Europe doubles down on post pandemic digital transition
17 June 2020: as the COVID-19 crisis accelerates structural, societal and economic changes, the EU looks to press ahead with plans for a dual green and digital transition, at the centre of the EU’s recent COVID-19 recovery plans.
The coronavirus crisis has made clear how important the digitalisation for societies and economies is worldwide. Reliance on technology has helped keep businesses and public services running, societies connected, and students educated. But the pandemic has also exposed digital shortcomings and vulnerabilities.
As stressed by Ursula von der Leyen, President of the European Commission, this calls on the EU to ‘press fast-forward’ on plans to repair the damage from the crisis in a manner that ensures a more sustainable, digital and resilient future for the bloc.
The EU’s recently presented COVID-19 recovery plans outline how the Commission intends to push the digital agenda forward. Several elements are seen as particularly critical; top of the list is the need to enhance connectivity. The plans have a focus on the infrastructure necessary for current, emerging and future processes and applications, including 5G.
Attention is also centred on establishing a ‘real data economy’ that can act as a motor for innovation and job creation, by enabling the development of new products and services. For the Commission, this requires common data spaces in key sectors including health, mobility and public administration as well as in support of broader industrial and greening policies.
Legislative proposals on data sharing and portability, with a focus on governance aspects, are in the offing. Also on the cards is a European Data Act to establish the conditions for access to and control of industrial data. Moves may also be made to open up high-value government datasets for research, innovation and SMEs.
A better business environment
Public consultation on a new Digital Services Act is already underway, raising questions about how to modernise the existing legal framework and tackle the dominance of some large online platforms. There are growing concerns over the consequences for smaller European companies to start up and scale-up. As a result, the Commission looks likely to propose new rules framing the responsibilities of digital services with regard to users, alongside stronger supervision and enforcement mechanisms. Potential ex-ante rules for platforms acting as gatekeepers may seek to encourage fairer competition and prevent abuse of dominant market power.
Looking at SMEs, the Commission also wants to reduce administrative burdens and encourage take-up of digital tools by simplifying online procedures, better use of one-stop support shops and developing e-procurement systems, among other measures. Implementation of company law changes should further facilitate the digitalisation and mobility of companies. This is all in addition to possible measures to improve the digital capabilities of law enforcement and justice systems.
Tech sovereignty
The EU’s digital policy planning also gives concrete expression to wider strategic fears about the EU’s lack of ‘tech sovereignty’, shared by a growing number of countries. Hence the Commission’s stated desire to strengthen autonomy and reduce excessive import dependence when it comes to key enabling technologies and infrastructure (as well as in health, pharma, food, space and defence sectors). Particular reference is made to avoiding undue third-country control of assets when it comes to 5G, cybersecurity and quantum communication infrastructure. Robotics, microelectronics, high-performance computing and data cloud infrastructure, blockchain, quantum technologies and photonics are also mentioned.
This perceived need to ensure sufficient strategic independence is also visible behind moves to enhance screening of third-country investments in European companies. Similar sentiments have been echoed in some of the discussions around digital taxation.
Meeting Europe’s digital investment gap
What does this all mean when it comes to funding? An assessment of the EU’s digital needs published alongside the recent budget proposals, suggests that there is an investment gap of €250bn in 2020 and 2021. The overall investment needs of the EU27 during the next two years are estimated at €1.5trn, including €940bn for greening.
Europe’s digital transformation investment gap
| Digital investment | (€bn, per year – 2020 - 2021) |
|---|---|
| Communication networks | 42 |
| HPC, graphene and Quantum | 6 |
| Cloud | 11 |
| AI, blockchain | 23 |
| Digital green technologies |
6 |
| Cybersecurity |
3 |
| Digital innovations, data and next generation internet |
5 |
| Semiconductor / photonics |
17 |
| Digital skills | 9 |
| Common European data spaces |
3 |
| Total | 125 |
The Commission has consequently tabled a modest increase in its latest multi-annual budget allocations to the ‘single market, innovation and digital’ heading compared to February 2020 proposals (see ICAEW chart of the week for a fuller breakdown). But, as importantly, funding under the proposed €750bn ‘Next Generation EU’ plans is supposed to be broadly directed towards helping countries achieve a twin green and digital transformation.
By Susanna Di Feliciantonio, Head of European Affairs, ICAEW