Digital economy and society: perspective directions in EU integration

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Modern technological revolution has fundamentally altered traditional ways the national economy and society have been functioning. The European Digital Economy and Society Index (DESI) is monitoring the states digital progress in four key areas: human capital, connectivity, digital technology’s integration and digital public services. DESI shows that several EU states still struggle to close the gaps in digital skills, the digital transformation of SMEs and the roll-out of advanced 5G networks. 

The European Commission has been monitoring the states’ digital progress through the Digital Economy and Society Index (DESI) since 2014. Each year, DESI includes country profiles which support the EU states in identifying areas requiring priority action as well as thematic chapters offering a European-level analysis across key digital areas, essential for underpinning policy decisions. The DESI is also the key tool when it comes to analysing digital aspects in the European Semester
The Commission monitors e.g. such areas as: “internet user skills” and “advanced skills and development” across the EU states to ensure people are equipped for the necessary digital skills. The EU institutions pursue a human-centric and sustainable vision for digital society throughout the digital decade to empower economy, citizens and businesses.

Annual DESI-22 index
The Digital Economy and Society Index (DESI) is an annual report published by the European Commission that monitors the progress of EU states on their digital development.
The DESI shows where the states have to further strengthen digital agenda, e.g. in accelerating industrial sector’s digitisation and SMEs. Besides, noted Commissioner for the Internal Market, Thierry Breton, “we need to step up the efforts to make sure that every SME, business, and industry in the EU have the best digital solutions available to them and have access to a world-class digital connectivity infrastructure”.
For example, Finland, Denmark, the Netherlands and Sweden remain the EU frontrunners; but even these states are facing gaps in some digital areas: e.g. the uptake of advanced digital technologies such as AI and Big Data, remains below 30% and far from the 2030 Digital Decade target of 75%; the widespread skill shortages have been slowing down overall progress while leading to digital exclusion in employment.
Among 3 Baltic States only Estonia ranks at 55 percent among EU-27 in four key digital areas, with the dominant placement in “digital public services”; Latvia and Lithuania are at about 50 percent. Only three states – Italy, Poland and Greece – substantially improved their DESI scores over the past five years, implementing sustained investments with a reinforced political focus on digital aspects, also supported by European funding.
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During the Covid pandemic, the states have been advancing in their digitalisation efforts; however, most EU states still struggle to close the gaps in digital skills, the digital transformation of SMEs, and the roll-out of advanced 5G networks. The EU’s Recovery and Resilience Facility, with about €127 billion dedicated to reforms and investments in the digital areas, offers huge opportunities to the member states to accelerate the digital transformation.
The new report includes country profiles, which help the states identify areas for priority action, as well as thematic chapters providing an EU-level analysis in the four principal policy areas: human capital, connectivity, integration of digital technology and digital public services.
In addition, the DESI country reports provide an assessment of national digital policies and an overview of the digital investments and reforms in the Recovery and Resilience Plans.
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The DESI findings show that while most of the EU member states are making progress in their digital transformation, the adoption of key digital technologies by businesses, such as Artificial Intelligence (AI) and Big Data remains low. Efforts need to be stepped up to ensure the full deployment of connectivity infrastructure (notably 5G) that is required for highly innovative services and applications; “digital skills” is another important area where the member states need to make bigger progress, argued the Commission.

National recovery and resilience plans, NRRPs
The DESI country reports analyse the states’ performance, describe the most important national digital policy initiatives and identify their key challenges. EU member states have committed to spending at least 20% of their national endowments under their Recovery and Resilience Plans on supporting the digital transformation. To date, an aggregate of €127 billion representing 26% of the total allocation of the 25 national plans approved by the Council of the European Union, supports the digital transformation.
The DESI country reports include a summary of the digital aspects of the national Recovery and Resilience Plans, where these have been approved by the Council, given the scale and importance of the Recovery and Resilience Facility (RRF), and the crucial role that this funding can play in addressing these challenges. National NRRPs are expected to have a major impact on the digital development plans, as EU states have committed to spending at least 20% of their national endowments on digital.
The EU has invested significant resources to support the digital transformation: about €127 billion are dedicated to digital related reforms and investments in the 25 national NRRPs that have so far been approved by the Council. This support represents an unprecedented opportunity for national political economy to accelerate digitalisation, increase the states’ resilience and recovery, as well as reduce external dependencies with needed reforms and investments.
Several EU states dedicated on average 26% of the Recovery and Resilience Facility allocation to the digital transformation, above the compulsory 20% threshold; some member states have chosen to invest more than 30% of their RRF allocation to digital: Austria, Germany, Luxembourg, Ireland and Lithuania.

Human resource in digital age
As digital tools become an integral part of economic and social development, people without appropriate digital skills risk being left behind. The DISI-22 acknowledge that only 54 percent of Europeans aged between 16-74 have at least basic digital skills; though the target of the EU Digital Decade is at least 80 percent by 2030.
In addition, although 500.000 ICT specialists entered the labour market between 2020 and 2021, the EU’s 9 million ICT specialists fall far short of the EU target of 20 million specialists by 2030 and are not enough to bridge the skills shortages businesses currently face.
During 2020, more than half of the EU enterprises (55%) reported difficulties in filling ICT specialist vacancies. These shortages represent a significant obstacle for the recovery and competitiveness of EU enterprises. Lack of specialised skills is also holding the EU back in its efforts to achieve the Green Deal targets; massive efforts are therefore required for the reskilling and upskilling of the workforce.

Digital Decade
The Path to the Digital Decade, presented in September 2021, and expected to come into force by the end of 2022, sets out a novel governance mechanism in the form of intense cooperation between EU institutions and the member states to ensure joint and effective achievements of the Digital Decade targets, objectives and principles. “The path” assigns the monitoring of the Digital Decade targets to the DESI; hence, the latter’s indicators are now structured around the four cardinal points of the 2030 Digital Compass.
The Digital Compass’ four points identify the decade’s main goals: a) preparing digitally skilled population and highly skilled digital professionals; b) secure safe and sustainable digital infrastructures; c) developing digital transformation of businesses; and d) assure appropriate digitalisation of public services.
The Commission together with the member states will work to develop EU-level trajectories to monitor progress for each goal; in turn, the member states shall draft national strategic roadmaps, outlining their national trajectories and actions to achieve the objectives and targets, including planned regulatory measures and investments.
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However, there are still many challenges associated with the digital transformation that need to be addressed during the digital decade. The EU must increase its strategic autonomy in tech and develop new rules and technologies to protect citizens from counterfeit products, cybertheft, and disinformation; most importantly, the EU states need to address the digital divide.

More information in the following Commission’s websites: = Press release “Digital Economy and Society Index 2022: overall progress but digital skills, SMEs and 5G networks lag behind”; = Digital Economy and Society Index; = Performance of individual member states; = Methodological note; = 2022 PREDICT study in ICT and R&D.

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