The European Commission has unveiled a €1.98-trillion budget proposal for 2028 to 2034, with €409 billion earmarked for a new, simplified European Competitiveness Fund (ECF) and increased support for the European Union’s research flagship programme, Horizon Europe.
The fund aims to streamline Europe’s fragmented financing schemes and signals a bold push for technological leadership, particularly in artificial intelligence (AI). But if the EU truly wants to strengthen its global standing in AI, it must avoid spreading resources too thinly across member states. The smarter bet is to concentrate investments in leading innovation hubs, where the chances of producing world-class breakthroughs are highest.
Paris stakes its claim as Europe’s AI capital
Paris illustrates the point. The French capital has emerged as one of the EU’s leading AI talent hubs, home to Mistral — one of the few European companies capable of keeping pace with the US and China.
This did not happen by accident. Paris combines leading institutions in AI research, such as ENS Paris-Saclay and École Polytechnique, with national research centres like CEA List and Inria, and local labs run by tech giants like Google, Meta, and Microsoft. Since 2014, 1,087 AI startups have been founded in the French capital, backed by some of Europe’s most active entrepreneurial graduates from HEC Paris and INSEAD Business School.
This article is part of The Parliament's latest policy report, "Regulating technology without stifling innovation"
Although Berlin and Munich together have produced more AI startups, Paris-based counterparts have outperformed both German and other European competitors in terms of capital. In 2024, Paris-based AI startups raised $2.8 billion, compared with $809 million in Munich and $410 million in Berlin.
These numbers pale in comparison with globally leading ecosystems like the Bay Area in the US, where AI startups raised $71 billion in 2024 alone. But this gap is all the more reason for the EU to start focusing its resources where they can have the greatest impact.
Public sector support has also helped in Paris. Public funds have been provided by Bpifrance, the French public sector investment bank and the government. Intermediary organisations, like Europe's biggest startup campus Station F, have supported startups throughout their life cycle. French President Emmanuel Macron has also incentivised US academics to come to the country to bring new expertise and skills.
The French case shows that building European AI companies isn’t just about talent, research excellence or funding in isolation — it is about how they interact to build a successful innovation ecosystem.
Why Europe can’t afford to spread its resources
The interconnected elements that made Paris successful are difficult to replicate without strong existing structures. Even the US and China rely on only a handful of competitive AI powerhouses.
If Europe dilutes its resources, it will achieve little more than mediocrity across the board, something it has been guilty of on many occasions. The lesson is clear: competing with Silicon Valley or the Beijing–Shenzhen–Shanghai corridor requires concentrated bets, not scattered subsidies.
With its new budget, the EU faces a strategic choice. While spreading financial resources across all member states may be the right strategy to promote regional cohesion, it could come at the expense of focused investment in advanced technologies. The €409-billion Competition Fund can either be distributed politically or invested strategically to build world-class AI ecosystems. Europe’s global position in AI may hinge on that decision.
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