Divided Digital Europe: The Continent Connects at Different Speeds

Introduction

The European Union (EU) aims to become the global leader in regulating tech. It has moved at laser speed to enact landmark legislation designed to transform the digital domain and set the rules governing the Internet’s future.

An initial goal was to leverage Europe’s 500 million consumers. In May 2015, the European Commission launched an ambitious Digital Single Market program designed to break down barriers across the EU’s 27 member states.¹  Through 16 initiatives — including an end to unjustified blocking of content at national borders, a revamp of copyright rules, and an overhaul of telecommunication rules — the commission aimed to unite the EU’s fragmented digital economies.

In 2016, the commission changed gears and pressed ahead with ambitious plans to curb what it perceived as the Internet’s excesses, in particular, privacy-invading personal data collection. The continent’s General Data Protection Regulation (GDPR), which went into force in 2018, attempted to set a gold standard for privacy protection, insisting that consumers give consent to any data collection.²  Companies and countries around the world rushed to adopt similar privacy rules.

A new European Commission took office in December 2019 and launched a debate on what it dubbed “digital sovereignty.”³  The term signaled a determination to “catch up” to Asian and US tech leaders and ensure that the EU retained strategic autonomy in the digital world.

At the same time, the new commission redoubled its regulatory offensive. Antitrust cases against Google, Apple, and others had dragged on for years, producing multibillion-euro fines, without any perceptible change in their business models.⁴  Then, in December 2020, the commission proposed two major pieces of legislation, the Digital Services Act (DSA) and the Digital Markets Act (DMA).^5 6  

The DMA targets large tech companies, dubbed “gatekeepers,” to spur new industry entrants and increase competition. It prohibits them from favoring their own services and collecting data from different services. Violators risk huge fines — up to 20% of their global revenues. European parliamentarians narrowed the DMA’s scope to a handful of US giants. Negotiations concluded in March 2022 and the new rules will go into effect at the beginning of 2024.

The DSA impacts almost all Internet platforms. It obliges them to combat illegal content, including hate speech and physical products.⁷  E-commerce marketplaces must vet their sellers and speed up the removal of counterfeit and dangerous listings. Social media platforms must allow flagging of dangerous posts and publish new transparency reports about their algorithms, among other obligations. Additional responsibilities are assigned to very large online platforms.⁸  The final DSA was approved in April 2022 and will also go into effect at the beginning of 2024.

Both bills moved through the complex EU legislative process at record speed, in a little over a year. The speed demonstrates a broad political consensus on the need to increase the regulation of technology companies. By contrast, the European Commission first proposed the GDPR in 2012 and took six years of negotiations and preparations before the regulation came into effect.

Yet, like all EU legislation, both the DSA and DMA reflect compromises between positions taken by the EU’s member states. The four countries investigated in this report — France, Italy, Denmark, and Poland —offer a good picture of where Europe enjoys a consensus on tech policy and where compromises are required. Each profile examines how the country is coping with the challenge of going digital, from its Internet infrastructure to its success in building online businesses. It then analyzes each country’s position on key tech policy questions.

A surprising picture emerges. Among the four national profiles in this report, most did not conform to widely held expectations and stereotypes of regulatory approaches.

Start with France. One could expect France to be dirigiste. It is. It is also surprising to learn how the country has become the incubator of many of Europe’s digital success stories and is a strong supporter of modernizing its labor market by leveraging the gig economy. France boasts cutting-edge infrastructure, booming e-commerce, and 25 tech unicorns, companies with at least €1 billion in market valuation. As Aurelien Portuese notes, this success represents true “grandeur.”

But Portuese warns that France is jeopardizing its achievements with a misguided pursuit of “digital sovereignty.” Paris is tempted to pursue data protectionism, crusade against US tech superiority, and remains “naïve” about the Chinese tech threat. “France should exploit its formidable potential with a more coherent digital strategy,” Portuese writes. “Otherwise, its dreams of digital grandeur could very well drift away to digital decadence.”

One would expect Denmark to be a free-trading and export-minded country. It is. The country is a digital pioneer, the birthplace of Google’s engine for its Chrome browser, and home to some of the world’s largest data centers. It also advocates for broad freedoms of expression.

Yet, as Jan Høst Schmidt describes it, digital Denmark is also pro-regulation. It is leading the charge to rein in online marketplaces, proposing to make them liable for products posted on their sites in the name of consumer protection. Danes support spending billions of public European funds subsidizing semiconductor, cloud computing, and other European tech ventures. “Denmark should continue to insist to build a true digital single market,” Schmidt writes. “On issues such as digital taxation, Denmark wants to find a transatlantic agreement. If this is impossible, however, it will side with European solutions.

Poland sees tech as a driver of economic growth. It is home to one of Europe’s most dynamic homegrown e-commerce marketplaces and aims to improve broadband connections. US tech enjoys widespread acceptance and Warsaw is uncomfortable with the EU’s push to clamp down on the digital economy. Instead, as Annabelle Chapman writes, Poland “favors a light-touch regulation to big digital platforms, placing it among the minority free-market minnows such as Estonia.”

The main clash concerns efforts to limit illegal speech. The right-leaning Polish government fears Internet platforms will be forced to use a heavy hand to moderate content. Warsaw is also uncomfortable with placing limits on the use of spyware to gather intelligence.  At the same time, the country’s Law and Justice government, in power since 2015, takes stands on cultural issues that “often puts Warsaw at odds with Brussels on content moderation, artificial intelligence, and other key digital dossiers,” Chapman writes.

Photo: Rome, 4 November 2021: President Roberto Rustichelli hosts the European Commissioner for Justice Didier Reynders, on the occasion of the final event of the Convienesaperlo campaign. Credit: Autorità Antitrust via Twitter.

Italy is a digital latecomer. It has lagged in Internet connectivity and resisted digitalization. Mediaset, the TV company controlled by former Prime Minister Silvio Berlusconi, for example, sought €700 million in damages from YouTube for copyright violations.⁹  Tech tax fines proliferated: Apple paid €318 million in back taxes in 2015 and Google was hit with a €306 million fine in 2017.¹⁰  Under pressure from taxi drivers, the government banned Uber in April 2017. ¹¹

But Italian leaders are rethinking their reticence, pushed by lagging economic performance and the COVID-19 pandemic. Reform-minded Italian Prime Minister Mario Draghi is spending a large portion of the country’s EU COVID-19 recovery funds on digital investments. Uber now is back on the road. “Suddenly, 75-year-old CEOs who had previously refused to use a computer — and had denied employees the option to work a single day from home — were managing entire teams remotely via Zoom,” writes Janna Brancolini. “Instead of shooing away IT managers who wanted to start conversations about cybersecurity, executives began drafting digital strategies and investing in improved network protections.”

These national priorities play out in Brussels’ corridors. Traditionally, the Benelux, Baltic, and Nordic nations have viewed the digital market as an opportunity for economic growth. They take a broad view of free expression and free markets and in the debate over the DSA pushed back against attempts to make platforms liable for failing to spot illegal speech from being uploaded. In the DMA, they insisted that remedies remain proportionate.

In contrast, the EU’s Big Four — Germany, Spain, Italy, and France — tend to put strict limits on speech. They see the need for far-reaching regulation of technology companies to establish a level playing field. Their policies veer toward state intervention.  In the debate over the DSA, the Big Four pushed to increase the responsibilities of platforms to combat illegal posts. In the DMA, they demanded strong measures to limit the power of so-called digital gatekeepers.

But beyond this black-and-white analysis are surprising nuances. Should e-commerce marketplaces be liable for every product posted for sale on their marketplace? Denmark, with its strong history of consumer protection, says yes, even if Europe falls far behind in online commerce. A Danish socialist Member of the European Parliament (MEP) Christel Schaldemose pushed hard to make Amazon, AliExpress, and eBay, among others, liable for every product sold on their platform, echoing the position of consumer groups that have pressed to turn the marketplaces into “suppliers.”¹²

Poland, home to the local e-commerce powerhouse Allegro, says no. France and in particular Italy are ready to compromise. The marketplace liability debate first emerged during the DSA negotiations. It then reemerged in 2022 with the proposed revision of the General Product Safety Regulation, a law that defines penalties and consumer rights around the sale of dangerous products. During the negotiations, Italian diplomats signaled opposition to Nordic efforts to impose expansive liability risks on marketplaces.

The bottom line is that most Europeans agree on regulating Big Tech even if they disagree on the details. The continent came together to pass the DMA, designating a few US tech giants as gatekeepers. Poles and other Central Europeans may have more concerns about confronting the United States than Western Europeans, but they went along without much resistance. France, Italy, and Denmark fought hard for tough regulation. In Brussels, French European Commissioner Thierry Breton and Danish Commissioner Margrethe Vestager teamed up as the key digital policymakers.

Yet the crackdown contains important limits. Most European countries argue against breaking the fundamental principle against requiring online platforms to conduct general monitoring.  Reflecting this concern, the DSA requires marketplaces to improve their onboarding of merchants and to check public databases against attempts to sell dangerous products.⁸  It leaves the marketplaces open to consumer lawsuits but retains the prohibition against platform policing.

Photo: Video conference of the members of the European Council: Speech by President Michel to President Biden. Credit. Council of the European Union. 

When the DSA was first envisioned, policymakers planned to focus on illegal speech. They believed it represented the most poisonous type of illegal content found on digital platforms. But it proved impossible to find a common continent-wide definition of illegal speech or even illegal terrorist propaganda while free expression concerns limited how far countries could agree to crack down. France took a hard line, outlawing everything from Holocaust denial to blasphemy. In contrast, Demark opposed restrictions on freedom of expression, while both France and Italy pushed social media platforms to control propaganda and extremism. Poland pushed back against almost all restrictions on speech, fearing overreach on content control.

The resulting DSA refrained from obliging Internet platforms to remove specific forms of speech, leaving that to individual countries to define. Instead, it forces platforms to add ways for users to flag illicit content and to take actions to stop dangerous disinformation from going viral. Users gain the power to refuse recommendation algorithms. Companies will be obliged to publish transparency reports about their content moderation.

Europe’s strategy to achieve “digital sovereignty” will require similar compromises. Although most Europeans approve of the goal to improve Europe’s digital performance, they differ on tactics. Should critical industries such as electric batteries, cloud storage, and semiconductors be subsidized? If so, by how much? Should the measures contain some protectionism, or at least favor European champions? Some countries, most notably France and Germany, aim to see Europe pursue digital sovereignty by limiting data flows and subsidizing European companies. Others, led by the Nordics, see digital sovereignty as promoting European standards and values and reject most infringements on free trade. And still others, particularly in former communist Eastern Europe, fear that efforts to crack down on illegal hate speech will result in silencing legitimate conservative voices.

Upcoming digital legislation will require a balance between national positions. In December 2021, the European Commission unveiled a proposal to make most drivers for Uber, Bolt, and other gig platforms become full-time workers. The European Parliament is toughening the opt outs and a final bill is expected to be approved in 2023. Denmark, with its strong welfare state, and Italy, hobbled by strong tax unions, say yes — but crucially, France, perhaps the EU country with the most stringent labor laws, says no.

In some key policy areas, such as how to tax large tech companies, alliances within Europe are shifting. France has led a campaign to impose a levy on digital platforms requiring tech firms to declare revenues and profits and pay taxes in the countries where they sell their products, rather than routing them through low-tax European headquarters in countries such as Ireland. Initially, Denmark opposed this effort, fearing it would lose tax revenues from its tech innovations to France and Italy where they were consumed. But Denmark has now switched course out of concern that large firms were not paying their fair share.

An unresolved debate concerns state aid and protectionism. France is leading the charge. It has succeeded in lobbying Europe to launch ambitious Europe-wide programs to build electric car batteries and semiconductors.  While the battery and semiconductor projects are concrete, and receive broad Europe-wide support, fears remain over other projects, such as one to create a European cloud. Danish, Dutch, and other critics see it as a dangerous lurch into protectionism against US providers — Amazon, Microsoft, and Google —most of whom are building data centers on their territories.

Artificial intelligence (AI) remains another subject of fierce debate. Although Europeans generally agree that AI should be ethical and controlled to avoid abuses, they disagree on how to achieve this goal, arguing over the proper level of restrictions.¹³  Denmark, wary of slowing innovation, and wary of technology used to conduct surveillance, wants a light-touch regulation, with only a few types of high risk areas considered off-limits. In contrast, Italy and France are willing to require more restrictions. Warsaw refused to support a text on AI and human rights that included the term “gender” equality.¹⁴  The final AI act, expected to be finalized by the end of 2022, will almost certainly fall in between these positions.

Data represents a key dividing point. Europe is planning a series of new data acts, some of which could promote data localization and discriminate against US cloud computing leaders, Amazon, Microsoft, and Google.¹⁵  France is pushing hard to build a French and European cloud, limiting the role of US firms.¹⁶  But Denmark and others are skeptical and fearful that the Gallic quest for digital grandeur will end up wasting European public funds on cloud white elephants — and believe the US cloud players are indispensable.

Photo: People using their phones in the city, Denmark. Credit: Shane Rounce via Unsplash.

In some key policy areas such as privacy, a consensus prevails. All four countries that are the focus of this report supported the adoption of GDPR privacy rules. They support reinforcing individuals’ control and rights over their personal data. Little appetite — and no political pressure — exists for Europe to weaken these rules, even if they have precipitated ongoing tensions with the United States over data flows.

Where this consensus breaks down is over enforcement. At present, countries regulate companies according to where their European headquarters are based.  This system has not worked, particularly with the GDPR. Ireland and Luxembourg, home to Google, Facebook, and Amazon, have struggled to muster the resources — and perhaps the will — to investigate and impose penalties. Large countries led by Germany, Italy, and France want to put their regulators in charge. Brussels has received additional powers to enforce the new DMA and DSA, but national regulators remain able to intervene.

The lesson is clear: despite diverging national perspectives, the overall, overriding European trend is to increase tech regulation. If little Denmark agrees with big France about the need to tighten controls on giant US content platforms and e-commerce marketplaces, the EU will crack down. Google, Facebook, Amazon, eBay, and others will soon be required to up their game — or face large fines. Although Italy and Poland may be pro-digital newcomers, they will not stop the others from upping pressure and responsibilities on digital platforms.

The United States has reengaged in transatlantic cooperation on technology. After several years of impasse, the United States and Europe agreed in March 2022 to a new deal securing the transatlantic flow of data.¹⁷  Both signed up in April to a new declaration in support of a “democratic” Internet, fighting Russian disinformation and cyber threats.¹⁸  Both also are working well to coordinate sweeping technology sanctions, creating an “information mechanism” to check that no one is cheating.¹⁹  The new US-EU Trade and Technology Council (TTC), which has met twice, is becoming a powerful forum for long-neglected discussions.²⁰

Significant as these achievements are, the United States and Europe disagree on serious issues about regulating the Internet, such as: how to pay for Internet infrastructure, whether to promote data localization, and perhaps most importantly, how much to isolate China. The United States perceives Europe’s approach as discrimination against US tech giants, even if the Biden administration’s reaction has been muted.²¹  In part, Washington is silent because it shares many European goals on ensuring fair competition in digital markets and in forcing Internet platforms to do more to combat illegal content. In part, too, US officials acknowledge that they can do nothing to stop the new European laws from going into effect.

Whatever the temptation, the United States should refrain from trying to divide and conquer Europe on digital policy. As this report shows, the continent’s diverse players, large and small, east, west, south and north, agree on the need for increasing tech regulation and are moving ahead, leaving the United States on the sidelines.

Europe’s divisions temper the most extreme proposals. The continent will have to answer crucial questions, both about how the DSA and DMA will be implemented and enforced, and about future regulations on issues ranging from data transfers to AI. Compromises will be required. This report attempts to illustrate how a diverse bloc of 27 nations manages to forge a consensus.

Digital Denmark: The Little Mermaid Wakes Up to Big Tech’s Risks

Executive Summary

Denmark is a digital pioneer. Google developed its Chrome JavaScript engine in Aarhus and Apple and others are locating some of their biggest data centers on the Jutland Peninsula. The small, prosperous Nordic country produces half of the world’s increasingly digitized hearing aids.²² Denmark leads the European Union (EU) in broadband connectivity and Internet penetration. Most Danes shop online and more than 90% of them communicate online with the public sector.

At the same time, Copenhagen has joined with France and Germany to insist on tough EU-wide tech regulation. Danish European Commissioner Margrethe Vestager has teamed up in Brussels with French European Commissioner Thierry Breton to carry out a tough crackdown on Big Tech. Denmark is leading the charge to rein in online marketplaces, proposing to make them liable for the safety of products posted for sale on their sites, in line with a long Danish tradition of strong consumer protection.

Innovation and regulation are not contradictions in the Danish mind. A marriage of strong regulation with open markets and skepticism of concentrated digital market power are hallmarks of the ordoliberal Social Democratic notion of digital sovereignty — contrasted to the French state-directed dirigiste version.²³ Digital Denmark is skeptical about Brussels-led proposals for digital protectionism and generous tech subsidies. Its vibrant freedom of expression tradition makes it wary of too strong of a crackdown on online speech.

Digital Performance

Denmark ranks at the top of the class in the European Commission’s latest Digital Economy and Society Index (DESI). It is among the top four countries for human capital, connectivity, integration of digital technology, and digital public services.²⁴

According to a 2021 Danish Statistical Office report, the COVID-19 pandemic boosted online shopping in Denmark by five percentage points from 2019 to 2020. Three-quarters of Danes bought online in 2020, compared to just over half in 2011. About 90% of Danish households own a smartphone and more than three-quarters of the population surf the Internet several times daily, with more than 80% subscribing to social media such as Facebook or Instagram.²⁵

Government services are digitized. Since 2014, all communication with public authorities takes place online with exceptions only for the elderly and the disabled. In 2020, about 90% of Danes used the public mailbox for communications with the public authorities and 92% of Danes receive e-mail from the public authorities.²⁶ About 80% consider their data safe with the government.²⁷

Photo: Danish Prime Minister Mette Frederiksen (center) and European Council President Michel (second left) visit the Technical University of Denmark. Credit: European Council.

Views on EU Digital Policy

Danes are skeptical about the French concept of EU digital sovereignty if it is defined as a state-directed anti-US effort. First, the Danish government fears that this poorly defined concept could lead to protectionism. Second, Danes are sensitive to the use of the term “sovereignty” in an EU context. They fear EU integration that leads to the erosion of their own national sovereignty.

The Danish government joined with like-minded EU partners such as Estonia, Finland, and Germany to specify that EU digital sovereignty must mean digital regulation in line with EU values. This means protecting free speech, human rights, and personal privacy, and keeping the Digital Single Market open to the world.²⁸ For Danes, digital sovereignty must allow individuals and society to take full advantage of digital innovation.

This means combining tough regulation with demands that data keep flowing to boost economic performance. The government has set up a Digital Partnership with representatives from businesses, unions, and academics. It recommends pushing Brussels to establish EU-wide digital health, allowing the country’s strong pharma industry to leverage its talents. Pharmaceutical companies like Novo Nordisk and H. Lundbeck account for almost half of Denmark’s exports to the United States.²⁹

The Digital Partnership supports an EU digital push to fight climate change, leveraging Denmark’s status as a wind superpower. Denmark is home to Vestas Wind Systems, the world’s largest wind turbine manufacturer and wind-generated some 47% of the country’s total electricity consumption.³⁰

On data privacy, Denmark takes a hard line. It is increasing funding for the Danish Data Protection Agency to investigate private sector abuses and has increased support for the Advisory Board on Data Ethics. Another Danish priority is bolstering the fight against fake news. At home, Denmark should establish data ombudsman with powers to issue fines.

Strong regulation of digital platforms is welcomed if it forces them to take increased responsibility for illegal content. In addition, Danes believe that mega platforms must be prevented from acting as gatekeepers that throttle competitors. In particular, these gatekeepers should be prevented from promoting their own services at the expense of competitors.

While these ideas are in the EU mainstream, Denmark is more radical in its approach to regulating e-commerce. In the Danish view, consumers must be protected from dangerous products. The government, Danish Members of the European Parliament (MEPs), and business organizations criticized the proposed Digital Services Act (DSA) for being too weak on marketplace responsibility for product safety. Danish MEP Christel Schaldemose proposed making marketplaces liable for the safety of products posted for sale on their platforms — an idea rejected by the full European Parliament and in the final DSA. Instead, marketplaces will have to improve their Know Your Customer onboarding of merchants and speed up takedowns of counterfeit and dangerous items. Consumers will have the right to seek compensation for damages.

On digital tax, Denmark’s former center-right government voted in November 2018 to block the European Commission’s proposal to impose a special tax on digital businesses.³¹ Although Denmark is traditionally skeptical about EU taxes, the present Social Democratic government and its supporting majority in the Parliament have changed the country’s position out of anger that the tech giants were not paying their fair share of taxes. As an alternative, Denmark supports the Organisation for Economic Co-operation and Development (OECD) process to set a minimum 15% tax rate on the largest multinationals.

Denmark supports EU digital industrial projects, provided they are transparent and consistent with strict state aid provisions. It has endorsed the EU’s ambitious plans to revive its digital industrial base, including cooperation and support for developing its semiconductor industry and creating an electric car battery alliance.  While Denmark does not take part in these chips and battery projects, it intends to leverage EU funding to promote the use of hydrogen power and for developing a common base for the secure use of standardized health care data.

Denmark’s strong welfare state and consumer protection tradition separate it from its low-tax, free-market Baltic neighbors. The divisions carry over into different stances on tech regulation. Baltics are skeptical. Danes are believers.

Photo: Participants at the 2019 WindEurope Offshore conference in Denmark, at a stand highlighting developments in green energy. Credit: Wind Denmark via Flickr.

Digital Policy

Broad political agreement exists on the need to support Denmark’s digital transformation. In the country’s wireless spectrum auctions, Danish telecommunications companies agreed to roll out a high-speed 5G mobile network to 75% of the Danish population by 2025. The telecom companies have invested around €1.3 billion.

But problems with planning regulation for around 150 masts for rural areas mean that the target has been missed. According to the Danish newspaper Berlingske, a political majority in the Danish Parliament wants to ease permitting.³²

In August 2021, the Danish government launched proposals to regulate social media. A national action plan would educate young people on the responsible use of social media.  Platforms would be required to delete illegal content within 24 hours after specific notification and to publish transparency reports. On the antitrust front, the government wants the Danish Competition Authority to block tech giants from acting as gatekeepers favoring their own services.

The government recognizes the need for support to strengthen critical technologies, adopting a risk-based approach to their regulation. It believes these should be identified via transparent analysis with clearly identified criteria. For artificial intelligence (AI), the upcoming EU rules should take account of the risks while not putting a brake on innovation.³³

Denmark’s Digital Partnership issued 46 recommendations. These include proposals to improve the digital capacity of Danish small and medium-sized enterprises (SMEs). Among the most interesting ideas was to establish public robot libraries. They would lend the robots to individuals and businesses. Funding for digital education and training should be increased. Public data should be made available under simple and clear rules.³⁴ Privacy protections should be bolstered, with increased funding of the Danish privacy regulator.

In response to these proposals, the government published its own digital strategy in May 2022 which in general endorses a large part of the Digital Partnership’s recommendations. The strategy includes 61 initiatives to increase digital security and competencies. About €300 million of public funding is earmarked between 2022 and 2026. A new Digital Advisory Board led by the former CEO of Microsoft Denmark, Nana Bule, has been established to monitor implementation. Danish business organizations have welcomed the strategy.

As part of the EU’s COVID-19 Recovery and Resilience Facility, another €300 million will be spent on digital projects over the next four years to extend rural broadband and digitize health care services.³⁵ New investments will help bring public services online and promote cybersecurity and AI. Importantly, public-private partnerships that promote data sharing will be encouraged.

Although Denmark is a cybersecurity leader in some international rankings, cyberattacks have hit several Danish companies, including Maersk, ISS, and Vestas.³⁶ A report from the Danish Parliament’s Committee of the Public Accounts criticized five specific public agencies for failing to meet standards for cybersecurity.³⁷

Denmark usually is a bastion of freedom of expression. It opposes Facebook’s ban on nudity, which Danes feel is overly restrictive. A Danish politician who tried to post a photo of Copenhagen’s iconic Little Mermaid statue was told it could not be published because of nudity rules.³⁸ Facebook subsequently relented and clarified its rules on nudity, allowing photos of paintings, sculptures, and other art that depict nude figures.³⁹

At the same time, Denmark insists on increasing the responsibility of social media companies for the content they host. In January 2022, the Danish broadcasting company DR profiled the mother of a young Danish woman murdered by Islamist extremists. She had failed to get Facebook to stop the sharing of the murder. Facebook insisted that it was trying to block the video, but Danish Minister for Industry, Business and Financial Affairs Simon Kollerup, responsible for regulating social media remained unconvinced — and said the failure underlined the need for strict rules requiring platforms to take down illegal content.⁴⁰

Denmark’s Digital Partnership recommendations endorsed by the government represent a solid strategy to tackle the main challenges for a successful digital transition. The open question is whether the government will unlock the needed resources and how the strategy will be implemented.

Denmark should continue to fight potential protectionism and insist that Europe build a true Digital Single Market. On issues such as digital taxation, Denmark wants to find a transatlantic agreement. If this is impossible, however, it will side with European solutions.

La France Numérique: Grandeur and Decadence

Executive Summary

In his 1837 novel Grandeur et Décadence de César Birotteau, the French novelist and playwright Honoré de Balzac portrayed a successful and arrogant Parisian perfumer who, a victim of his success, became delusional and squandered his wealth with visions of grandeur and frivolous expenditures. French digital policy does the same, navigating between grandeur and decadence.

Grandeur has been placed first and foremost, as French politicians refer to this Gaullist expression to achieve what they call digital sovereignty. While debate remains over the exact meaning of the term, the French conception emphasizes national self-sufficiency in most digital technologies. The assertion of grandeur and sovereignty has never been as vocal, even as France’s influence on the international stage wanes. In the past, France has spent public funds on a series of misguided state-run projects,  — Plan Calcul, EuroNet, and even a public effort to rival Google called Quaero. All ended in undeniable, often costly failure.

Present day French digital policy can point to undeniable tech success stories. France is home to a growing number of innovative tech start-ups. Its e-commerce market is one of Europe’s largest and most competitive. It is loosening its labor market to allow Uber and other gig economy actors to flourish.

But these attempts to achieve grandeur lead French politicians to flirt with decadence — and to revive the Gaullist tradition of alleged neutrality between, on the one hand, the United States, and on the other hand its main rival — yesterday, the Soviet Union, and today, China. Disheartened by the transatlantic relationship following the announcement of AUKUS, a new Australia-United Kingdom-United States security pact that cost France a submarine contract with Australia worth billions of dollars, France’s attitude toward the digital agenda is to pretend to practice some form of equidistance between the United States and China.

Paris downplays the cybersecurity threat posed by China. Given the considerable influence of France, and especially of any French president, on European digital policy, this internal and existential French dilemma of how to remain independent of both the US and China may prove decisive for the future (and reality) of transatlantic digital policy.

The French quest for digital independence creates tension within the EU. Other Europeans — start with Denmark, but also, as we will see, Italy and Poland — prefer to partner with US companies.

Digital Performance

France’s digital performance has exceeded expectations. Over the last few years, French society has embraced digital technologies and French tech start-ups are scaling up.

Digital adoption has increased dramatically. In 2020, France ranked second after Switzerland among the Organisation for Economic Co-operation and Development (OECD) countries in adopting high-speed Internet subscriptions per 100 inhabitants.⁴¹ Out of 65 million inhabitants, France has 59 million Internet users — a 91% rate.⁴² It has 49 million active social media users, and 67% of the French population makes online purchases or pays bills online.

E-commerce is booming, with an average annual growth in France of 18%. It accounted for $54 billion in sales in 2021. In France, the average cost for broadband is about €28 per month — a low price when compared to the €58 for Americans or the €34 for Swiss and Danes.⁴³

France’s venture capital market is burgeoning: start-ups raised more than €11 billion in 2021, well above the €5 billion raised in 2020.⁴⁴ The French venture capital market is Europe’s third largest, after the United Kingdom (€32 billion) and Germany (€16 billion).⁴⁵ Notable successes include companies like Back Market for secondhand smartphones; BlaBlaCar for ridesharing; Deezer for streaming music; OVHcloud for cloud computing; and Sorare for blockchain soccer card trading.

The “French Tech” initiative created in 2014 and dedicated to growing French start-ups is another success story.⁴⁶ By the end of 2021, France counted 26 tech unicorns, companies with at least €1 billion in market valuation.⁴⁷ This goal was achieved well before the original 2025 target.

Located in Paris, Station F is the world’s largest start-up campus, incubating more than 1,000 tech start-ups.⁴⁸ The upcoming University of Paris Saclay campus plans to bring together prestigious French universities and leading corporations. It already boasts 155,000 researchers and ranks 14th worldwide in the Shanghai University overall ranking of universities globally.⁴⁹ French tech companies are oriented toward international opportunities: 40% of their revenue comes from outside France, and they accounted for a 14% increase in French exports between 2020 and 2025.⁵⁰

The French government has launched a French Tech Visa to attract foreign talent to France with a simplified, fast-track scheme for non-EU start-up employees, founders, and investors.⁵¹ Visas apply to family members, are valid for four years and renewable, and are not conditional on the applicant having certain educational qualifications.

Photo: French President Emmanual Macron meets with Bill Gates. Credit: Elysée Flickr

Views on EU Digital Policy

France is Europe’s leading cheerleader for digital sovereignty, the pursuit of a utopian tech multipolarity that makes the country a divisive — and decisive — voice in the transatlantic digital partnership.⁵² It pushes forward a hopeless goal to “Europeanize” US and Chinese tech platforms, pursuing a “sovereign cloud” forcing companies to store data inside its borders, and imposing a digital tax on Internet platforms located outside the country but selling to French consumers.⁵³ In 2017, French President Emmanuel Macron laid down his vision that a “key to our sovereignty concerns digital sovereignty.”⁵⁴ He stated that “rather than bemoaning the fact that the current leaders in digital technology are American, to be followed by the Chinese, we must create European champions.”

When France presided over the Council of the European Union during the first half of 2022, the French vision of digital sovereignty became a European priority.⁵⁵ France embraced the Digital Services Act (DSA) and the Digital Markets Act (DMA) unconditionally, as these pieces of legislation contribute to transferring power and wealth from US tech companies to European and French ones. In February 2022, France pushed to create a new European public fund to support scaling up start-ups.⁵⁶ Macron has advocated for creating 10 Big Tech companies in Europe by 2030 — companies whose market capitalizations would reach tens of billions of euros (“the decacorns”).⁵⁷

France desires to remain independent in the quest for tech leadership between the United States and China. Paris has avoided banning Chinese information and telecommunications company Huawei despite cybersecurity concerns made clear by the National Cybersecurity Agency of France (ANSSI).⁵⁸ Huawei already supplies half of the network infrastructure of the French companies Bouygues Telecom and SFR. Here, the notion of sovereignty seems to not matter as much as when it comes to US digital platforms.⁵⁹

Photo: Face ID information shown on an IPhone in French. Credit: Mathieu Improvisato via Unsplash.

Digital Policy

French digital policy relies on the Digital Agency (Agence du Numérique). Created in 2015, this agency is dedicated to “preparing” French society for the digital revolution.⁶⁰ It oversees:

• Executing a High-Speed Broadband Plan (Plan Très Haut Débit) aimed at covering the entire French territory with high-speed Internet.
• Launching the Tech Society (Société Numérique) to foster the opportunities enabled by digital technologies.
• Support for French tech start-ups domestically and globally.

As part of the European Union’s (EU’s) Digital Single Market program, France has launched a national strategy to encourage even its most vulnerable citizens to adopt digital technologies.⁶¹ It is part of the French Tech Tremplin aimed at identifying “French-speaking aspiring entrepreneurs from tougher backgrounds and welcoming them into the French tech ecosystem.”⁶²

The French approach to digital technologies is illustrated in the 2016 Law for a Digital Republic (Loi pour une République Numérique). It addresses multiple issues such as digital accessibility, a sovereign operating system, digitalization of administrative documents and procedures, fiber Internet everywhere, and fairness obligations for digital platforms.⁶³

In a post-COVID-19 France, the recovery plan (France Reliance or Relaunch France) will invest €7 billion in the digital economy, with €3.7 billion allocated to start-ups and strategic digital technologies, €2.3 billion to the digital transformation of the state, €300 million to training in digital professions, and €800 million to the dissemination of digital technology.⁶⁴

French digital policy embraces EU regulations and portrays strong enforcement actions against the United States. With the idea of scaling up French tech companies, the desire to regulate foreign tech companies remains fundamental to the notion of digital sovereignty in France.

France possesses a powerful potential for being a powerhouse of digital innovation in Europe. The success of French tech, its high-skilled workforce, its robust infrastructure, and the high penetration rate of broadband demonstrates such potential.

Positive results are already visible: France remains third after the United Kingdom and Germany in Europe for its ability to nurture tech start-ups. Macron has scored considerable successes — removing red tape, reducing taxes, easing immigration, and investing in universities and training. However, significant improvements are still required.

France should exploit its formidable potential with a more coherent digital strategy. Otherwise, its dreams of digital grandeur could very well drift away to digital decadence.

Italy: La Dolce Vita Goes Digital

Executive Summary

If Italian Prime Minister Mario Draghi cannot close Italy’s digital divide in the next five years, it will not be for a lack of effort — or money. Italians long resisted digital disruption, banning Uber after complaints from taxis, tying YouTube up in copyright disputes, and preferring traditional to online advertising. But when COVID-19 hit, this reticence vanished.

In Europe, Italy was the first and hardest hit by the pandemic, which forced many Italians to stay inside their homes for months. With most retail businesses and offices closed, technologies that other countries had previously embraced to increase efficiency — like intranets, e-commerce, and video conferencing — were no longer perceived as being just about saving time. They became vital.

Although the pandemic accelerated digital trends worldwide, it is hard to imagine a more dramatic shift than in Italy. Suddenly, 75-year-old CEOs who had previously refused to use a computer — and had denied employees the option to work a single day from home — were managing entire teams remotely via Zoom. Instead of shooing away IT managers who wanted to start conversations about cybersecurity, executives began drafting digital strategies and investing in improved network protections.

Despite this embrace of a digital revolution, Italy faces serious hurdles. The country’s infrastructure lags. The Draghi government has responded by identifying digitization as a top priority. More than a quarter of the country’s €195.1 billion in European Union (EU) recovery funds will go to digital investments.⁶⁵ Italy received the lion’s share of EU payouts, more than a quarter of the total given out.⁶⁵ The unanswered question is: After years of Internet apathy, will Italy be able to establish itself as a capable digital economy?

Italy’s digital policies need to be updated to reflect this digital opportunity. The country has long been obsessed with online privacy.⁶⁶ It has led the European charge to impose special discriminatory taxes on digital businesses.⁶⁷ And it has put up high regulatory hurdles to limit the gig economy, even shutting down Uber and waging war against Airbnb.⁶⁸

Digital Performance

Italy consistently ranks below the European average in digital penetration. About 80% of Italians connected to the Internet in 2020, with 75.6% logging on daily, according to the European Commission. The country’s fixed-line broadband penetration rate stands at 29.9%, compared to an EU average of 44%.⁶⁹

Urban-rural divides and regional differences between the north and south account for this poor showing. It does not help that Italy has one of the oldest populations in the world. Mobile broadband penetration is much higher at 93.6% than fixed connections, according to the European Commission.⁶⁹ Still, the country ranks 24th out of 27 EU member states for 4G coverage, with 99.3% of households covered.⁶⁶ Testing for 5G began in 2017, and the first networks debuted in 2019.

Affordability is not an issue; in 2021, the Economist Intelligence Unit ranked Italy the fourth cheapest for Internet and mobile phone access out of 120 countries surveyed.⁷⁰ Most unlimited broadband plans range from about €20 to €30 per month, while mobile plans offering 30+ gigabytes (GB) of data monthly start at around €5.⁷¹

Of Italy’s 51 million Internet users, more than 43 million are active on social media.⁷² WhatsApp (90.8%), Facebook (78.6%), and Instagram (71.8%) are the most popular platforms, according to a 2022 report by the global agency We Are Social.⁷³ TikTok use remains low at 28.9%, but the video-sharing app registered the most consistent growth from 2020 to 2021. Online gaming has also grown in popularity, with 82% of Internet users now gaming online — and paying 22% more on average for games than they did in 2021.

For years, Italy’s unreliable mail service plagued e-commerce. But thanks in part to the pandemic and in part to Amazon — which showed that cheap, reliable shipping is in fact possible in Italy — habits are shifting. Today, 46.7% of Italians shop online weekly, and almost another 10% have made at least one online purchase at some point.⁷⁴ In 2020, Internet advertising edged out TV advertising to become the most-purchased ad medium, with a market of €1.9 billion annually, according to the Digital Media Observatory, a research institute at the Polytechnic University in Milan.⁷⁵

Given these seismic shifts, it should come as no surprise that financing in Italian high-tech start-ups is rocketing. It doubled between 2020 and 2021 — from €669 million ($758 million) to €1.46 billion ($1.65 billion), the Digital Media Observatory reports.⁷⁵

Cybersecurity is seeing serious growth, too. In 2020, 31% of larger organizations reported an increase in cyberattacks, and 60% vowed to increase their security budgets.⁷⁶ Overall, cybersecurity spending increased by 13%, reaching a total market value of €1.55 billion ($1.76 billion).⁷⁷ It was not just the private sector that faced a cyber reckoning; in June 2021, Italian Minister for Technological Innovation and the Digital Transition Vittorio Colao admitted that between 93% and 95% of the government’s servers were not fully secure.⁷⁸ Italy was the last major European country to adopt a national cyber strategy in May, 2022.⁷⁹

VIEWS ON EU DIGITAL POLICY

Italy is simultaneously one of the EU’s most enthusiastic members and one of its least compliant. While the country aligns with EU policy, including with digital policy, its revolving-door governments and excessive bureaucracy often make it difficult to implement EU regulations.

Like the EU, Italy defines digital sovereignty in a French style, with the goal of reducing dependency on foreign technology. In practice, that means doing a better job competing with the United States and China in areas such as cloud computing, artificial intelligence (AI), blockchain, and chip technology.  “We need to aim for scientific and technological excellence, as well as strong regulatory policies and allocation of resources that will allow Italy and Europe to be the third great sovereign in innovation and research,” Italian Technological Innovation and Digital Transition Minister Vittorio Colao said during a digital sovereignty event in March. “Europe is a gentle giant, but it’s also been a bit of a sleeping giant. We need to catch up.”⁸⁰

Italy has expressed its “full support” for the Digital Services Act (DSA), designed to force Internet players to take more responsibility for tackling illegal content. “This is an important moment of change to increase trust and responsibility on the part of new technologies, assign responsibility to new intermediaries, and protect products and content produced in Spain, Italy, France and throughout the EU,” Colao said in February.⁸¹ It is important to strengthen the European Commission’s powers of supervision, investigation, and enforcement, he said.

Rather than going it alone, Italy wants to establish itself as a major player in Europe’s quest for digital sovereignty. On the one hand, those ambitions make sense since Italy is the third-largest economy in the eurozone. On the other hand, Colao acknowledged that the country must undergo a serious cultural shift.

About 58% of Italians ages 16 to 74, or 26 million people, now lack basic digital skills — much higher than the European average of 42%, according to the European Commission’s Digital Economy and Society Index (DESI).⁸² Italians also tend to avoid risk, with the country ranking second to last in Europe in the 2019 Global Entrepreneurship Index.⁸³ Even people who are temperamentally inclined to try something new are turned off by the high cost of doing business, including labor laws that make it overly difficult to fire underperforming employees.

In some key policy areas, Italy has broken from other Southern Europeans. When France (as well as Denmark) pushed for marketplaces to be obliged to take down dangerous products from sale within 24 hours after specific notification, Italy said that these obligations were too burdensome and went beyond the rules for brick-and-mortar shops. The government suggested mandating the takedowns of dangerous products “without delay” instead. Rome also supported a risk-based approach to avoid “being excessively burdensome and unfair” to companies selling products like books.

Photo: Italian Prime Minister Mario Draghi (right) visits Antonio Cuccovillo higher technical institute in Bari, Italy. Credit: Presidency of the Council of Ministers, Government of Italy.

Digital Policy

Although Italy may be most focused on closing the digital gap, it is active in several other key digital policies as well. These include prioritizing online privacy, adopting one of Europe’s first digital taxation laws, and regulating the gig economy and other global tech giants.

Digital Spending: Italy received the largest share of the EU’s coronavirus pandemic recovery funds — €195.1 billion — and has earmarked another €30.6 billion ($34.67 billion) in national funds to bolster its planned reforms. Under the National Recovery and Resilience Plan approved last year, 25.1% of the money will go to “digitalization and innovation.” The main initiatives include expanding 5G broadband access; strengthening digital capacity at government agencies; helping manufacturing businesses digitize their production processes; and enhancing digital skills to boost the tourism and creative fields.⁸⁴

In January, Colao said €9.5 billion had already been allocated, including €1.9 billion ($2.51 billion) earmarked for a “national strategic data center.” The project would consolidate national and local government data, which are currently stored at 11,000 separate data centers, into one Italian cloud computing center. Originally, the goal was for the data center to be “located in Italy and controlled by Italians,” but it proved impossible to rely solely on Italian technological know-how. The bid ultimately went to an Italian company that will partner with either Google or Microsoft.⁸⁵

Online Privacy: Italy’s Data Protection Authority, the Garante per la Protezione dei Dati Personali, is aggressive in its enforcement of the continent’s strict General Data Protection Regulation (GDPR) rules. The Garante fines companies for marketing strategies that misuse customer data, privacy violations such as publishing contact information in online articles, and discriminatory algorithms. Targets extend beyond traditional tech companies. In January, the Garante levelled a €26.5 million ($30 million) fine against Enel Energia for what it called “overly aggressive” marketing that used customer data without permission.⁸⁶

During the COVID-19 crisis, the authority proved pragmatic. It oversaw the rollout of the country’s Green Pass system. In Italy, proof of COVID-19 vaccination was required for close to a year to enter almost all public places, with compliance monitored through the digital Green Pass that takes the form of a QR code. Italy also required all citizens over the age of 50 to get vaccinated or face fines, with the Garante monitoring data sharing between government agencies.

Digital Tax: Italy was quietly an early supporter of digital taxation. In December 2019, Parliament approved a digital services tax that was worded almost identically to an EU proposal that had stalled in late 2018. The 3% tax applied to gross revenue of online advertising, online sales, and data processing for companies with global annual revenue of at least €750 million, of which at least €5.5 million must come from digital services in Italy.⁶⁷

The tax originally required separate implementation legislation, which the Italian government held off on issuing while it waited to see if Europe or the Organisation for Economic Co-operation and Development (OECD) would reach an international agreement. But faced with serious budget shortfalls and a spending battle brewing with Brussels, in December 2020, Parliament went ahead and approved a new tax that took effect directly in 2021, without additional legislation.⁸⁷ Under a sunset provision, the tax will automatically be repealed if an international tax agreement enters into force.

Gig Economy: Although food delivery app use was virtually nonexistent in Italy prior to the COVID-19 crisis, Italians have since embraced deliveries — and Italy became an unexpected champion for gig economy workers. In February 2021, the Milan prosecutor’s office fined four food delivery services a combined €733 million ($830 million) for violating Italian labor law by classifying their 60,000 delivery riders as independent contractors.⁸⁸ Soon after, Just Eat agreed to hire its 4,000 riders as regular employees with a minimum wage, benefits, travel reimbursements, and safety equipment. In December, the remaining food delivery services — Uber Eats, Glovo, and Deliveroo — reached a deal to improve worker conditions, though the prosecutor did not say if the agreement included hiring the workers as employees.⁸⁹

Antitrust: Italy’s antitrust authority has emerged as one of the most aggressive in Europe when it comes to cracking down on international tech companies. In December, the Autorità Garante della Concorrenza e del Mercato fined Amazon €1.13 billion ($1.28 billion) for privileging sellers who use the company’s logistics services.⁹⁰ Not long before, the Italian regulators leveled a series of multimillion-euro fines last year against Apple, Google, and Facebook. The fine came as the European Commission was investigating Amazon for similar practices in other countries.⁹¹

Whether Italy succeeds in implementing its digital agenda will be a question of timing and red tape. Parliamentary elections will be held in summer 2023. That means Draghi, the prime minister, could have just 16 more months left in office. Italy is famous for political gridlock and theatrics, but since taking over as prime minister in February 2021, “Super Mario,” as Draghi is popularly known, has been credited with bringing the necessary clout to cut through the noise and pass legislation in record time. But the clock is ticking, and the political infighting is as fierce as ever.

Proud Poland: A Pro Digital Power Haunted by Nationalist Nightmares

Executive Summary

Often at odds with Brussels, Poland is uncomfortable with the European Union’s (EU’s) regulatory push to clamp down on the digital economy.

Poland is pro-digital, supporting the digitization of public services and innovative companies. It favors light-touch regulation to big digital platforms, placing it among the minority free-market minnows such as Estonia.

At the same time, Poland’s Law and Justice government, in power since 2015, takes a traditional position on religious and social issues.⁹² The government’s stance on cultural issues is divisive within Polish society and often puts Warsaw at odds with Brussels on content moderation, artificial intelligence (AI), and other key digital dossiers.

Digital Performance

In Poland, 90% of households enjoyed Internet access in 2020 (for broadband Internet, the figure was 67.7%), with fixed-line Internet costing an average of $16 per month.⁹³ Coverage is uneven: 4.5 million Poles have never used the Internet, according to a report by Federacji Konsumentów, Poland’s Consumer Federation.⁹⁴ The country has taken steps to counter digital exclusion. The National Broadband Plan — adopted in 2014 and updated in 2020 — envisages that every household in Poland will have access to the Internet with a speed of at least 100 megabytes per second (MB/s) by 2025.⁹⁵

Large US companies run Poland’s most-visited websites.⁹⁶ Google counted 27 million real users and an online reach of 94% in October 2020, with Facebook and YouTube ranking second and third respectively. YouTube, Facebook and its Messenger app, Instagram, and WhatsApp are the most popular social media platforms.⁹⁷

Despite the entrance of Amazon, Poland’s own Internet giant, Allegro, dominates e-commerce.⁹⁸ In October 2021, Allegro’s website and app counted more than 21 million users, compared to 5.6 million for Amazon in Poland (amazon.pl and other country versions).⁹⁹ In recent years, a growing percentage of Poles have begun to  shop online, a trend supported by the pandemic.¹⁰⁰ The European Commission’s Digital Economy and Society Index (DESI) shows that the average Pole buys more online than the average German. Today, the e-commerce market in Poland is worth an estimated PLN 100 billion ($25 billion), up from PLN 70 billion before the pandemic and PLN 27 billion in 2016.¹⁰¹

Investment in Polish venture capital is growing, too. In 2020, it amounted to €477 million ($540 million), an increase of 70% compared to the previous year.¹⁰² Public-private capital accounted for 62% of financing, while 48% of the total value of transactions came from international funds.

Cybersecurity represents a major concern, not only in relation to attacks attributed to Russia, but also to the perceived threat from China.¹⁰³ Warsaw has urged NATO allies to coordinate against Chinese cybersecurity challenges.¹⁰⁴ In its Cybersecurity Strategy for 2019-2024, the government seeks to bolster the country’s resistance to cyberthreats while “guaranteeing the right to privacy and maintaining a free and open Internet.”¹⁰⁵

This tension between digital threat and digital opportunity lies at the heart of Poland’s digital policy and how it plays out in the country’s relations with the EU.

Photo: Mateusz Morawiecki hosts European Commissioner for Internal Market Thierry Breton. Credit: Chancellery of the Prime Minister of Poland via Twitter.

Views on EU Digital Policy

Warsaw views digital as an opportunity for the Polish economy and is skeptical about imposing restrictions on online marketplaces and social media. But Poland punches below its potential weight in pursuing free-market, pro-US policies. Its attacks on EU democratic norms undercut its leverage.

Warsaw’s pro-digital attitude is perhaps most visible in the government’s approach to supporting artificial intelligence (AI), and its skepticism about potential EU-imposed restrictions. The country’s 2020 AI policy paper emphasizes the economic benefits of introducing AI in priority sectors of the Polish economy, which the paper estimates at around 2.65% of the gross domestic product (GDP). The paper assigns the need for greater Polish involvement in the development of the moral dimensions of AI.¹⁰⁶ “It is also crucial that the AI solutions created always serve people, putting their dignity and rights first. That is why it is so important that the Polish voice continues to be heard in the global debate on the ethics of artificial intelligence and how intelligent or autonomous agents operate,” the paper states.

Yet Warsaw cannot go it alone when it comes to AI and tech more generally. For Poland to become globally competitive, it needs to cooperate broadly with its international partners, especially EU countries, the US, Japan, and NATO members, the policy paper argues. At the EU level, this includes ensuring that Polish entities participate in the EU’s programs (such as Digital Europe, Horizon Europe, and the Innovation Council) as much as possible. More broadly, Polish Prime Minister Mateusz Morawiecki has declared Poland’s support for technological, scientific, and regulatory cooperation between like-minded countries.¹⁰⁷

On the EU’s digital policy, Poland has been broadly supportive of efforts to deepen the single market for digital services — with its own addendums, particularly when it came to what it perceives as censorship of right-wing views. A government non-paper related to the recently finalized EU rules governing digital platforms, the Digital Services Act (DSA), argued that the “time has come to review provisions relating to the removal of illegal content from the Internet and to content moderation by intermediary service providers.”¹⁰⁸

Specifically, Warsaw wanted mechanisms for users that prevent content from being removed or blocked “without justification,” and for users to obtain a right to appeal a platform’s decision to block or remove uploaded content. In practice, the focus has been on the Law and Justice government’s opposition to the blocking of nationalist content on social media.

Photo: Efforts of the digitization of the Prime Minister in Poland. Credit: @CyfryzacjaKPRM via Twitter.

Digital Policy

Poland’s domestic digital policy contains a paradox. On the one hand, the Law and Justice government headed by Morawiecki since 2017 has been actively pro-digital, supporting the digitization of the public sector and tech start-ups. On the other hand, the government has sought to use the digital sphere to further its own agenda — when it comes to the regulation of social media content and government use of spyware — which has become a further source of tension with Brussels.

Digitization has been viewed as powering Poland’s economic development. Since Poland shook off the shackles of communism, traditional industry has driven the country’s remarkable development. Google and other Big Tech firms already have located important back offices in the country and Amazon is building significant warehouse space. In its report on Poland, McKinsey & Company says that “digitization and converging toward a tech-driven economy have a big potential to unlock the new growth engine that Poland urgently requires.”¹⁰⁹

The Morawiecki government agrees. In addition to serving as prime minister, Morawiecki is minister of digital affairs — a sign of the importance that he assigns to the sector.¹¹⁰ His government has sought to support digital start-ups, for example, through the Start in Poland program for domestic and foreign companies. It not only offers financing and support but seeks to promote “positive changes in legislation” and “the development of the entire innovation ecosystem.”¹¹¹

The GovTech Polska program, run by the prime minister’s office, attempts to build bridges between the public sector and innovators.¹¹² Other projects include developing the gov.pl portal, which seeks to build a unified information technology (IT) system for the public administration.¹¹³ Primarily financed by EU funds, the project is part of the Digital Poland Operational Program.¹¹⁴ Data illustrates that the percentage of Poles accessing public services online is increasing year by year.¹⁰⁰ A particular area of progress is healthcare, where the pandemic has accelerated digitization.¹¹⁵

Yet the Morawiecki government’s broadly open approach to digital has created tensions with the EU on two issues.

The first issue is online freedom of speech. The Law and Justice government has taken on the role of the defender of freedom of speech against what it sees as digital censorship. When Facebook banned the nationalist opposition party Confederation in January 2022, the government rushed to its political rival’s defense.¹¹⁶ “Digital censorship is a powerful threat to democracy today,” Morawiecki wrote on his Facebook page.¹¹⁷ The government went so far as to link the incident to the wider debate on the EU’s Digital Services Act (DSA), which aims to toughen the responsibilities for platforms to deal with illegal content.¹¹⁸

Poland has proposed its own tough platform liability proposals. In January 2021, the Ministry of Justice presented a draft law on freedom of speech on social media.¹¹⁹ It calls for fining social media networks up to PLN 50 million ($13.4 million) for failing to restore deleted posts or accounts. The ministry presented it as “a response to the EU regulation” and “one of the first legal acts in the European Union protecting the freedom of speech.”¹²⁰

The second issue is surveillance — in particular, the government’s previous use of spyware to monitor its political opponents. In January 2022, Jarosław Kaczyński, Law and Justice’s chairman, admitted in an interview that Poland was in possession of Pegasus, the Israeli spyware which has been blacklisted in the United States.¹²¹ In January 2022, according to the University of Toronto’s nonprofit Citizen Lab, an opposition senator’s phone was hacked 33 times ahead of the elections, between April 26, 2019, and October 23, 2019.¹²² Amnesty International independently confirmed the hacking.¹²³ These revelations provoked a political uproar. Opposition leaders demanded a parliamentary commission of inquiry into the government’s use of Pegasus. Voters expect explanations, too: according to a poll, almost two-thirds of respondents say that the Polish special services’ use of the Pegasus surveillance needs to be clarified.¹²⁴

Both issues place the Polish government on a potential collision course with its European partners amid the debate on the proposed EU rules governing digital platforms, the DSA, and calls — in the EU and beyond — to crack down on governments’ illegal use of spyware. While recognizing the Polish government’s efforts to support the digital economy and the digitization of public services, the outlook is one of further tension between Warsaw and its European partners over digital.

Conclusion: Bridging the Digital Divide

The European Union (EU) is pressing ahead with sweeping technology regulations, a process that requires compromises among its 27 member states. A broad consensus exists that those new digital markets must be regulated, and unlikely allies are emerging to push forward with landmark pieces of legislation. On both the Digital Services Act (DSA) and the Digital Markets Act (DMA), dirigiste France teamed up with free-market-minded Denmark to force large tech companies to assume new responsibilities and obligations.   

But the two countries continue to spar on other key issues, such as how to define digital sovereignty. For France, the term often translates into protectionism, allowing Europe to build up competitive industries in areas now dominated by the United States. For Denmark, the term translates into an ordoliberal notion, combining high levels of regulation with open markets and skepticism of concentrated digital market power.  

If France avoids a lurch into protectionism, it possesses a powerful potential for being a powerhouse of digital innovation in Europe. The success of French tech, its high-skilled workforce, its strong infrastructure, and the high penetration rate of broadband contribute to demonstrating such potential. Positive results are already visible: France remains third after the United Kingdom and Germany among European countries for its ability to nurture tech start-ups. French President Emmanuel Macron has scored considerable successes — removing red tape, reducing taxes, easing immigration, and investing in universities and training.  Significant improvements are still required.  

Denmark starts with a strong competitive digital base. Its digital partnership recommendations, endorsed by the government, represent a solid strategy to tackle the main challenges for a successful digital transition. The open question is whether the government will unlock the needed resources to support this ambitious strategy. Denmark should continue to insist on building a true digital single market, opposing French efforts to torpedo it or build an EU digital iron curtain. On issues such as digital taxation, Denmark will want to find a transatlantic agreement, and it should work with its partners to forge a true transatlantic digital alliance.  

The other European countries profiled in this report bring different priorities to the negotiating table.  Italy, long a digital laggard that attempted to hold back the Internet revolution, is now embracing change. Although it still believes in strong regulation — its antitrust and privacy authorities have been aggressive enforcers against Amazon and others in recent years — Rome searches for middle ground between the French and Danish approaches. Italian Prime Minister Mario Draghi understands that his country must collaborate with US tech to build up its digital capacity.   

Whether Italy succeeds in implementing its digital agenda will be a question of timing and red tape. Besides the 2026 recovery fund deadline, parliamentary elections will be held in summer 2023. That means Draghi could have just 16 more months in office. Italy is famous for political gridlock and theatrics, but since taking over as prime minister in February 2021, “Super Mario” has been credited with bringing the necessary influence to cut through the noise and pass legislation in record time. But the clock is ticking, and the political infighting is as fierce as ever.     

Right-wing Poland promotes pro-digital policies with right-wing exceptions, exemplified by its proposed bills on social media “free speech” and the government’s use of Pegasus spyware. Both issues place the Polish government on a potential collision course with its European partners amid the debate on the EU rules governing digital platforms.  

The case studies include a series of domestic and EU-wide policy recommendations. These are designed to allow countries to benefit from the digital revolution and to play a constructive role in building a transatlantic digital partnership.   

Encourage Digital Development

European countries need to increase their public digital investments. They should target much of their COVID-19 relief spending to improve connectivity and research and development.  

• Denmark’s investments in digitization and technology research and development are modest.  The country should budget additional resources for research and development of digital solutions, for education and training, and for digitizing small and medium-sized enterprises (SMEs) and the public sector. It should build on its strengths in health care, renewable energies, and agriculture, ensuring that all these industries remain at the forefront.  
• Italy plans to invest much of its resources from new EU COVID-19 recovery funds in digitization. To take full advantage of these funds, the country should pair investments with structural reforms of its sclerotic labor market and business red tape. It should also follow the lead of other EU member states, such as France, in encouraging the development of domestic unicorns and digital entrepreneurs.  
• Poland should accelerate the digitization of public services and support for innovative start-ups. The Three Seas Initiative (3SI), of which Poland is a part, includes initiatives to invest in digital infrastructure across the 3SI region. Poland should take a leadership role in this format. The country’s right-wing government should be stopped from abusing surveillance technology, and a proper parliamentary Investigation into the government’s use of the Pegasus spyware should be launched. The country’s opposition to allowing platforms to moderate content needs to ease so the river of hate and illegal speech does not become a flood.  
• France should embrace policies that drive rather than block digital success. The administrative nature of French universities represents a significant obstacle to the emergence of ideas, inventions, and vital collaboration with tech entrepreneurs. With the highest capital gain tax rate in Europe of 34%, French start-ups scale up by moving to the United States, reinforcing the anti-US sentiment. France should create tax incentives to retain, rather than lose, its best innovators.   

Boost Competition

The EU agrees that Big Tech monopolies must be loosened. But its antitrust policies must avoid targeting US companies disproportionately. Antitrust should remain based on careful economic analysis, not on political preferences. 

• Denmark should strengthen its competition policy by injecting additional resources for the Competition Authority and in-depth market analysis. It should seek implementation of a DMA that targets all mega platforms, not just US companies.  

• Italy, Poland, and others should avoid following other member states in the pursuit of digital sovereignty, if this strategy veers into protectionism and limiting data transfers or hinders transatlantic cooperation in critical areas.  
• France should reform its antitrust policy to embrace dynamic competition, rather than static competition, where big companies (whatever their country of origin) represent not a market failure but a market necessity. The country’s allergy toward bigness can only drive out investments and deter innovation.  

Reset Transatlantic Relations

The EU should rest its digital policies on EU values and tradition but remain open to international solutions.   

• While European policymakers target US tech companies, Silicon Valley will be critical to the EU’s future. Italy needs to encourage US investment in its COVID-19 recovery plans.   
• The relative French neutrality between US and Chinese tech platforms is unsustainable: values of democracy and mutual prosperity should lead French politicians to refrain from slogans such as “digital sovereignty,” which prevent French firms from embracing the already significant innovations made by US tech companies.  
• Poland has been an indispensable partner in the transatlantic alliance on defense and security, especially since Russia’s invasion of Ukraine in February 2022. With its robust digital agenda and growing private sector investment, Poland has an opportunity to work with both Washington and Brussels to lead on digital issues as well, working to prevent the EU’s digital sovereignty push from undercutting transatlantic cooperation. 

Forge Transatlantic Data and Tax Deals

The EU and the United States have worked together to keep data flowing across the Atlantic Ocean. In early 2022, US President Joseph R. Biden, Jr. and European Commission President Ursula von der Leyen agreed to sign a new Privacy Shield deal before the end of the year. The two sides have also agreed on a corporate tax reform designed to set a minimal taxation on large companies, particularly large Internet companies.  

• Denmark should remain firm in its opposition to a specific digital tax that would discriminate against its innovative companies.  
• France should drop its own national digital tax that disproportionately hits foreign companies.   
• Italy should encourage its European commissioner, Paolo Gentiloni, who is responsible for taxation, to push back against digital tax initiatives.  
• Poland should use its influence to push both for transatlantic tax and data deals.  

Confront China

 The EU should become more cautious about its engagement with China on digital policy.   

• Italian businesses benefit from strong trading relations with China, with many luxury brands using Alibaba to sell to the rising Chinese middle class. But Rome should become prudent about Chinese tech investments.  
• France should be less naïve about China’s cybersecurity threats and its undemocratic model. As part of a transatlantic partnership, the EU will be more influential in shaping the Western vision of a free and open Internet.   
• Denmark should be careful about Chinese investment in Greenland, including in mines for iron and uranium. It should also scrutinize Chinese plans to construct new airports in the territory. So far, the government has blocked these projects, citing security concerns.  
• Poland should continue to crack down on Chinese industrial espionage. In January 2019, Huawei employee Wang Weijing was arrested in Poland on charges of spying. 

Acknowledgments

This report is the result of research contributed over the course of 6 months by Janna Brancolini, Annabelle Chapman, Jan Høst Schmidt, and Aurelien Portuese. All opinions are those of the author(s) and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis (CEPA). A special thanks to Tyson Barker for his thoughtful feedback.

This report is part of the Center for European Policy Analysis’ Digital Innovation Initiative, which explores trends in tech policy in Europe and the United States to advocate for transatlantic unity on digital regulation. CEPA would like to thank Craig Newmark Philanthropies, Google LLC, and Microsoft for their support of this project on the importance of a common transatlantic approach to digital policy.

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