This is reasonable.
Though knowing that the data used to serve ads has very little overlap with the information that governments are interested in, makes this move more pointlessly destructive.
Funny enough, the data that governments are interested in isn't getting restricted. There are laws about how to protect that store that data, but that data is not being restricted.
Let's not pretend that governments are going to tell companies to stop collecting data, that they are inherently interested in procuring.
You can't look at governments, but especially the EU, as a single entity. Some parts of it want to collect all data possible while others want to protect your privacy. Here is a good article on how EU courts and the Irish government for example had very different views on this topic [2].
The general pattern you can observe is some political entities and/or countries really like to push surveillance and data retention laws in the name of security, sometimes without possible understanding the amount of misuse this could enable [3]. On the other hand privacy activists and other political entities and/or countries fight back against those and push for laws protecting privacy and your data or prohibit mass surveillance [4]. Sometimes those political "battles" are pretty obvious, with a recent example being the chat-control plans of the European Commission that the European Parliament will hopefully/likely reject [5].
[1] https://techcrunch.com/2022/08/12/google-android-location-tr... [2] https://www.politico.eu/article/data-retention-europe-mass-s... [3] https://netzpolitik.org/2021/urgently-needed-france-spain-pu... [4] https://www.theverge.com/2023/5/11/23719694/eu-ai-act-draft-... [5] https://www.aol.com/privacy-busting-chat-control-plans-17282...
There are different levels of impact, but generally all EU governments consider the government to be "competent at safeguarding private data". Making any and all data collection justified.
Even Germany collects a lot of private data.