The Geopolitics of the Digital Revolution: Europe’s Defining Test

This is one of the main conclusions of the report "The Geopolitics of the Digital Revolution: Europe’s Defining Test", published by the Center for the Governance of Change (CGC) at IE University and authored by Miguel Otero Iglesias and Gonzalo Rodriguez Gordo. It examines how digital transformation is reshaping geopolitics and how Europe can respond to the resulting strategic dilemmas.

Drawing on the analyses developed with various experts on the field over a year of research, the report explores the competition between digital governance regimes, the material foundations of digital power embedded in the technology stack, the evolving dynamics of the data-driven economy, and the growing importance of monetary sovereignty in an era of digital finance. 

The report’s authors identify four interconnected domains in which European action is urgently required to ensure the region’s digital sovereignty and geopolitical agency, both within the Union and beyond its borders, in close cooperation with international partners:

• First, Europe  must strengthen enforcement, institutional coherence, and coalition-building, while ensuring that regulatory ambition is matched by technological capability.
• Second, the EU must build greater control over the technology layers of the digital stack by supporting European competitors in critical infrastructures such as cloud, compute, AI deployment, and semiconductor ecosystems and digital software applications, while diversifying partners and reducing one-sided dependencies.
• Third, Europe must strengthen its capacity to capture the benefits of the machine knowledge capital economy by enabling the emergence of European alternatives, promoting strategic catch-up to overcome legacy vulnerabilities, and reconceptualizing data not merely as a byproduct of economic activity but as a strategic asset, the 5th factor of production, that underpins value creation and competitiveness.
• Fourth, the Union must enhance the modernity and adaptability of its critical infrastructures, particularly in the monetary and financial realm, by developing European safe assets, deepening and integrating capital markets, strengthening the euro’s international role, and advancing projects such as the digital euro to reduce external vulnerabilities in payments and liquidity provision.

To realize this vision, the report advances 22 specific recommendations for policymakers and industry leaders.

The challenge, the authors argue, is not only to regulate the digital environment, but also to ensure that the European social contract can be sustained in a world where digital infrastructures and capabilities have become instruments of power, competition, and strategic dependency.

The report, part of a multiannual research program on “The Digital Revolution and the New Social Contract”, will be presented today, February 23, 2026, at a public event with Thierry Breton, former European Commissioner for the Internal Market, and Arancha Gonzalez Laya, Dean of the Paris School of International Affairs at Sciences Po, among other speakers.

Read the full report and access the whole set of recommendations here.

Learn more about our research program on "The Digital Revolution and the New Social Contract" here.