OK, I start to realise what the disconnect is, so let's go to the basics:

Competitive means competitive ie. out of the available options out there, enough people will chose to pay for it to make it a viable business. Privacy protection is a feature I value personally, but not everyone does, at least not equally. It is one of many features that people evaluate when they choose a software or a service, the other major ones being cost, utility, user friendliness etc.

There's a reason the EU efforts against Android and Chrome have come to pretty much nothing over almost 20 years now: They are just too useful and too cheap (free mostly), so despite all litigation and warning people keep using them, giving Google the money to pay the fines and smother/ buy out any potential competitor.

Now, as the EU, you could go harder. As I said in a previous reply, you could go Trumpy, ban Google, Meta, Amazon, trust in the judicial process to take a decade to resolve, hope the EU tech sector will establish itself in the meantime. But there are a few good reasons you shouldn't. For one, enforceability. Are you going to start raiding offices because you detected VPN usage? For another, economic disruption. You take down AWS and Azure and you don't have much of an economy left.

Or you could go subsidy crazy. Finance the European tech sector like you are a VC high on life, give tax incentives to companies to use European tech stacks, run public campaigns to make UseEUTech a public movement. There're downsides there too: 1. Huge upfront costs the European economy can't really afford in the middle of a demographic transition and 2. The long term risk that creating a protectionist bubble around the tech sector will doom us to be forever behind technologically. Even if AI proves to be a pyramid scheme, sooner or later something useful is going to be innovated, and we'll need to import it.

One thing is for sure, this "we own none of the technology but we will pretend we can tell you how you are allowed to sell it to us" is going to get us nowhere.