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I think the scenario posited here is the worse possible one where we are still chronically online but on a dead internet while being fully and relentless surveilled.
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The internet of the future is an IQ test. Are you smart enough to get in, do your work in a focused manner, and get out so that you live your life? Many, many people will fail this test.
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Counterpoint: meatspace is awful unless you're a normie. Christ, the day I got out of my small town and into a major city university dorm room with fast Internet was the day my life opened up. I found people with my interests. Etc.

"The Internet sucks. Get offline," is the battle cry of someone who likes Marvel movies and the book that Target has at the checkout line, or lives in one of about five cities in the USA.

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I'd rather have the internet healed
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The Internet is fine and the bad parts will heal or remove themselves if we remove the actual bad thing: smart phones. The Internet is not supposed to follow you around hence the term "In Real Life" or "meatspace". If you want to be "terminally online" you need to sit your ass down in front of a computer for hours.
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When people say things like this, they mean the good parts of the internet, e.g. real people who are able to be honest because a pseudonym allows them to say things they would be punished by evildoers for saying if the evildoers could identify them. Taking that away doesn't get you out of the engagement-optimized ad funnel, it just makes that be the only thing left.
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Having a digital ID does not obviate that (in principle), thanks to zero-knowledge schemes.

To my understanding then, the issue is that the EU's implementation only has a ZK-based solution in the plans so far.

But then this initiative says "No Digital ID", not "No Auto-Deanonymizable Digital ID", so...

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