Issue #15 - January 23, 2026

The End of Europe's Innovation Fairytale

Steve Bannon has for a long time called Europe a "protectorate", while Europe was seeing itself as a good brave ally of the US. Now the US is laying out a geopolitical agenda that shows the full meaning of this unfriendly vision, old Europe has to face this reality with no fairy tale.

Last week's Greenland crisis marked a turning point. When Trump threatened escalating tariffs against eight European countries unless they acquiesced to US control of Greenland, France immediately pushed to activate the EU's Anti-Coercion Instrument—the bloc's never-before-used "trade bazooka." While Germany hesitated and Trump ultimately backed down, the willingness to consider such measures represents a profound shift. This sudden readiness to contemplate punitive measures against US companies—however brief—could have long-term impact on Europe's innovation policy moving forward. At its core is a systematic reassessment of current dependencies with the US. This might represent the start of an unstoppable movement towards a de-risking approach towards US technology, not only from enterprises but also, more profoundly, from consumers themselves.

While the American soft power is in full retreat in Europeans minds, Europe has little to offer as an alternative. The continent is still far behind when it comes to consumer products, enterprise solutions and the innovation ecosystem that can sustain it, particularly in terms of capital access. In addition, the EU has built a decade of policy based on the assumption US technology is the best, and works even better when US players comply with our regulatory framework that puts privacy and precaution principle at its core. This status quo is going to dramatically change. First, it is critical to call out that the US considers EU tech laws as extraterritorial, and wants to get rid of them as they don’t accept the idea of having Europe be the de facto regulator of tech at global level. Put aside US’s push for no regulation over its key champions, Europe will likely want to commit to an aggressive tech agenda to de-risk its reliance on foreign technologies. Concerns are also growing over having only American players as card payment issuers. The list goes on and on with space, military, energy, etc. But if we just take the example of cloud, as the FT notes, “EU companies rely on US cloud providers for nearly 70 per cent of their services”, showing the level of reliance might be so deep that co-badging and mutual cooperation strategies could prove more beneficial. Examples already exist: the partnership between EssilorLuxottica and Meta on smart glasses, the partnership between Google and Thales on cloud, etc. But to comprehensively address the gap, Europe will also need to face the reality of its regulatory choices. Physical AI, world models, LLMs, are technologies that require collecting massive data, and for multiple purposes and use-cases, something that proves very hard to do with the current laws in place. Companies outside the EU are already on track to dominate the next generation of technology because they don’t face a regulatory burden on data use. Reforms on GDPR should be tailored for EU success and the EU digital Omnibus is the vehicle to act fast. Finally, Europe needs to build the architecture to scale. It’s about following Draghi/Letta recommendations on EU capital markets, the 28th regime, a lighter regulatory regime for smaller players, and going further in terms of economic integration, with the political support of citizens and member states. Ultimately, the next decade can't be about constraining American tech giants while remaining dependent on them. Europe must choose: build genuine alternatives with the regulatory flexibility and capital access required, or accept protectorate status as permanent reality.