Much if not all of Europe already has ISP level bans. If they can use those bans against football streaming sites, why not Facebook?

And actually I think just banning them from conducting any business, accepting payments/etc, would be mostly sufficient. They could continue to operate at a loss, but it would put American corps at such a disadvantage that domestic social media might be able to compete, and enforcing regulations against domestic companies should be far more feasible.

On which grounds would you punish some companies which are using a fully legal platform? If you had beef with the ad contents, you'd punish them already for that. But if you have beef with the platform algorithms, punish them for exactly that. Not over proxies! As long the algorithm was designed for creating dependence, than regulate that - exactly like you (should) regulate other substances creating dependence. And some countries are going exactly this way: not only Australia but also Finland, Spain...