I've spent quite a few years doing software dev for various governments, including the EU. Every time this was brought up, the engineers (including myself) who brought it up were pretty much laughed out of the room. Apparently the question of where stuff is hosted was answered by people who are several paygrades above mine, and they're obviously very well informed (/s).
Ultimately it always came down to money. And AWS/Azure/GCP are apparently so much cheaper that nothing else matters.
It's not really even about the hosting. Apple devices are US-based. Windows, MacOS, and even Linux are primarily US-based (Linus wrote Linux in the USA, even if he wasn't originally from here). All of the major web browsers are built and run by US-based companies. Many of the SAAS companies are US-based, even if they offer a choice in data hosting locations. The US owns the internet and quite a bit of the technology stack.
Ultimately it always came down to money. And AWS/Azure/GCP are apparently so much cheaper that nothing else matters.
It's a sad state of affairs.