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Digital transformation rises on the EU policy agenda amid Covid-19

Covid-19 has monopolised Europe's policy agenda, but the Digital Services Act will shift focus back onto its ambitious plans for a digital upgrade.

When Ursula von der Leyen took the helm of the European Commission in December 2019, she outlined an ambitious plan for the digital economy, putting it top of the policy agenda in the EU. In the year since, a number of competing pressures have conspired to knock it down the list of priorities, not least the ongoing Covid-19 pandemic. But this week, the long-awaited Digital Services Act, which looks to update the bloc’s oversight of Big Tech companies, will come into force and shift attention back onto digital policy. 

Unsurprisingly, Covid-19 dwarfed all other areas of debate in the European Parliament this year, with more than 5,000 mentions, according to data in Atomico’s State of European Tech 2020 report. This pushed many technology-related issues down the agenda, and the number of times MEP’s mentioned Big Tech, privacy and artificial intelligence all fell year-on-year. However, mentions of digital transformation increased slightly, reflecting the need to accelerate digitisation as a result of the pandemic.  

In Europe, less than a fifth of companies are ‘highly digitised’ and only 12% use big data analytics, according to the European Commission. To turbocharge the digitisation of business, the EU has carved out a significant chunk of its new €1.8trn budget for the digital agenda and is pushing through numerous updates to its digital framework. In addition to the Digital Services Act, it plans a swathe of new legislation to target areas such as data sharing and the ethical use of artificial intelligence. 

Tom Wehmeier, partner and head of insights at Atomico, welcomed the focus that the EU has placed on digitisation since the pandemic. As a direct result of the pandemic we’re seeing the EU double down on support for Astart-ups – for example, the €150m funding announced at Web Summit,” he says. 

But while Europe’s tech ecosystem is flourishing, it is still dwarfed by those of the US and China. The combined market capitalisation of all European technology companies founded since the year 2000 is less than either Amazon or Apple alone, says Wehmeier. 

If we want to accelerate faster, Europe needs to double down on how it can support the start-up ecosystem. That means not only focusing on Big Tech, as we’re better off trying to build from the bottom,” he says. “We need to make sure we create deep and liquid capital markets. We need to make sure we don’t introduce policies with unintended consequences like blocking M&A. 

The only other topic to have moved up the agenda significantly was Green Deal, the EU’s action plan to be climate neutral by 2050. Mentions in the parliament increased, although the topic lagged behind both data privacy and digital transformation for mentions in legislative documents. 

The growing focus on the Green Deal is not at the expense of the digital agenda, says Eline Chivot, senior policy analyst at the Center for Data Innovation, as there are clear synergies between the two policy areas. 

“Technology is an enabler of the green transformation and I see much more of a positive narrative being driven and shared by the Commission on that,” she says, referencing the core role that data centres and artificial intelligence play in the development of smart grids and green hydrogen. 

Although the EU’s focus on technology-related issues has withstood the pandemic, its priorities differ from those of Europe’s technology industry, the Atomico report also shows. A survey of technology businesses in Europe found that disinformation topped their list of concerns, but was only mentioned in five pieces of EU legislation so far this year according to the report.  

The Digital Services Act and the EU’s Democracy Action Plan, an initiative to build more resilient democracies in the bloc, both contain some measures to address disinformation. But other areas of digital policy look to take precedence in the EU’s agenda, says Chivot. Disinformation is still important, but competition policy and antitrust and trying to regulate platforms, especially foreign platforms, is more [of a focus],” she says. 

Despite the all-consuming nature of Covid-19, it is clear that the EU is still committed to an ambitious digital agenda that will position Europe as a world-leading data economy, says Chivot. 

This is very much a real push from Europe to try to enlarge its footprint when it comes to crafting rules for the digital economy, as it did with the GDPR trying to set a global standard and to really compete,” she says, adding that it must position itself as a leader in this regard as it cannot compete with the likes of China and the US when it comes to the development of new technologies. 

Chivot argues that a central reason for Europe’s deficiencies is that it lacks an “entrepreneurial spirit” when it comes to digital technologies and tends to focus on risks over the opportunities. In this respect, the Digital Single Market plays an important role by laying the foundations for increased innovation and risk taking.  

But both Chivot and Wehmeier express concern about whether the parts of the new digital framework will adequately balance the needs of business against regulatory considerations. 

The Digital Services Act has the potential to help our startups and scale-ups generate even greater outcomes. We’ll soon find out whether it has struck the right balance, says Wehmeier. “Europe needs to ensure that it is setting appropriate standards for Big Tech without jeopardising the success of our flourishing ecosystem.” 

Amy Borrett

Amy Borrett is the resident data journalist at Tech Monitor.