EU cyber independence under assault – Portugal Resident
In recent essays, I have compared Portugal and Ireland as being similar in size of population and land areas which largely confront the Atlantic Ocean. Until recently, each had a small, peripheral status among the 27 member nations of the EU. However, the advent of Artificial Intelligence and the digital revolution changed this to being strategic “gateways” to the continent due mainly to the convergence of fibre optic cables which carry information vital to commercial, industrial and military interests.
At the outset of the 21st century, the Irish government offered attractive taxation incentives and an easing of regulations to U.S. technology companies. Apple, Google, Meta and Microsoft opened their European headquarters in Dublin and the likes of OpenAI, Tik-Tok and X all established representation.
Phenomenal growth followed and the Irish economy changed to being almost entirely dependent on the introduction of foreign capital. The government now sources almost five times the per capita corporate tax revenue as France or Germany. In year 2024/5, three U.S. cyber-giants contributed 45% of the country’s tax on corporate earnings which were levied at rates much lower than those demanded elsewhere in the EU.
Taxation was not the only incentive. Many members of an administration staffed by officials who had “kissed the Blarney Stone” entered the “revolving doors” system of employment by transferring themselves to well-paid jobs offered by the Americans who sought native talent to smooth the entry of their businesses to the rules of the EU economy. In turn, some American executives accepted positions as consultants to the Irish Data Protection Commission (DPC).
This cosy arrangement naturally brought criticism from other member states of the EU and has become more vociferous now that Ireland, since July 1, assumes the Presidency and thus, for six months, will be responsible for setting the time-table for legislation which includes the regulation of the digital economy.
By one of those inadvertencies to which we have become accustomed in EU governance, the country which hosts a foreign company’s HQ is responsible for its regulation in all other member jurisdictions. Although Ireland has an unblemished record of societal justice, the same cannot be said for its business acumen.
At present, the EU relies on foreign, mainly U.S. companies to furnish about 75% of its requirements for technology and cloud computing in order to maintain public order and services including the growth of defence spending. With current geopolitical revolution causing global tremors which shake the very foundations of international alliances, there is a very real danger that organisations such as NATO will fracture. Erstwhile friends may adopt more neutral strategies or even aggressive policies when trading disputes need to be resolved.
For this reason, the Cloud and AI Development Act (CADA) is being formulated with the aim of reducing dependence on non-EU sources. Homegrown entities will be encouraged with incentives to achieve a European capacity for generating a regulated cyber industry whereby sensitive sectors such as security and sovereignty will be protected from exterior meddling and surveillance.
For example, the Act recognises that the many applications of AI will require a tripling of data centre capacity within the next five years with all of the implications for a corresponding growth in the green sector of energy and water services and the mining of “battery metals”.
But the legislation loses its way by also insisting that each of the 27 members must set up “acceleration zones” where applications from constructors must be enabled to bypass planning and environmental legislation regardless of public consternation at the prospect of landscapes being submerged in a conglomeration of solar panels and windmills to service the massive, ugly buildings.
This demonstrates how the EU, which was founded primarily as a trading association to further the prosperity of its members, cannot behave as a federated body without a drastic overhaul of its constitution. There seems little point in legislating to protect a sovereignty which does not fully exist due to the fragmentation of national government policies and regulation.
While Portugal is not yet assimilated to the same degree as Ireland, its economy is also under assault by non-European investors who wish to strengthen their grip on critical and strategic holdings in the brave new domains of high technology. However, such compliance with foreign demands in return for a temporary inflow of investment must be weighed with the greater need to conform with the strategic requirements for a United Europe free from obligations to any other nation.
_____________________
Also read:
Portuguese data centres: a future under the waves?
Portuguese data centres – clean energy
