Why aren’t the world’s breakthrough AI companies European? Why do most promising European tech startups relocate their headquarters across the Atlantic? Why do European unicorns dream of becoming American?
When ChatGPT emerged, the first instinct of some European countries was to ban it rather than embrace it. Let that sink in.
This reaction, of course, speaks volumes about our relationship with innovation – or as I like to call it, our “situationship” with innovation. Yes, a situationship – complete with emotional trauma and uncertainty about where we stand and where we’re heading.
António Costa, president of the European Council, has just called for a “big bang” moment on competitiveness. Speaking to the Financial Times ahead of last week’s EU summit, he acknowledged an uncomfortable truth: Europe’s problems stem as much from national regulators as from Brussels’ over-regulation.
Which begs the question: Is this another well-intentioned diagnosis destined to gather dust alongside the Lisbon Strategy?
The Pattern the EU Can’t Break
In 2000, the EU launched the Lisbon Strategy with the goal of “transforming the EU into the most competitive and knowledge-based economy in the world.” The strategy correctly identified our structural challenges.
Nearly a quarter-century later, we are reading Mario Draghi’s report and basically grappling with the same issues.
Let me share some scary numbers. Mississippi, the poorest U.S. state, has a GDP per capita of €49,780 – higher than most of Europe’s leading economies, falling just €1,524 short of Germany’s €51,304. When West Virginia, Arkansas, and Alabama economically outperform Spain, Italy, and France, we must acknowledge the problem is indeed serious.
The scale becomes even clearer when you look at the bigger picture. According to an EPICENTER report, the EU’s share of the global economy has plummeted from 25.8 percent in 2004 to 17.6 percent in 2024. The EU average GDP per capita is €40,060. The U.S. average? €80,023. The gap is impossible to ignore.
The Exodus
But GDP figures only tell part of the story. The real consequence of our situationship with innovation is that people are voting with their feet.
In 2023, Eurostat reported 4.3 million people migrating into the EU from non-EU countries, but 1.5 million left the bloc – including a disproportionate share of our highly skilled citizens. Researchers, engineers, entrepreneurs. The people Europe claims to want.
Europe’s net tech talent inflows dropped from 52,000 in 2022 to 26,000 in 2024, according to Atomico’s State of European Tech report. OECD data shows 3.4 percent of EU-born graduates with advanced degrees migrate to the US. LinkedIn reports a 15 percent rise in EU-to-US tech worker migration since 2019.
And wait, there is more: since 2005, at least 358 European startups have relocated their headquarters to the US for better funding and markets.
Why? Green and red (tape), in a nutshell. A senior engineer in Paris earns around $65,000. In Silicon Valley? $320,000. High taxes, suffocating bureaucracy, and regulatory hurdles that make starting a company feel like navigating a labyrinth designed by Kafka.
Surveys show 34 percent of European tech professionals want to leave. They are leaving because Europe won’t let them build.
Gold-Plating Our Way to Irrelevance
Costa’s analysis offers something crucial: the problem is not just EU over-regulation – though that is real enough – it is what he calls “gold-plating.” Europe has created a system that combines the worst of both worlds: burdensome rules from Brussels that then get multiplied across 27 different national jurisdictions.
Thus, are company operating across Europe must hand over the same data to authorities in every single member state. Not once. Not to one central authority. Twenty-seven times.
Now, centralization is not always the answer – concentrated regulatory power in Brussels has given us plenty of innovation-killing directives. But when you layer EU overregulation on top of 27 sets of national bureaucracies, each adding their own interpretations and requirements, you get regulatory chaos.
The irony? While we debate whether Brussels or national capitals are more to blame, innovation simply leaves. It does not wait for us to resolve our internal arguments about regulatory jurisdiction.
Less is More
So what is the way forward?
The answer might surprise you in its simplicity – we need to do less, not more. As the co-author of Human Freedom Index Ian Vásquez puts it: “This time, instead of more spending and planning, it would be better to focus on reducing the disincentives to innovation.”
The EU’s traditional approach has been “command-and-control” – a top-down system of mandates, subsidies, and bans. These measures might show quick results on paper, but they crumble without continuous government support. It is like trying to hold water in your hands – the moment you loosen your grip, it all flows away.
Instead, the EU needs a market-driven approach where government intervention is minimal but strategic. Think of it as setting up the rules of the game rather than trying to play every position on the field. This means using smart economic incentives – price signals and differential taxation – that allow markets to adapt organically.
And let’s address the elephant in the room – bureaucracy. I know it is not pleasant when Silicon Valley bros mock EU regulations on social media. But rather than taking offense, we should take note. Their criticism, however crude, points to a fundamental truth: Europe needs to liberate its creativity and innovation from the weight of excessive regulation.
The Commitment Question
Costa wants to “give a new political impetus” comparable to what Europe achieved on defense spending last year. That is admirable. But political impetus without structural change is just another cycle of diagnosis without treatment.
The real question is whether Europe is ready to commit – truly commit – to innovation and market-driven growth. Not the half-hearted, one-foot-out-the-door approach we have maintained for decades. Not the constant hedging and gold-plating and national vetoes.
A real commitment means accepting that innovation requires freedom to fail, that competition means some companies will lose, that openness creates vulnerability alongside opportunity. It means trusting European ingenuity enough to let it breathe without suffocating it with 27 different sets of compliance requirements.
Because ultimately, situationships do not work. They waste time, create uncertainty, and prevent both parties from reaching their potential. Europe and innovation need to move past the ambiguity. They need to either commit to the relationship or admit they are not ready for one.
* Federico N. Fernández is a visionary leader dedicated to driving innovation and change. As the CEO of We Are Innovation, a global network of over 50 think tanks and NGOs, Federico champions innovative solutions worldwide. His expertise and passion for innovation have earned him recognition from prestigious publications such as The Economist, El País, Folha de São Paulo, and Newsweek. Federico has also delivered inspiring speeches and lectures across four continents, authored numerous scholarly articles, and co-edited several books on economics.
Source: We Are Innovation
