The case for building Europe’s sovereign cloud: A vision for the Cloud and AI Development Act
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As the European Commission finalises the Cloud and AI Development Act, DIGITAL SME’s new policy paper sets out how the upcoming proposal can become an accelerator for market change.
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A credible CADA must rest on a robust definition of “sovereign cloud,” anchored in legal and operational control. Federation must become the centrepiece of the proposal: an interoperable ecosystem of European providers, built on open standards and shared frameworks, that can offer customers a sovereign alternative across the full cloud stack.
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EU cloud providers hold less than 13% of their home market, leaving the continent exposed to economic outflows and resilience risks. Strategic public procurement can rebalance the market by introducing a European preference and making interoperability a condition for market access.
The European Commission is preparing to publish the Cloud and AI Development Act (CADA), a flagship initiative of the upcoming Tech Sovereignty Package, aiming to triple the EU’s computing capacity by 2030. With the proposal now in its final stretch, DIGITAL SME’s new policy paper lays out what the Act needs to deliver if it is to reshape Europe’s cloud market. This comes at a decisive moment for Europe’s technological and industrial future, as businesses, governments, and citizens increasingly recognise the strategic importance of controlling critical infrastructure.
Yet the European cloud market remains structurally imbalanced: EU providers hold less than 13% of their own market, while three US hyperscalers control a large majority of it. This dependency generates an annual outflow of over €260 billion and creates security and resilience risks, for instance, through the legal exposure of non-EU providers to third-country jurisdictions.
A well-designed CADA can serve as a cornerstone of Europe’s digital decade. SMEs represent the majority of Europe’s tech ecosystem and have a strategic role to play in scaling the EU’s compute capacity, but they face structural barriers that market forces alone will only slowly remove.
DIGITAL SME’s policy paper argues that true sovereignty hinges on building a federated cloud ecosystem and demands a full-stack European cloud offer, spanning computing, storage, platforms and applications, underpinned by interoperability and shared investment. To make that vision real, four concrete recommendations are put forward:
- Robustly defining “sovereign cloud”, anchoring it in legal and operational control to close loopholes for “sovereignty washing”;
- Embedding a European preference in public procurement with multi-provider rules that open doors for SMEs and curb vendor lock-in;
- Making federation a core industrial policy goal by conditioning procurement access on common interoperability standards;
- Mobilising public-private finance to de-risk data centre investment while streamlining the fragmented national permitting processes that currently slow infrastructure rollout.
The CADA represents a significant opportunity for the EU to strengthen its technological independence. European providers already have the technical capabilities. DIGITAL SME calls on the European Commission to deliver a Cloud and AI Development Act that translates those capabilities into new pathways for SME-led innovation, collective scale and lasting strategic advantage.
