It's not a popular opinion but if I was the EU I would do the following:

(1) Fully fund Firefox or an alternative browser (with a 100% open source commitment and verifiable builds so we know the people who get ideas like chatcontrol can't slip something bad in)

(2) Pass a law to the effect: "Violate DNT and the c-suite goes to jail and the company pays 200% of yearly revenue"

(3) same for having a cookie banner

#1 seems the most likely to happen (but I like the others).

Seems like maybe forking it in an agreeable way, and funding an EU crew to do the needful with the goal of upstreaming as much as possible.

I don't have insight into EU investments but that would provide a lot of bang for their euros.

Europe had a potential Mozilla: Opera. They let it flounder and Chinese investors bought it.

I liked the original Opera—it’s been a while, but I think I actually paid for it on Windows a long, long time ago—but I’m not sure they were ever a “potential Mozilla,” at least in the way I would interpret that. They were a closed source, commercial browser founded by a for-profit company.

(Also, point of order: Opera was always based in Norway, which is not a member of the European Union.)

What stops the EU from doing that now?

Regulation.

Wrong. They are actually doing it, with NLNet and NGI (Next Generation Internet) but they chose to funs Servo not Firefox.