This is to just allow you to sign in to other parties with your government ID if needed. (instead of other parties asking you for passport/ID for compliance/KYC)
So, given all that, the only thing you can safely assume that most of what EU governments store on you is known by a wide range of foreign intelligence agencies; some of them considerably more hostile than the NSA which we all love to hate. Mostly you're not providing any new information whatsoever when you fill in the forms to enter e.g. the US. It's just security theater.
Central repository won't store anything, the same as google SSO doesn't store your data if you sign in to third party sites. (it just authenticates you).
Maybe this is what you are misunderstanding?
Also, government already has your data, so that 1 central repository for IDs already exists.
As for hacking... going after any one of those 3000 is less likely to get you in trouble then going after a government (as incompetent as they are). See oil pipeline hack to understand consequences.
> "The digital wallet will securely store payment details and passwords and allow citizens from all 27 countries to log onto local government websites or pay utility bills using a single recognised identity, the newspaper said, citing people with direct knowledge of the plans."
Doesn't that directly imply that it is more than a simple SSO?
If you go the FT article, you have a link to the official documentation. Draw your own conclusion, I still see it as SSO.
https://digital-strategy.ec.europa.eu/en/policies/trust-serv...