Henna Virkkunen, the EU Commission’s newly appointed Executive Vice President for Tech Sovereignty, Security, and Democracy, faces the monumental task of reshaping the continent’s digital future. Her mission isn’t just about internal reforms—it’s about strengthening Europe’s global position as a sovereign. Yet, as Europe seeks to assert its sovereignty in the tech world, it must also contend with shifting geopolitical dynamics. With a new U.S. President signaling less tolerance for adversarial policies toward American companies, Virkkunen must skillfully navigate the delicate intersection of regulation, innovation, and foreign policy to maintain Europe’s strategic alliance with its most important partner, the United States. To do so, she will need to closely consult with Commissioner Kaja Kallas, the former Estonian Prime Minister and now the EU’s High Representative for Foreign Affairs and Security Policy—a role often referred to as the EU’s “foreign minister”—to ensure that Europe’s tech policy aligns with its broader diplomatic and security goals.

Virkkunen inherits a legacy shaped by her predecessors, most notably Thierry Breton, whose heavy-handed regulatory approach defined much of the EU’s tech policy, complemented by Margrethe Vestager’s strict approach to competition in the tech space. Breton’s focus on reigning in foreign tech giants produced landmark legislation such as the Digital Markets Act (DMA), the Digital Services Act (DSA), and the AI Act. While these regulations have solidified the EU’s position as a legislative powerhouse, they’ve inadvertently weakened Europe’s innovative ecosystem, driving promising startups (see e.g., Algolia, Klarna, Kyriba, Aircall) to the United States, where they face fewer barriers to growth. Moreover, these policies have frustrated many American companies operating in Europe, creating tensions that risk undermining transatlantic relations in the tech sector.

Unlike Breton, Virkkunen’s early declarations signal a more pragmatic and tech-friendly approach. She recognizes that Europe needs less draconian rules and more room to grow, aligning with the urgent calls for change articulated in the Budapest Declaration on the New European Competitiveness Deal, adopted at the informal EU leaders’ summit on November 8-9, 2024. Echoing the findings of Mario Draghi’s recent report on European competitiveness, the declaration highlights the critical need for a paradigm shift. It emphasizes that the current regulatory framework is too burdensome. The regulations are creating obstacles for startups to scale up, pushing them out of the market, leaving the U.S. as the primary destination for startups seeking growth-friendly ecosystems. Moving forward, a potential deregulation plan championed by Virkkunen could also align with the vision of newly elected U.S. President, Donald Trump, who has signaled an intent to prioritize deregulation in certain industries and sectors. Harmonizing the EU’s efforts with this transatlantic perspective could strengthen Europe’s strategic partnership with the U.S., particularly in sectors where technological leadership and cooperation are vital. As such, Virkkunen has a unique opportunity to reverse this trend and foster an environment where innovation flourishes—not just within the confines of compliance, but as a natural product of entrepreneurial spirit.

Europe’s ambition to bolster its digital strength requires a delicate balance between two goals: building homegrown technologies and managing dependencies on foreign tech. To date, the EU has leaned heavily on the latter, crafting regulatory frameworks that reign in foreign tech companies, while neglecting to nurture its own. The U.S. and China illustrate two divergent approaches. In the U.S., innovation is bottom-up, driven by private entrepreneurship and venture capital. In China, as Anu Bradford aptly points out in her recent book Digital Empires, innovation is state-driven, with massive government incentives steering technological advancement. Europe, however, risks being neither—bogged down by top-heavy regulations that smother creativity.

The EU’s ambition to outcompete the U.S. and China in technology is admirable, but currently, it lacks the environment to build its own Apples, Googles, Metas, or Bytedances. The brainpower and talent are undoubtedly present in Europe, but the environment stifles the EU’s potential, making it nearly impossible for innovation to flourish. While the U.S. doubles down on market-driven innovation and China employs state-directed strategies, Europe finds itself stuck in the middle, crafting rules that are more likely to restrain than inspire. If Europe wants to remain competitive, it must make fundamental changes, starting with reshaping the mentality. The choice isn’t between regulation or innovation; it’s about creating a framework that fosters the entrepreneurial spirit necessary for breakthroughs while ensuring that tech advancement ultimately serves consumers.

Henna Virkkunen has a critical opportunity to refocus the EU’s priorities on fostering innovation. Her task is to prove that regulation is not the only instrument in the EU’s toolbox. This means the new Commission must work on simplifying regulations while fostering a startup ecosystem through targeted incentives—laying the groundwork for a European Silicon Valley. Building European tech sovereignty also means understanding “sovereign” decisions when it comes to policy-forming. True sovereignty isn’t about isolating Europe from global competition but about building the capabilities to collaborate on equal footing. In a world where technology drives both security and economic power, Europe’s ability to maintain its traditionally strong partnership with the U.S. depends on strengthening its innovation (and not its regulatory) base at home.

As such, focusing on tech sovereignty also indicates that the transatlantic alliance remains crucial for the EU, particularly in sectors where technology intersects with military and defense capabilities. As the geopolitical landscape shifts—driven by the results of the U.S. elections—Europe must prepare for a partner that is not likely to tolerate adversarial tech policies towards U.S. businesses. A returning Trump administration, for instance, may prioritize American innovation by reducing government barriers. Europe needs to match this momentum. The EU should seek to combine the best of both worlds: America’s entrepreneurial spirit, rooted in the bottom-up dynamism Alexis de Tocqueville admired, and Europe’s commitment to serving customers as holders of rights, a principle deeply ingrained in European thinking. This requires moving away from the rigidity of the “Brussels Effect,” which focuses on dictating global standards through regulation, and toward a more flexible, innovation-friendly model that still aligns with Europe’s core values.

Strategic Competition with China is not just an American problem; it is a European one too. China’s state-driven advancements in artificial intelligence and semiconductors threaten to reshape global tech standards and supply chains, impacting Europe’s economic and security interests. To address this, Europe and the U.S. must collaborate. For Europe, this means going beyond regulation to become a technological leader and treating U.S. tech companies as partners, while avoiding an overly selective approach that targets sectors like social media. True sovereignty is about making clear choices that strengthen shared strategic interests, not merely dominating the regulatory sphere.

Henna Virkkunen holds the pen that could draw a new Fin(n)ish line for Europe’s digital future. Europe needs action, not more red tape. Sovereignty demands collaboration with allies and a bold commitment to domestic innovation. The time to build is now, and Commissioner Virkkunen knows it. The question is whether Europe will seize the moment to change gears and hit the accelerator on innovation and competitiveness, or stall out and fall further behind in the race. As a European, I trust Commissioner Virkkunen has a heavy foot on the pedal.

Lilla Nóra Kiss, PhD, is a Senior Policy Analyst for the Information Technology and Innovation Foundation, where her research focuses on international antitrust law, innovation policy, and the regulation of digital platforms. She also serves as an Adjunct Faculty Member at the Global Antitrust Institute of Antonin Scalia Law School, George Mason University. In this role, she teaches Antitrust Law and Consumer Protection Law in the LLM in Global Antitrust Law & Economics program.  @lillanorakiss