Scale and culture. For scale, see https://blog.pragmaticengineer.com/software-engineering-sala... for more. There just isn't a lot of money in only a local market, and trying to accommodate a dozen countries worth of languages, culture and standards is far more difficult than one.

For culture, a lot of European countries feel it is justified developers earn similar to other white collar jobs. It doesn't have the "heightened" status I often feel the US seems to give developers. Other white collar jobs don't really earn a lot either. Tech jobs kind of stop growing at senior, and require pivoting into management at least partially for higher income. Speaking of management, it is kind of unheard to earn more than your manager, unless you solidly outrank them in seniority. As a result, whatever the manager is paid, forms a tight glass ceiling for oneself.

Sounds like a failure to embrace meritocracy.

Less offer, similar demand. European tech companies could pay more, but they don't need to because they don't compete as much for workers. If you ask for more they have no trouble finding someone else who will take it.