I find it endlessly fascinating how governments always get lost in the symptoms of the problems at hand instead of addressing the underlying problem itself.
The EU has no viable software industry because there's no real single market to fundraise from and sell into (no single capital market, no single language market, no single regulatory market, etc).
The lack of domestic EU software/hardware products sits entirely downstream of that issue. The open source community will not magically solve this problem for them.
What if we stopped wasting time on anything that is not solving the core issue. The symptoms will take care of themselves after you solve the disease.
I think you are just decribing one factor that caused the problem. There is many a detailed analysis, the most respected being the one by Draghi.
Previously this also wasn't much of a problem. The US tech companies were international companies and less "US" companies. Now they aligned themselves with the US regime and are e.g. a supply chain vulnerability and properly taxing them causes issues in national defence (via Ukraine). I for one did not anticipate this own-goal w.r.t. Europe by the US.
How is this not solving the core issue? You need to do both. Ensure the software is made (pay devs), and if you're funding this, make sure it is licensed as a public good (free, oss).