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As the global digital economy accelerates, Europe faces growing pressure to close the gap with the United States and China. While the US scaled digital platforms and China rapidly industrialized data, the European Union focused on building an extensive regulatory framework for data governance. Although these rules aim to protect privacy and promote trust, they have also limited Europe’s ability to fully harness data for innovation and economic growth.
Data has become the foundation of artificial intelligence, digital services, and productivity gains. However, Europe’s data ecosystem remains fragmented, slowing progress and weakening competitiveness in a world increasingly shaped by technology.
Europe’s Regulatory Focus and Its Consequences
Over the past decade, the EU introduced multiple data and digital laws, including the General Data Protection Regulation, the Data Governance Act, the Data Act, the Open Data Directive, and the Artificial Intelligence Act. Together, these policies form the most comprehensive data governance framework in the world.
While strong oversight has benefits, it has also created friction. According to the European Commission’s 2025 State of the Digital Decade report, Europe’s data remains scattered across national systems, governed by inconsistent rules, and burdened by administrative complexity. As a result, data flows poorly across borders and sectors, limiting innovation and slowing the development of competitive digital services.
Public Sector Fragmentation and Private Sector Costs
Many of the obstacles to data sharing in Europe are not directly related to privacy protection. Public sector data is often stored in incompatible formats, updated inconsistently, and governed by different access regimes across institutions and countries. Limited use of application programming interfaces further restricts data interoperability.
A European Commission study found that more than half of public officials cited inconsistent data standards and missing technical infrastructure as key barriers to collaboration with technology providers.
Private companies also face high compliance costs. Meeting the requirements of major digital laws such as GDPR, NIS2, and the AI Act is estimated to cost tens of billions of euros annually. For small developers, these costs can significantly reduce profit margins and discourage innovation.
The EU’s New Data Union Strategy
To address these challenges, the European Union has introduced a Data Union Strategy designed to shift the focus from data protection alone to data value creation. The strategy aims to accelerate data sharing, simplify compliance, and support innovation across sectors.
One major proposal is one-click compliance, which would allow regulatory requirements to be verified automatically. A European Business Wallet would store verified company credentials, enabling faster trust checks and reducing administrative burdens for businesses.
In addition, the Open Data Directive will expand access to legal, judicial, and administrative data through standardized APIs. By making high-value public datasets easier to access, the strategy seeks to improve transparency, reduce costs, and support data-driven decision-making.
The plan also includes the creation of data labs. These environments would allow secure analysis of sensitive data without transferring ownership, helping transform unstructured records into usable resources for startups and artificial intelligence developers.
Challenges to Implementation
Despite its promise, the new data strategy faces significant obstacles. First, timing is a concern. While global competitors move quickly, Europe often struggles with delays caused by overlapping regulations and coordination challenges.
Second, many public institutions lack the technical skills needed to implement advanced data systems. A large share of government artificial intelligence projects remains in pilot stages due to inconsistent records and limited digital expertise. Building data literacy across public administrations will take sustained effort.
Third, new governance structures risk adding complexity rather than reducing it. Without strong coordination, common data spaces could replicate existing fragmentation. Access to data alone does not generate value. Organizations must also be able to integrate data into daily operations and strategic decisions.
Closing the Data Utilization Gap
A 2025 productivity analysis highlighted a major gap in Europe’s ability to turn data into action. While a small group of digital leaders has mastered data integration, most organizations still lack the systems and incentives needed to use information effectively.
Closing this gap requires interoperable systems, clear standards, skilled personnel, and institutional frameworks that reward data use rather than mere compliance.
What Is at Stake for Europe
The data challenge goes beyond regulation. It affects Europe’s long-term economic relevance in an era defined by artificial intelligence and digital infrastructure. The United States competes through scale, China through speed and coordination. Europe’s potential advantage lies in trust, reliability, and high-quality governance.
If implemented effectively, Europe could position itself as a global provider of trusted data infrastructure. The foundation has been built. The next step is turning regulatory structure into practical economic value.
