From Vulnerability to Opportunity: Rewiring Europe’s Tech Ecosystem

Abby Deng | Europe and Eurasia Fellow

Image sourced from Lautaro Andreani via Unsplash

The European Union’s (EU) technology-related conversation has largely centred on regulation: addressing the addictive design of social media platforms such as Meta's, monopolistic behaviours by tech gatekeepers like Google and so on. Yet these regulatory battles can obscure a less visible issue: the EU’s longstanding technological dependence on the United States (US). Breaking this entrenched habit is difficult but also presents an opportunity for the public and private sectors to nurture an alternative industry, through industrial policy and public procurement, that could secure European tech sovereignty.

The Geopolitical Cost of Tech Dependence

The US was traditionally viewed as a trustworthy EU ally, yet this relationship has become more complicated as private US Big Tech firms have become both political actors and political instruments.

In response to the International Criminal Court’s (ICC) investigations into alleged war crimes in Gaza, the Trump administration began penalising American companies providing services to sanctioned ICC officials with fines and prison sentences. By early 2026, 11 ICC officials had been placed under sanctions. The consequences extended beyond formal penalties: some officials had their credit cards and accounts with Amazon and Google disabled. This digital lockout exposed the severe leverage Washington can exercise through Europe’s structural technological dependencies. Indeed, the EU relies on non-EU countries for more than 80 per cent of its key digital technologies.

The Frictions of Weaning Off US Tech

The EU has attempted to break its tech habit, with the US firm Palantir offering a useful case study of the dilemma. Palantir is as much an American software company as it is a political actor, having published its “Technological Republic” manifesto in April 2026 to champion US technological hard power. The firm is deeply entrenched in Europe’s most sensitive areas, like the North Atlantic Treaty Organization’s (NATO) operations, the United Kingdom’s National Health Service (NHS), and Germany’s police databases. Given the sensitive nature of the data it handles, France’s domestic intelligence agency (DGSI) is moving to replace Palantir with its domestic company ChapsVision, acting on French Prime Minister Sébastien Lecornu’s call that France “cannot rely on tools developed by foreign powers” but “must have its own”.

However, such decisions are fraught, primarily due to a significant capability gap between leading US providers and the European alternatives. For example, in July 2026, Palantir’s Maven Smart System was cleared to process NATO’s most classified intelligence, with officials arguing no EU alternative rivals Palantir’s scale and performance. Furthermore, switching to less mature European tech providers risks operational vulnerabilities in national security, where reliability and performance are essential. This is a significant gamble amidst crises like the Russia-Ukraine war, the Israeli-Palestinian conflict, and terrorism concerns.

Private companies appear even less aligned with the political urgency to build European tech sovereignty. Airbus, a key client of Palantir since 2015, renewed its agreement in 2026, using Palantir Foundry for manufacturing, fleet predictive maintenance, and supply chain operations. This reliance reflects a broader structural reality: from cloud hyperscalers like AWS and Microsoft to proprietary analytics, American software underpins European enterprise.

This deep entrenchment of American providers makes switching costly and unappealing for European public and private sectors, stifling the development of emerging European alternatives.

The Blueprint for a Tech-Sovereign Europe

While urgency and apprehension dominate European conversations around this issue, this moment presents a critical opportunity for the EU to elevate its technological standing. By working with emerging European technology firms, Europe can secure geopolitical independence and preserve democratic values — not by fully decoupling from the US Big Tech firms, but by building viable EU alternatives. This would reduce Europe’s exposure to shifts in US corporate and government policy, as well as the extraterritorial reach of US laws. Specifically, European-controlled infrastructure could reduce exposure to US legal leverage over American providers, including requirements to disclose European data under the CLOUD Act for US criminal investigations, or warrantless foreign intelligence surveillance under FISA Section 702.

A strong first step is the development of European AI firms like Mistral and Aleph Alpha, reflecting distinct paths to autonomy. Mistral’s open models let governments and businesses inspect, audit, and host systems locally, while Aleph Alpha emphasises explainability, safety, and sovereign hosting for regulated sectors. Yet these private initiatives cannot scale without stronger European government backing via strategic public procurement over continued US reliance.

Beyond nurturing software alternatives, Europe must play to its industrial strengths. While US companies dominate generative AI platforms, Europe retains advantages where AI integrates with physical production, leveraging its legacy in advanced manufacturing, automotive engineering, and robotics. Consequently, the EU’s most viable path to technological relevance lies in redirecting capital toward Physical AI — intelligent systems interacting with the physical world — through Important Projects of Common European Interest (IPCEIs). This shift aligns with the bloc’s “Apply AI Strategy” and mirrors the EU-focused public procurement mechanisms proposed in the 2026 Industrial Accelerator Act.

Software has become hard power, and nations lacking it risk compromising their technological sovereignty. Europe needs private-sector competency, robust industrial policy, and its 27-member single market acting as a unified customer. The EU must proactively nurture its domestic tech industry by embracing preferential public procurement. This entails accepting short-term performance trade-offs in exchange for strategic independence, national security, and long-term domestic capability. Only then can genuine EU tech sovereignty become a reality.

Abby is the Europe and Eurasia Fellow at YAIA, and is passionate about playing a part in building stronger ties between Australia and the region. Abby has experience living across Australia, Asia, and Europe, and holds a Bachelor of Commerce degree from the University of Sydney.

Disclaimer: The views and opinions expressed in this article are those of the author, and do not necessarily reflect the views and opinions of Young Australians in International Affairs. AI tools were used by this author for grammar checks only, but all content is original, and no plagiarism has been used in the preparation of this article.