Both solutions would require the company to have a prohibitive amount of their investment money set aside to cover the tax costs to employees of vested options. That both has perverse incentives and is a very substantial innovation tax—making investments in startups even more risky, and raising funds more difficult (since doing so at an increasing valuation also increases the capital requirements needed to cover the tax bill of future veering events).

The American approach is simple: no sale, no profit, no tax. If Europe wants their own Silicon Valley, they need to adopt similar startup-friendly tax laws.

We talk about companies awash in VC money. This whole tax discussion looks a lot like helping VC more than actual employees. Or like finding excuses and scape goats why these companies aren't doing such things right now.

There is nothing like 'companies awash in VC money' in Europe. The investments here are laughable compared to US, or China, and the products are mostly not really innovative, because of the risk, as discussed here.