How Europe can use innovation as a springboard to recovery and prosperity

When the European economy casually achieves zero growth in the final quarter of 2023, how Europe chooses to respond at this moment will be one of the biggest and most important decisions that will shape its long-term future. there is a possibility. To revive stagnant economies and increase prosperity, Europe needs to harness a proven and powerful growth engine: technology-enabled economic growth.

Europe’s competitiveness has long lagged behind the rest of the world due to lackluster technology adoption, but the challenges of the past are now coming to a head. As technology transforms nearly every sector of the global economy, Europe’s slow rate of technology adoption, coupled with a tsunami of sometimes contradictory new technology regulations, has stagnated foreign investment and likely undermined the region’s future prosperity. It poses what is the biggest fundamental threat in decades.

While global peers have sought to boost innovation, investment and adoption, Europe’s technology sector lost $400 billion in overall market capitalization last year as foreign venture capital investment halved. This means Europe is losing out on the latest technological developments that will enable future growth. McKinsey warns of Europe’s widening technology gap, finding that large European companies are now 20% less profitable than their American counterparts, with 90% of the difference attributable to technology-creative industries. discovered. They warn that unless Europe closes the technology gap, European companies are likely to be placed at a competitive disadvantage in a wide range of sectors, jeopardizing Europe’s long-term prosperity.

McKinsey is not alone. Amid economic weakness, the European Central Bank (ECB) director has warned of the urgent need to close Europe’s technology gap to address the competition crisis, citing slow technology adoption as the root cause of the region’s current situation. It points out that this is due to strict regulations in the product market. Lack of competitiveness.

The good news is that if Europe can foster a more innovation-friendly environment and close the widening technology gap, Europe could generate an additional staggering €3.2 trillion in economic benefits, with nearly all Accenture’s research estimates that it can impact and improve the sector. About the European economy. This is the kind of economic package that Europe urgently needs.

However, one of the biggest barriers to bridging this technology gap is a lack of trust in technology. Consumers and businesses will not adopt new technologies if they fear that their privacy, safety, or security may be at risk. In fact, according to Eurobarometer, three-quarters of Europeans point to the need for stronger cybersecurity and better data protection to increase the use of digital technologies. In contrast, McKinsey has found that if companies proactively address these issues and foster digital trust, they can increase annual growth rates by more than 10%.

For many years, in order to increase trust in technology, Europe’s leading cybersecurity agencies have argued that:[s]“Security by design and privacy by design must be fundamental principles adopted by manufacturers and digital service providers.” Major technology platforms are building core privacy, safety, and security protections into technology by design. We take this approach by integrating it into our foundation. We need all kinds of technology. Developers need to step up and follow suit.

But the EU’s new Digital Markets Act (DMA) will require companies to remove by design the very safeguards they built into the heart of their technology to protect privacy, safety and security. It’s amazing now to see it heading in the direction. While its goal is to foster new competition, the DMA’s rules contain inherent flaws and require companies to remove existing app store safeguards created to protect users. This can expose users to a huge number of new risks. As Benedict Franke, CEO of the Munich Security Council, explains, the DMA “does little to improve the security of the EU and its people,” but instead “has “This has the serious side effect of putting millions of people at risk by overriding protections for the world.” ”

He’s right. And these changes pose new challenges not only for business users trying to avoid hacking, but also for parents trying to protect their children, seniors trying to avoid scams, and people trying to avoid having their work pirated. It also poses new challenges for intellectual property owners concerned about their apps, and for voters concerned about fraudulent apps. Spreading false information. Technical experts and the US government have warned EU policymakers about the potential risks of DMA, but so far the EU has done little to warn businesses and consumers.

In this case, the legislator enacted contradictory technical obligations that were in direct tension with each other and adopted ambiguous provisions that created new legal uncertainties. All of this leaves important questions that policymakers ultimately need to address. Other countries would be wise to carefully consider all the implications before copying the EU’s digital regulatory system.

The economics of this approach are enormous. Although the DMA is primarily aimed at regulating U.S. companies, the Center for Strategic and International Studies estimates that the DMA and accompanying Digital Services Act could add up to €71 billion a year to costs for European companies. doing. Almost half of this is borne by European small and medium-sized enterprises.

To strengthen its economic engine, narrow the technology gap and increase long-term economic competitiveness, Europe must fully embrace a more reliable technological future. As mobile devices have become the primary means for users to access the internet, maximize trust across the mobile ecosystem, overcome lagging mobile 5G adoption rates, and increase the estimated benefits of next-generation mobile 5G1 You can start taking steps to reach trillion euros. Mobile innovation is predicted to come to fruition.

At a pivotal moment that could determine its long-term economic potential, Europe stands at a critical digital crossroads. Will we be able to develop the fundamental trust in technology needed to move from being a technology laggard to a leader and reap the enormous benefits of a more innovative economy? Only time will tell. But the path to prosperity begins with choosing to drive a more reliable technological future and unlock previously unimaginable opportunities to improve people’s lives.