The primary reason Europe lags behind is the substantial lack of investors & VC's.
The case highlighted by the author is typical of large corporates but if you look at any decent tech company in London for example, this case would sound ridiculous and extreme.
European investors are just bankers (with a few exceptions).
Also you might have heard of a little company kicking the shit out of Intel... ARM. Based in Cambridge UK, that is also where most tech investments in Europe are happening (not London or Berlin).
Also, Germany and Switzerland are much more quiet and private about investments. You won't hear about many of them.
These days you can invest in a UK startup, and have the government pick up 100% of the tab if it fails. Not to mention insane tax breaks (100%+) for r&d and for exploiting patents. The UK already has crowd equity.
If you get all your news from YC then you're probably stuck in the silly valley echo chamber.
Keep in mind the other notable differences between here and the US such as free health care, a larger number of paid holidays etc.
Also bonuses. Bonuses in London can be 100% of salary or more.
National health insurance is not really free in the UK... but UK contractors pay less tax than US ones generally. German freelancers get paid more, but pay more tax (and get more holidays).
Developers outside of London can earn less, but many prefer it.
I need to earn £50k to cover just childcare costs and the mortgage (looking forward to both of those going down soon). I could sell up and buy a similar property 5 miles away and those costs would both halve. I could sell up and buy a similar property 10 miles away and have no mortgage at all. Neither of those would make us happier as a family (no matter how much I'd love to have no mortgage); we want to live where we're living now, so I just get on with it.
The service prices (health, education, banking, communications, etc) are generally much lower than in the US, though, so it's hard to get an accurate comparison of cost-of-life.
The varied answers you get about London salaries is because the financial industry pays pretty well, competitive with SV or NY money. Everyone else gets paid peanuts. Or goes contracting like me.
There's something mysterious about the low wages for programmers.
I believe the most important part is this:
If EIS shares are disposed of at any time at a loss, such loss can be set against the investor's capital gains or his income in the year of disposal.
So basically, if you take a loss, you can deduct it against any other gains you have.
I get the general perception top tier Sand Hill VCs are now willing to invest in Series B or later (and some Series A) in Europe. Costs have dropped, even in Europe, so you can get pretty far on $50-100k in savings for a seed round. So the big problem in the long term is probably risk-aversion in hiring, vs. raising money.
Doubtful about the second bit - beaurocracy seems to become magnified in London.
I was referring to the likes of Facebook UK, Google, Badoo, Songkick, etc.