Dr Diana Nasulea // 15 July 2026

This briefing examines the European Commission's European Technological Sovereignty Package, which seeks to reduce Europe's dependence on foreign digital technologies through measures including Chips Act 2.0, the Cloud and AI Development Act (CADA), an EU Open-Source Strategy, and a Strategic Roadmap for Digitalisation and AI in Energy. While the paper recognises that Europe faces genuine technological dependencies, it argues that the Commission's proposed solution relies too heavily on subsidies, industrial policy, and origin-based sovereignty requirements that are unlikely to address the underlying causes of Europe's competitiveness challenges.

Drawing on evidence from the EU's own experience with the 2023 Chips Act, the GAIA-X cloud initiative, and studies on industrial policy and data localisation, the analysis argues that technological competitiveness is better achieved through open markets, competition, and improved framework conditions than through protectionist interventions. Rather than strengthening Europe's digital resilience, the proposed measures risk increasing costs for businesses and consumers while failing to deliver the strategic autonomy they promise.

The briefing finds that the package's costs and distortions are unlikely to be distributed evenly. Relaxed state aid rules favour wealthier member states with greater fiscal capacity, while origin-based procurement requirements and data localisation obligations are expected to raise compliance costs and reduce choice, particularly for SMEs and startups that rely on affordable access to world-leading cloud and AI services. The paper also warns that vague sovereignty criteria could encourage regulatory capture and "sovereignty washing", benefiting large incumbents rather than innovative challengers.

The paper concludes that Europe should pursue technological sovereignty by strengthening competitiveness rather than restricting competition. Instead of expanding subsidies and imposing nationality-based requirements, policymakers should focus on completing the Digital Single Market, improving access to capital and affordable energy, strengthening interoperability and portability, and reserving narrowly defined sovereignty requirements for genuinely sensitive national security applications.

The main findings of the briefing include:

• The EU's experience with the 2023 Chips Act and the GAIA-X initiative suggests that industrial policy and production targets have delivered limited success while failing to achieve their stated objectives.
• Data localisation requirements and origin-based procurement rules are likely to increase costs, reduce consumer choice, and disproportionately burden SMEs and startups.
• Relaxed state aid rules risk widening disparities within the Single Market by favouring larger member states with greater fiscal resources.
• Broad sovereignty requirements based on ownership and nationality risk encouraging protectionism, regulatory capture, and "sovereignty washing" without materially improving security.
• A more effective approach would strengthen Europe's competitiveness through a deeper Digital Single Market, lower energy costs, improved access to capital, technology-neutral regulation, and narrowly targeted security measures where genuine strategic risks exist.