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

      On November 19, 2025, the European Commission released its Digital Omnibus package, proposing amendments to the AI Act, GDPR, ePrivacy Directive, Data Act, and various cybersecurity frameworks all at once. The term "simplification" was mentioned 23 times in the press release accompanying the package. Just six days prior, a collective of 127 civil society organizations had issued an open letter alerting that the package would result in what they described as the largest rollback of digital fundamental rights in EU history.

      The Commission was deliberate in its use of the term "simplification." It is an idea that few oppose, as it suggests the idea of organizing a cluttered desk. However, what the Omnibus actually suggests is far more significant: postponing key obligations of the AI Act for high-risk systems by up to 16 months, establishing a new legitimate interest basis under the GDPR for firms training AI models on personal data, redefining the concept of personal data, and eliminating the requirement for AI providers and users to ensure AI literacy among their staff.

      These are not mere editorial changes; they constitute fundamental concessions. The rationale behind these moves is familiar and may seem logical at first glance. The assertion is that Europe cannot compete with the United States and China in artificial intelligence if companies are overwhelmed by compliance requirements.

      Mario Draghi’s influential competitiveness report from September 2024 provided the intellectual basis for this argument, stating that the EU has lagged behind in the digital revolution, with a growing productivity gap compared to the US, and that regulation bears part of the blame. The Omnibus is the Commission's response to Draghi’s assessment, albeit it addresses the wrong issue.

      The underlying assumption of the Omnibus is that regulation is the primary factor hindering Europe's progress. The belief is that by reducing regulatory friction, European AI firms will thrive. However, evidence suggests a different narrative. As Anu Bradford, a professor at Columbia Law School, pointed out in a 2024 paper published in the Northwestern University Law Review, the existing technology gap between the EU and the US cannot credibly be attributed to the intensity of European digital regulation.

      The root causes are more fundamental, including the lack of a true digital single market, shallow and fragmented capital markets, harsh bankruptcy laws that deter risk-taking, and an immigration system that hampers the attraction of global tech talent. Bradford’s argument undermines the foundation upon which the entire Omnibus is built. Before 2010, Europe had virtually no significant tech regulations during the very years when companies like Google, Meta, and Amazon established their global dominance. If minimal regulation were the key to technological success, Europe should have produced its own giants during that time, which did not happen.

      Statistics tell a similar story. The State of European Tech 2025 report indicates that US startups attract funding at roughly 0.74% of GDP, compared to 0.35% for the UK and Ireland, the top-performing region in Europe. Nearly half of the late-stage funding for European deep tech spinouts still comes from outside Europe, mainly from the US. We previously noted that around 30% of Europe’s unicorns between 2008 and 2021 relocated abroad, primarily to the US. They were not avoiding the GDPR; they were pursuing investment, customers, and a vast market that Europe still fails to convincingly offer.

      This structural issue cannot be resolved by any omnibus, and it is the one Brussels seems least eager to tackle. Weakening the AI Act does not create a unified market for European capital. Redefining personal data does not provide a startup in Tallinn with seamless access to clients in Lisbon. Extending compliance deadlines does not encourage a pension fund in Amsterdam to allocate 2% of its assets to venture capital instead of 0.01%. The Omnibus addresses a symptom, and not even the correct one, while leaving the underlying problem unaddressed.

      What the Omnibus does risk is dismantling something Europe has actually built. Over the last decade, the EU has constructed a regulatory framework that no other region could replicate: the GDPR, the Digital Services Act, the Digital Markets Act, and the AI Act. While these frameworks were not universally embraced, and their implementation has been inconsistent, collectively they represented something genuinely unique: a credible, values-driven framework for governing technology that set global standards.

      The GDPR has emerged as a prime example of the "Brussels Effect," with major US tech companies adopting it as their de facto global standard instead of maintaining separate systems for various markets. When the AI Act was enacted, as noted by TNW, the EU positioned itself as a global leader in AI governance, with other jurisdictions closely monitoring how enforcement would unfold.

      This regulatory credibility formed a competitive advantage, albeit one that doesn't manifest in quarterly GDP metrics. It attracted researchers, influenced corporate governance standards, and provided European companies with a trust premium in markets where consumers are increasingly conscious of