Progressive Economic Policy for Europe


Digital Sovereignty Requires Autonomy and Decentralisation

by Paul Nemitz and Matthias Pfeffer

The European Commission has set a goal of achieving “digital sovereignty” for Europe. But what does that mean, and what steps are required? The obvious starting point for understanding the importance of digital sovereignty and what will be required to achieve it is Europe’s dependency on digital actors from Silicon Valley and China: sovereignty is the opposite of dependency. It is also important to understand how data protection, ex-ante regulation and ex-post competition law interact with one another. If Europe is to secure a flourishing medium-sized business sector, growing tax revenues, rising prosperity, a functioning democracy and rule of law it will need decentralised digital technologies. Ultimately, it must be acknowledged that there can be no autonomy of the individual without democratic sovereignty – and both must therefore be properly protected.

Was the European Council of 2 October 2020 the turning point?

On 2 October 2020 the European Council adopted a set of watershed decisions on digital regulation, noting in its Conclusions: “The possibility of adopting rules on the systemic role and responsibilities of online platforms with significant network effects should be explored.”  In other words, the European Council has finally recognised that the  Big Tech GAFAM platforms (Google, Amazon, Facebook, Apple and Microsoft) serve systemic functions that require different regulation strategies than small and medium-sized actors, or sectoral actors generally. This is a central realisation that opens the door for asymmetrical regulation of the market-dominating platforms.

Most of the digital infrastructure services and platforms used by citizens, businesses and governments are provided by corporations based outside Europe. While European providers are required to observe strict laws such as the General Data Protection Regulation (GDPR) and pay proper taxes, it is extremely difficult to enforce European laws and collect European taxes from the major overseas platforms. If Europe is to acquire digital sovereignty, the data protection rules to which European companies are subject must also be applied consistently to international actors. Only then will firms in Europe see a level playing field. The European Council’s other decisions are also welcome. They are designed to achieve strategic autonomy while preserving an open economy. Digital developments are to be brought more closely into line with European values to enhance the attractiveness of the European model. And there is to be targeted funding and support for developing technologies such as quantum computing, blockchain, human-centric artificial intelligence and secure cloud services hosted on European infrastructure.

It is important to remember that the design and regulation of European digital architecture involves much more than infrastructure and hardware. The software is a decisive factor and must be treated as such. The software and the technology as a whole must embed decentralisation into the future IT structure. The major social networks could also be required to open their systems to independent small and medium-sized providers (interconnectivity). That would introduce competition into this monopoly market for the first time. Market organisations also need to be prohibited from favouring their own products in markets they organise themselves. Such a prohibition on self-preference should also apply only to corporations that have already achieved immense market power.

While regulatory asymmetry is urgently needed, a different, an existing asymmetry needs to be rectified: sectoral market opening – or sectoral obligations – without corresponding obligations which can have potentially disruptive effects on business models, platforms and technologies. Examples include the historic regulation of landline and mobile telephone communication without corresponding controls on the new voice over internet technologies, and the obligation on banks to open their systems to new payment service providers without the latter granting the equivalent access. Similar constellations exist in many other sectors, including mobility (Uber versus taxi) and the media sector (print and television vis-à-vis social networks and streaming platforms).

New sectoral regulations will need to take account of the unwritten rules of the platform economy to ensure that potential competitors serving the same function are always also subject to equivalent constraints. So sectoral rules can no longer be based on the type of entity providing the services or on the technologies involved. The sole point of reference will be a functional definition of the service provided, in order to automatically include functionally equivalent solutions even where these are supplied by different companies or use different technologies. It must no longer be possible for companies in the rapidly developing platform economy to evade sectoral regulation simply on the basis of their business model or technology. The very nature of the platform economy – and now also AI – is to open up and then dominate one sector after another, always using the same means.

The digital future is decentralised

The Council’s Conclusions continue: “ Building a truly digital Single Market will provide a home-based framework allowing European companies to grow and scale up.” If this vision is to become reality, the definition of what constitutes a “truly digital Single Market” will have to be explicated. In the first place, it will mean a digital market whose laws are also applied equally consistently to external players operating within it (including those from the United States and China).

Unless effective instruments are brought into play, the powerful winner-takes-all effects of the platform economy will destroy the medium-sized business sector and the competitive market model. European sovereignty therefore also requires decentralisation of both the economic and the social benefits of the internet. We want to retain a strong medium-sized business sector distributed across Europe, rather than ending up with a handful of digital oligopolies. That also means decentralisation of data storage and processing, ideally at the “edge” of the internet, in users’ (mobile) data devices. This would also minimise data privacy and security issues. And then we need decentralisation of research and of the financial rewards extracted from the digital economy. In research and development we continue to need a broad base and above all access to the wealth of expertise across Europe. Decentralised internet commerce is also advantageous for growth – and not least tax revenues – as it distributes growth geographically while securing the function of established taxation mechanisms.

It’s the democracy!

The European Council’s narrowing of the discussion about external digital dominance to market questions represents a grave deficit and a fundamental weakness of the current regulation discussion. The question of democracy is not explicitly mentioned in the European Council’s text. That is exactly the attitude that permitted the GAFAM to become so dominant.

Media organisations occupy a special position in a deliberative democracy, as the indispensable “fourth estate” providing critical oversight of government, supplying objective information to the public, and expediting the processes of democratic opinion-forming and decision-making. Democracy can only flourish where verified information is able to circulate and accessible to all, and diverging opinions can be freely expressed. This makes the free press an especially inappropriate target for Silicon Valley “disruption”.

In fact unregulated digitalisation of the public sphere has already endangered the systemic role of the media in two respects. Firstly, 80 percent of online advertising revenues today flow to just two corporations: Google and Facebook. This income is lost to the press, which faces ever dwindling resources for the costly professional journalism that is vital for democracy. Secondly, unlike the press Google and Facebook assume no responsibility for the content they disseminate – including fake news, conspiracy theories and illegal content. Both have announced that they are willing to pay professional media outlets for content, with Google alone promising one billion US dollars. But as always their strategy is to preempt state regulation with “self-regulation” that allows them to continue to set their own rules. While this move does represent a belated admission of the responsibility they share for the decline of the press, it points in a fundamentally wrong direction. The urgent need is not for voluntary contributions, but enforcement of financial obligations under existing law, in this case the law of copyright.

Existing law must also – finally – be enforced to hold the platforms responsible for their dissemination of illegal content. They currently tolerate hate speech and incitement to violence on a global scale. The social media corporations must be required by law to remove obviously illegal content without external prompting. It is not enough to take action only after notification by third parties. In fact they already possess real-time information about all uploaded content – without any need for upload filters – because they assess all received content in order optimise their advertising. In the case of content that is not obviously illegal it would be conceivable for the platforms to continue to respond on the basis of external requests. Here too, we need to avoid narrowing the debate to purely economic questions in view of the destructive effect of these types of content on society and democracy. Specifically, once the European Commission has published its regulation proposal, the so-called Digital Services Act (DAS), it will be crucial not to leave the work of the Council exclusively to the economics and digital affairs ministers. The justice ministers must ensure that protection of fundamental rights and democratic liberties is also part of the process, including the competition relationship between the unregulated platforms and the regulated press and broadcasters.

But we must go further than defensive and protective provisions. Democracy needs to win back its power to shape the public sphere. This must also include the widely demanded creation of a European Public Sphere. Such a project will give Europa the opportunity to win its damaged public sphere back for democracy. A European media platform would first of all make the quality content of Europe’s public broadcasters accessible to all of Europe’s citizens in all their languages. Then such a platform would also need to be accessible to quality private-sector media and culture providers. Like a sovereign European cloud infrastructure, such a platform would need clear political guidelines and decisions on regulation, standard-setting and certification to create public confidence in the lived values that define Europe.

The public sphere upon which a flourishing democracy depends also includes our communities. Digitalisation must remain in the hands of the communities, to the benefit of civic engagement. Concretely that means: Digital sovereignty begins in the community. Local government must receive access to valuable data sources like Airbnb’s rental data and traffic data from Google Maps and Uber. And where local authorities purchase services they must also receive access to data gathered in the scope of the contract. The choice here is whether to enable civic engagement in the realm of data – or to leave the data in private hands as a bonus to contractors. European law must enable and facilitate data sovereignty of local governments. Smart City development should not be left to Google and the other GAFAM corporations, but instead become one of the central pillars of European democracy.

European sovereignty depends on the sovereignty and liberty of its citizens – and vice versa. It is time to correct Bill Clinton’s famous slogan: “It’s not (only) the economy, it’s the democracy, stupid!”

(Translated from the German)

About the Authors

Paul F. Nemitz is Principal Advisor in the Directorate-General for Justice and Consumers of the European Commission.


Matthias Pfeffer is TV journalist and producer.

Together with Paul Nemitz he published The Human Imperative, Power, Freedom and Democracy in the Age of AI.

The views expressed in this article are not necessarily those of Friedrich-Ebert-Stiftung.



Editorial Board

Division for Economic and Social Policy

Dr. Andrä Gärber
Sina Dürrenfeldt
Max Ostermayer
Dr. Robert Philipps
Markus Schreyer

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