What would happen to the jrpg genre if FF7 was never made? Would it be better off without it? Would it be worst without it?

It would be weaker, it made the genre outside of Japan on the PS1

More niche with higher quality titles. FFVII started the flash over substance JRPG. The FF series never really recovered from it.

I guess less popular and less "FF-ish".
And the worst part, even more of them wouldn't make it to Europe.

Well i guess RPGs would continue to be fairly niche, but FF would have still found fair popularity in the west, the big budget and cutting edge graphics guarantee decent sales in the west. Back in the NES/SNES days many Japanese games couldn't get attention, but the internet has helped. Even FF6 got 400k sales in NA, and most RPGs were starting to get enough attention to get released in the US at least. RPGs were on their way up heading to FF7, just that FF7 accelerated things very quickly.

Probably less CGI/cutscenes.

It would mean less jrpg fans in the west.

this. Doesn't matter which console you like more, it started the trend of more cgi cutscenes. They're slowly turning into interactive movies which is why I enjoy handheld rpgs more.

Actually the success probably thwarted innovation. The result being that the genre is suffering crib death. The game cemented poor development practices, and brought about a complacency. That was not earned by the mechanics, but by cinemas. The result is now obvious what the cost really was. Western role playing games are now the standard while JRPG titles are the niche.

The difference being that Western models spent more time in the slow cooker then the Japanese models which were fast to capture their essence, and thus had no more room to grow in any way approaching radical.

The sad answer is for the industry in Japan as a whole Final Fantasy was a flash in the pan kind of disaster. Which gave a short term boom, but a long term bust. Now the existing conventions are not letting the genre reinvent itself.