Europe is breaking down its own regulations in order to compete with the United States.

      On 19 November 2025, the European Commission released its Digital Omnibus package, a legislative proposal aiming to amend the AI Act, GDPR, ePrivacy Directive, Data Act, and various cybersecurity frameworks all at once. The term "simplification" was mentioned 23 times in the associated press release.

      Just six days prior, a coalition of 127 civil society organizations had already issued an open letter warning that the package would represent, in their view, the largest rollback of digital fundamental rights in EU history.

      The Commission intentionally chose the term "simplification" since it enjoys universal support. Simplification evokes the idea of tidying up.

      However, the Omnibus actually proposes far-reaching changes: postponing the core obligations of the AI Act for high-risk systems by as much as 16 months, establishing a new legitimate interest basis under the GDPR for companies training AI models using personal data, narrowing the definition of personal data, and removing the requirement for AI providers and developers to ensure their workforce possesses AI literacy.

      These actions are not merely editorial improvements; they represent structural concessions.

      The rationale behind these proposals is familiar and, at first glance, compelling. The argument is that Europe cannot compete with the United States and China in artificial intelligence if its companies are overwhelmed with compliance requirements.

      Mario Draghi’s pivotal competitiveness report from September 2024 laid the intellectual groundwork, stating that the EU has missed the digital revolution, the gap in productivity with America is widening, and regulation is partially to blame. The Omnibus is the Commission’s response to Draghi’s observations, but it is addressing an incorrect question.

      The Omnibus is based on the assumption that regulation is what hinders Europe’s progress. The idea is that by removing obstacles, European AI companies will thrive. The problem is that evidence suggests a different conclusion entirely.

      As Anu Bradford, a professor at Columbia Law School, pointed out in a 2024 paper published in the Northwestern University Law Review, the technological gap between the EU and the US cannot be realistically attributed to the severity of European digital regulation.

      The underlying issues are more fundamental: the lack of a genuine digital single market, shallow and fragmented capital markets, punitive bankruptcy laws that deter risk-taking, and an immigration system that complicates the attraction of global tech talent.

      Bradford’s argument dismantles the very foundation of the Omnibus. Prior to 2010, Europe had virtually no significant tech regulation, during the time when Google, Meta, and Amazon established their global dominance. If minimal regulation were the key to tech success, Europe should have produced its giants during that period. It did not.

      The statistics support this narrative. According to the State of European Tech 2025 report, US startups secure funding at about 0.74% of GDP, while the UK and Ireland, the highest-performing European region, are at 0.35%.

      Almost half of all late-stage funding for European deep tech spinouts still originates from outside Europe, primarily from the US. We previously reported that around 30% of Europe’s unicorns between 2008 and 2021 moved abroad, mainly to the US. They did not leave because of the GDPR; they were pursuing capital, customers, and a market that Europe still fails to convincingly provide.

      This is the structural issue that no Omnibus can rectify, and it’s the challenge Brussels seems least inclined to address. Easing the AI Act does not create a European capital markets union. Narrowing the definition of personal data does not provide a startup in Tallinn with seamless access to customers in Lisbon.

      Extending compliance deadlines does not persuade a pension fund in Amsterdam to allocate 2% of its assets to venture capital rather than 0.01%. The Omnibus focuses on treating a symptom, and not even the right one, while leaving the core problem unaddressed.

      What the Omnibus risks doing is dismantling something Europe has actually built. Over the past decade, the EU has established a regulatory framework that no other region can replicate: the GDPR, the Digital Services Act, the Digital Markets Act, and the AI Act. These regulations have not been universally embraced, and their implementation has varied. However, together, they represent something genuinely unique: a credible, values-driven approach to governing technology that has set global standards.

      The GDPR has become, as Bradford described it, a textbook example of the “Brussels Effect,” with major US tech firms adopting it as their de facto global standard rather than maintaining separate systems for different markets.

      As noted by TNW when the AI Act took effect, the EU had positioned itself as a global leader in AI governance, with other jurisdictions closely observing how enforcement would unfold.

      This regulatory credibility constituted a form of competitive advantage, albeit one that may not appear in quarterly GDP figures. It attracted researchers, influenced corporate governance standards, and provided European companies with a trust premium in markets where consumers increasingly value how their