E.U. Governments Cautioned Against Cutting Tech Budgets

Europe's telecommunications industry is lagging, despite having some of the most successful companies serving some of the most connected populations in the world. The European Union's official in charge of the digital agenda says the bloc is making a huge mistake by not investing more in this sector — depriving itself of a source of income and jobs it can ill afford to ignore.

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European budget problems prompted governments to cut back on investments in digital services and broadband networks. Industry officials say this damages Europe's ability to compete.

Terri Schultz reports from Brussels.

TERRI SCHULTZ, BYLINE: The European Union's own officials acknowledge there's a serious disconnect between what Europe is doing and what it needs to do to stop falling behind in the telecommunications industry.

Digital Agenda Commissioner Neelie Kroes warns cash-strapped EU governments that by cutting their technology budgets, especially in broadband improvements, they are dooming themselves.

NEELIE KROES: The digital economy is growing seven times faster than the rest of the economy. There is too much risk-avoiding in Brussels and in national capitals and that has to stop or Europe has no future.

SCHULTZ: Things aren't going in the right direction at the moment. European telecoms stocks are trading at less than 10 times their earnings, American stocks at more than 17-and-a-half times earnings.

Kroes admits EU laws and policies are also hurting companies' bottom lines. She wants EU competition authorities to allow some of the 100 European mobile operators to consolidate across borders. So far that's being resisted by regulators. By comparison, with a population just a third smaller than the EU's, the U.S. has only six major providers. Kroes says with the EU economy still weak, complacency is a killer.

For NPR News, I'm Terri Schultz in Brussels.

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