I think governments funding software development could be a useful counterweight in an industry dominated by a few giant corporations, similar to how lots of countries have state funded media alongside commercial options.

But the EU forking Android is not a remotely realistic starting point. How do you persuade manufacturers to use it? Would Google license its proprietary apps to run on it? How will the small team of devs cope with whatever changes are coming in hardware next year? Forking Android is easy, making your fork a viable alternative is almost impossible.

In theory the EU could throw its weight around and demand that Google & OEMs work with 'EUdroid' if they want to sell phones in Europe. But that would be a massive political fight, much bigger than funding a few developers.