Submitted by Thomas Kolbe

It was summit season again in Berlin. After crisis meetings with the automotive and steel industries, attention on Tuesday turned to the next trouble spot: the digital economy. So far, EU regulators have literally strangled it.

Grand reception at Berlin’s EUREF campus: Around 900 participants from politics, business, and science across Europe traveled to the capital for the Digital Summit. Among the prominent speakers: Chancellor Friedrich Merz and his French counterpart Emmanuel Macron, both currently facing stiff political headwinds at home.

EU Europe has now officially entered crisis mode on the political level as well. The sheer number of economic summits reflects this and bodes ill for the coming years. Looking at the digital economy, which has initiated the next major economic revolution, one must conclude: the panic mode in Brussels, Paris, and Berlin is justified.

The technological gap between the Eurozone economy and competitors in the U.S. and China appears, at present, unbridgeable. Revolution? Not in sight.

Lifeless Capital Market

A glance at the raw numbers provides a clear sense of the technological hiatus: In the U.S., over $340 billion is being invested in artificial intelligence this year, following $244 billion in 2024. In China, the private sector mobilizes roughly $100 billion to upgrade digital processes.

The EU, even when generously including the U.K., reaches barely €25 billion—a negligible share on a global scale.

Amazon alone invests roughly $118 billion, almost five times the capital of the entire EU economy, which can only muster its small contribution through roughly 50% public funding. Politically embarrassing, economically disastrous.

Spiritless Summit

The dilemma of European policy emerged clearly from the speeches in Berlin. From the start, the regulatory framework was far too tight, stifling innovation, leaving the digital economy dependent—primarily on American giants like Amazon, Google, or Microsoft. SAP software? Often comes from the U.S.!

A central demand of the summit was therefore to reduce this dependency on powerful overseas competitors.

The European Commission announced on summit day that over the next twelve months, it would review how stricter regulation could rein in allegedly anti-competitive practices by cloud providers like Microsoft Azure and Amazon Web Services. A tough struggle lies ahead to confront the U.S. government, which will undoubtedly push back forcefully.

Meanwhile, Chancellor Merz repeated his call for European digital sovereignty and warned against reliance on American software. It is about actively shaping the digital future, he reiterated—initiating a catch-up process to close the gap with the competition.

State Intervention

European politicians draw the familiar conclusion: public funding. It already accounts for roughly 40% of total AI volume in Europe and will increasingly target the training and retention of European IT talent.

It should also help build an independent digital infrastructure, particularly in cloud services and cybersecurity, another Achilles’ heel of the European economy.

The trade association Bitkom calls for a sweeping simplification of EU digital laws and a drastic reduction of reporting obligations. The GDPR has been a costly and senseless flop, like other elements of Brussels overregulation. AI Act and Data Act—everything must be reviewed, streamlined, or scrapped.

Digital Tax as Ultima Ratio?

In its current state, the EU digital economy is simply unable to scale or keep pace with international competitors. Another discussion point: a digital tax on ad revenues of global players, especially U.S. firms. Recently, Culture Minister Wolfram Weimar introduced the idea polemically.

But what would that actually change? In Europe, the state blocks innovation. Too much capital flows through public channels to allow a functioning venture capital market to emerge capable of funding these innovations.

Summit participants likely realized the EU faces a trade-off: maximum data protection hinders industry growth. The EU will need to liberalize and return data control to users. On Wednesday, this issue will be central in a Brussels parliamentary debate.

Energy and Innovation Culture

The economy of the future is data-driven, dependent on stable energy infrastructure and highly competitive startups surrounding technological hubs. None of this exists in Germany today. Result: international investors are largely uninterested in the location.

Considering the size of the European single market, remaining capital strength, and robust academic structure, it is a political feat to have strangled the digital economy so completely. Brussels built the regulatory framework long before a significant digital economy existed. When it comes to controlling and manipulating the free market, Brussels acts efficiently—and destructively.

Commission Retreat Needed

Breaking out of this regulatory trap and stimulating digital entrepreneurship would require a radical break from poor practices: ending rules like the AI Act or GDPR, halting ongoing interventions via the Digital Services Act (DSA) and Digital Markets Act (DMA), which regulate Europe’s digital market in minute detail.

Yet the summit showed little insight into the self-created problem. Brussels views growing criticism of the DSA and DMA as an attack on its power. Digital regulation, like climate policy, must be seen in the context of the ideological reshaping of the Euro-economy. Brussels is the command center of this fatal process. Pressure on the regulator grows with the deepening recession.

Market barriers must fall, entrepreneurship must be freer, fiscal burdens reduced, and the state must retreat from dominating the capital market. Cutting the Gordian knot of digital regulation through radical liberalization to allow autonomous European ecosystems to grow sounded, at the Berlin summit, like a fable.

Collision of Philosophies

Rarely have U.S. and European political philosophies and economic paradigms collided so violently as in the digital economy. Disputes over Brussels’ censorship, the DSA, and planned chat monitoring have caused real tensions, escalating since U.S. VP J.D. Vance criticized European censorship at the Munich Security Conference in February.

The fight for civil rights, freedom of speech, and property rights is clearly taking place in the digital space: freedom vs. surveillance, self-responsibility vs. nanny state—U.S. vs. EU? Broadly, one could interpret it that way. But the U.S. will also have to address the market power of its own digital oligopolies and whether new competitors can access the market freely—or whether lobbying, like in Brussels, shields Amazon & Co. from competition.

Digital Risk Space

For the European regulator, the digital space is above all a narrative risk: an unbounded, hard-to-discipline public space that fuels opposition rather than suppressing it.

Recent attacks by German politicians on U.S. platforms like X and Meta reflect growing awareness—and the loss of control in conflict areas critical to EU politics and ideology: climate policy, the Ukraine conflict, and the deepening economic crisis, largely underreported in state-affiliated media.

The risk of a critical opposition forming in opaque, decentralized, polemical, and highly visible ways remains ever-present.

Error and Control

In the debate on the digital future of the Eurozone economy, the specter of the digital euro—and the question of individual sovereignty in the digital space—looms.

Even attempting to integrate this technology as a form of centralized state dominance in money and capital markets shows that Brussels does not understand digital technology as a matter of decentralized competition, which thrives under minimal state regulation.

With the Genius Act and U.S. stablecoin integration into banking—a quasi-alternative money market—Washington pushes credit creation deeper into the private sector’s responsibility.

European Anachronism

Everything points to the synchronized merging of decentralized money creation and technological AI applications, which is why the EU’s attempt to centralize and tightly regulate these elements is doomed.

The Digital Summit confirmed fears: European policy is intellectually and bureaucratically trapped in a model where public funding, detailed regulation, labor norms, and heavily censored public discourse form the ideological blueprint.

This cannot and will not end well if technological progress pushes toward freedom.

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About the author: Thomas Kolbe, born in 1978 in Neuss/ Germany, is a graduate economist. For over 25 years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.