moves forward quietly toward a digital euro that guarantees that, at least in the monetary sphere, sovereignty does not depend on external infrastructures.

In this way, Europe does not want to limit itself to regulating the game of others, but wants to play again: producing technology, retaining data and ensuring that its currency continues to be a tool of power.

But this is where the contradiction appears. Because competing in a world of giants requires more than good intentions and regulatory frameworks. It requires muscle, speed and a cohesion that Europe is still trying to build.

Europe’s Achilles’ heel

The problem is not only geopolitical, but structural. Europe grows less because it produces less. The euro area’s potential growth has been lower than that of the United States over the past decade. European labor productivity advances more slowly, while the American economy has better capitalized on the digital revolution.

Added to this is a silent but decisive factor: Europe is aging. The fertility rate remains below replacement level in most member states. A smaller active population implies less economic dynamism, more pressure on the welfare state and greater difficulty sustaining the European social model.

In this context, digitalization is not an aesthetic option, but rather a necessity to compensate for a shrinking workforce.

Expensive energy, weak competitiveness

Reindustrialization requires competitive energy and, after the break with Russia, Europe has diversified suppliers and accelerated the energy transition. But energy costs remain higher than in the United States, where natural gas is much cheaper thanks to domestic extraction.

This places European industry in a complex position, as it competes with American companies that have cheaper energy and with Chinese companies that receive direct state support. Therefore, reindustrializing without competitive energy may become an exercise in voluntarism.

Europe’s great decision

In this way, Europe faces a profound dilemma: competing in the new global economy with fiscal and institutional rules designed for another era. With a tax burden exceeding 40% of GDP and a high average debt, the euro area aspires to lead the digital transition while maintaining a fragmented political architecture and strict budgetary discipline.

But without a strong European treasury, without large-scale domestic venture capital and with productivity growing more slowly than its competitors, the question is inevitable: can a real industrial policy exist without financial muscle?

In this context, digitalization is not only a technological bet, but rather a matter of power. Global payment infrastructures continue to be dominated by American actors. Digital platforms managing European data are mostly external. And therefore, the semiconductor value chain is heavily concentrated in East Asia.

Consequently, the debate over the digital euro or data sovereignty reflects a much deeper decision: to remain a global power or to become a sophisticated periphery in a world dominated by Washington and Beijing. Sovereignty today is not proclaimed. It is invested in. Therefore, it is necessary to be prepared to understand — and protect — our economic future in a world that is no longer what it once was.

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