How EU funding drives digital sovereignty

Europe’s prosperity and its ability to chart its own course depend on digital sovereignty: the ability to build and control the technologies, data and networks that power Europe’s economy and daily life.

In 2024, the European Central Bank (ECB) warned that Europe needs approximately €750–800 billion more each year to reach its own goals: a greener economy, modern digital infrastructure and credible defense. This type of investment was referred to as “good money” — funding that strengthens long-term productivity and competitiveness rather than merely providing quick fixes.

To turn “good money” into results, Europe should connect research-driven grants with deployment-focused tenders, supporting home-grown companies to develop into the unicorns that can anchor Europe’s technological independence.

The EU funding toolbox

Europe’s innovation landscape is supported by a cohesive funding architecture that spans from early research to continent-wide deployment. At its core are five key instruments that are critical to Europe’s digital sovereignty.

Horizon Europe

Provides financing for frontier research and ambitious pilots, seeding the discoveries that will power future European technologies.
The European Innovation Council (EIC)

Serves as a venture builder, offering a unique combination of grants and equity investments of up to €15 million. This support enables deep-tech start-ups to secure capital and gain the stability needed to scale globally while remaining based in Europe.
The Connecting Europe Facility (CEF)

Funds cross-border energy, transport and digital networks to turn innovation into infrastructure.
The Innovation Fund

Supports large, low-carbon demonstration projects for the green transition, which is essential to Europe’s strategic autonomy.
The European Investment Bank (EIB) and InvestEU

Attract private investment through loans, guarantees and equity, ensuring that Europe’s most strategic technologies can grow without relying on external capital.

These core instruments create a virtuous chain: research ignites ideas, venture equity scales them, infrastructure programs enable deployment, and large-scale financing brings in private investors. By keeping key technologies, data capabilities and intellectual property inside Europe, they help safeguard the continent’s ability to set its own digital rules and protect critical assets.

Other EU programs complement this foundational structure, including LIFE for environmental action, the Modernisation Fund and the Just Transition Fund to support regional energy shifts. The European Institute of Innovation & Technology (EIT) connects researchers and entrepreneurs, while the European Defence Fund (EDF) fosters joint defense research and development (R&D). Together, these initiatives reinforce Europe’s capacity for innovation while ensuring that the underlying capabilities remain under European control.

Two complementary mechanisms

This diverse funding landscape ultimately relies on two complementary mechanisms that move ideas from research to large-scale deployment: EU grants and public procurement. Understanding how these mechanisms work together is essential for seeing how Europe turns financial support into strategic autonomy.

EU grants finance research, pilot projects and early-stage innovation. The European Union (EU) co-funds this work but does not purchase a finished product, allowing the beneficiaries, such as universities, start-ups or consortia to retain ownership of intellectual property. This way, Europe as a whole benefits from the knowledge created. In contrast, public procurement occurs when the EU or a public authority purchases a defined product or service, such as a secure cross-border data platform. In this case, the EU pays for delivery and typically owns or directly uses the resulting product.

Grants spark innovation, while public procurement deploys it at scale. Linking the two mechanisms ensures that what begins as a grant-funded breakthrough can mature into services and infrastructure that strengthen Europe’s technological independence and secure its digital sovereignty.

Grants spark innovation; tenders deploy it. For digital sovereignty, Europe needs both — and a strong connection between them.

How consultancies add value

Once the basics are clear, consultancies help organizations navigate complexity and maximize impact. They align ambitions with the right mix of grants and tenders, design competitive proposals, and build strong cross-border consortia. They monitor procurement calls and prepare winning bids while ensuring compliance with EU regulations. Importantly, they know how to blend different sources of financing — combining EU grants with EIC equity, EIB guarantees, InvestEU or private capital — so projects can scale beyond pilot stages. By using the results of grant-funded projects as proof of capability when bidding for tenders, they create a continuous pipeline that connects research to market application.

Transition initiatives: Closing the gap

Between early research and full-scale market adoption lies a persistent “valley of death” — a gap that Europe has struggled to bridge. Structural fragmentation across Member States, diverse regulatory environments and a historic risk aversion among private investors make it difficult for promising innovations to move from lab prototypes to commercial scale. Even when EU grants successfully spark breakthrough research, the leap to large contracts or mass deployment often stalls. This is largely due to private capital being reluctant to invest without clear market signals, while public procurement rules can be slow to adapt.

Transition initiatives are designed to overcome these barriers. They link grant-funded research to public procurement, reduce risk through blended finance that combines public and private investments, and bring together start-ups, corporations, universities and public bodies to create entirely new markets. By connecting the pipeline from discovery to deployment and sharing financial risks, these partnerships provide promising technologies with the credibility and momentum needed to attract investment and scale quickly.

In doing so, transition initiatives turn good money into tangible outcomes — new industries, high-quality jobs and resilient supply chains — while providing the missing bridge that allows Europe to convert its research strengths into lasting digital sovereignty.

The digital foundations of sovereignty

Alongside its funding programs, the EU is establishing the technical foundation of digital sovereignty — the shared infrastructure that keeps the levers of trust and data under European jurisdiction. These initiatives can be understood in three tiers.

Core trust enablers

At the core of Europe’s digital future are eID and eSignature, which provide secure, EU-wide digital identities and legally binding signatures. Without these tools, Europeans would need to rely on foreign platforms for basic authentication, risking ceding control over citizens’ personal data. Together with eDelivery, the Union’s secure “digital postal service,” these tools create a trusted environment for cross-border digital transactions. By providing Europeans with their own trusted identities and secure channels, these initiatives protect both citizens and institutions from dependence on non-EU platforms. Additionally, business wallets will simplify participation in EU grant and procurement programs, ensuring funding can be accessed and executed with EU-level trusted identities.

Data infrastructures

To ensure that Europe’s AI and analytics adhere to European rules and values, the EU is developing European Data Spaces across various sectors, including health, energy, mobility, manufacturing, finance and the Green Deal. These federated platforms facilitate the sharing and combining of high-quality data while upholding strict European standards of privacy and governance — ensuring that the datasets used to train AI remain firmly under European control. Supporting this initiative are the Once-Only Principle, which allows citizens and businesses to provide information only once for reuse by public authorities, and the Context Broker, enabling real-time data exchange across sectors for smart cities and Internet-of-Things services.

Applications and standards

Further along in the architecture are shared services and standards that bring efficiency and interoperability. The European Blockchain Services Infrastructure (EBSI) provides tamper-proof records and verifiable credentials; the Big Data Test Infrastructure (BDTI) offers a shared environment for experimenting with AI and big data analytics; and the EU-wide eInvoicing standard streamlines electronic billing. Although the sovereignty impact of these initiatives may be more indirect, they reinforce the higher layers of the digital economy.

Core trust enablers Data infrastructures Applications and standards

Core trust enablers

At the core of Europe’s digital future are eID and eSignature, which provide secure, EU-wide digital identities and legally binding signatures. Without these tools, Europeans would need to rely on foreign platforms for basic authentication, risking ceding control over citizens’ personal data. Together with eDelivery, the Union’s secure “digital postal service,” these tools create a trusted environment for cross-border digital transactions. By providing Europeans with their own trusted identities and secure channels, these initiatives protect both citizens and institutions from dependence on non-EU platforms. Additionally, business wallets will simplify participation in EU grant and procurement programs, ensuring funding can be accessed and executed with EU-level trusted identities.

Data infrastructures

To ensure that Europe’s AI and analytics adhere to European rules and values, the EU is developing European Data Spaces across various sectors, including health, energy, mobility, manufacturing, finance and the Green Deal. These federated platforms facilitate the sharing and combining of high-quality data while upholding strict European standards of privacy and governance — ensuring that the datasets used to train AI remain firmly under European control. Supporting this initiative are the Once-Only Principle, which allows citizens and businesses to provide information only once for reuse by public authorities, and the Context Broker, enabling real-time data exchange across sectors for smart cities and Internet-of-Things services.

Applications and standards

Further along in the architecture are shared services and standards that bring efficiency and interoperability. The European Blockchain Services Infrastructure (EBSI) provides tamper-proof records and verifiable credentials; the Big Data Test Infrastructure (BDTI) offers a shared environment for experimenting with AI and big data analytics; and the EU-wide eInvoicing standard streamlines electronic billing. Although the sovereignty impact of these initiatives may be more indirect, they reinforce the higher layers of the digital economy.

By organizing these initiatives into tiers based on trust, data and applications, the underlying logic becomes clear: trusted identities enable secure transactions; secure data spaces ensure Europe’s AI and analytics are trained on European-governed data; and shared standards drive efficiency without sacrificing autonomy. Together, they form the technological foundation for a digital future shaped by European democratic norms and strategic independence.

Key actions

For EU institutions

Scale transition initiatives in AI, clean technology and defense so that grant-funded breakthroughs move rapidly into public procurement and market deployment.
Accelerate the development of European Data Spaces and strengthen the CEF Digital Building Blocks to maintain control over critical data and infrastructure within Europe.

For companies and investors

Leverage EIC blended finance and InvestEU instruments to grow deep-tech start-ups into global competitors while keeping intellectual property anchored in Europe.
Use the EU Seal of Excellence and other recognition schemes to attract national or private co-funding, especially during tight EU budgets periods.

Conclusion

Digital sovereignty represents more than just a technical ambition; it is Europe’s license to shape its own economic and geopolitical future. In an era where data flows and digital platforms define power, the ability to control critical technologies, trusted identities and strategic data is as important to Europe’s security as energy or defense.

By aligning its powerful funding instruments, such as Horizon Europe, the EIC, and the CEF with transition initiatives and the EU’s digital infrastructure, Europe can turn good money into lasting strength. This means not only creating unicorns or deploying advanced networks but also ensuring that the next generation of AI, cloud and cybersecurity capabilities are built on European rules and values.

The prize is clear: a resilient economy that can compete globally, a democratic digital space that protects citizens, and a Europe whose technological future is decided in Brussels and the Member States — not elsewhere. Digital sovereignty is therefore both the foundation and the proof of Europe’s capacity to remain a true global player in the years to come.

How KPMG firms can help

CEOs navigating the Clean Industrial Deal face the challenge of not only accessing EU funds but also aligning these funds with their long-term strategies. KPMG firms help leadership teams connect funding with competitiveness by mapping out how Horizon Europe, the EIC, InvestEU and public procurement can underpin industrial transformation, decarbonization and digitalization agendas.

We bring a pan-European perspective on regulation, capital markets and supply chains, ensuring investments reinforce both sustainability and sovereignty. By combining boardroom strategy with deep technical and financial experience, KPMG firms empower executives to seize EU opportunities at scale — turning funding streams into growth, resilience and market leadership in the industries that will define Europe’s future.

For more information on these key actions, please contact Ruth Guerra, Richard Marcos and Wout Steurs.