STOCKHOLM (Reuters) - Seven European countries have changed their laws to increase employee ownership in startups to rival the U.S. in attracting talent and investment, while other countries are lagging, a report by venture capital firm Index Ventures found.

While stock options were integral to Silicon Valley’s success, Europe has been hampered by bureaucracy and by taxing employees too early, among other restrictions.

The European Union needs a coordinated industrial policy, rapid decisions and massive investment if it wants to keep pace with the U.S. and China economically, Mario Draghi said in a long awaited report last month.

Over 500 startup CEOs and founders joined a campaign called "Not Optional" in 2019 to change rules that govern employee ownership — the practice of giving staff options to acquire a slice of the company as they compete for talent with U.S. firms.

Germany, France, Portugal and the UK lead European countries in making changes that match or exceed those of the U.S., while Finland, Switzerland, Norway and Sweden got lower ratings in the Index report.

When companies such as Revolut and others go public, that ownership translates into real money for employees, said Martin Mignot, a partner at Index and an investor at fintech Revolut, which is valued at $45 billion.

($1 = 0.9236 euros)

(Reporting by Supantha Mukherjee in Stockholm; Editing by Sharon Singleton)