The European Union has significantly changed global tech rules with its recent regulations, including the Digital Services Act, Digital Markets Act and the Artificial Intelligence (AI) Act. But to stay competitive in the global technological race and harness tech’s societal benefits, it must make its regulatory environment fit for purpose. Now is the time to focus on innovation, digital simplification and investments — not new regulation.
The EU needs a holistic approach to its digital rulebook. Many of its legislative acts are sensible and encourage responsible business practices. But businesses should not have to hire more lawyers than engineers just to comply with EU legislation requirements. As policymakers, we must streamline and clarify legislation to reduce regulatory overlaps and bureaucratic burdens, particularly for SMEs.
Enabling innovation
We must shift focus to enable innovation. Europe needs to attract top talent and balance the risk-based AI Act — which classifies specific technologies into four risk levels: unacceptable, high, limited or minimal — with initiatives that encourage the uptake of AI by companies and the public sector. The development and use of AI tools will be crucial for strengthening Europe’s competitiveness and improving the quality of welfare, such as in healthcare.
Sandboxes — environments designed to test new technologies — can be an important tool, but they will not be sufficient if we have general overregulation. The AI Act must be implemented pragmatically, with an understanding of the technology’s business cases, and supervisory authorities should avoid an overly strict application of the rules.
This article is part of The Parliament's latest policy report, "Regulating technology without stifling innovation"
Simplifying the digital rulebook
Europe’s digital rulebook needs regular assessment to ensure it remains fit for purpose and does not add to business burdens. The AI Act should be included in the upcoming digital ‘omnibus’ designed to streamline existing legislation, to make it more workable for businesses. In implementing the AI Act, there is a need for legal clarity, in particular relating to the high-risk requirements.
Overlaps and conflicting interpretations in the broader digital laws must be removed. These issues are exacerbated by national gold-plating — the extension EU directive powers when transposed into member-state law — and regulatory fragmentation. The EU’s General Data Protection Regulation (GDPR) is just one area which would benefit from simplification and more uniform application.
Increasing investment
The EU must increase investment. Europe has strong talent, universities and startups, but too few companies scale up within the bloc, which remains far behind in funding. In 2024, the US led globally with $109 billion in private AI investments, whereas Sweden, the highest-ranking EU country, placed fourth with $4.34 billion.
We need to invest more in research, to mobilise private capital and to complete the Savings and Investments Union. If we want European champions in the sector, we need an investment climate that is favourable to venture capital.
The EU should not impose new digital legislation, unless it provides significant advantages for competitiveness or addresses clear legal gaps identified through impact assessments. More layers of legislation will only make it more difficult for European companies.
The Commission’s withdrawal of the AI Liability Directive is a great start to simplification; it already reduces the burdens the AI Act places on businesses. We must evaluate existing frameworks, including the AI Act and Product Liability Directive, before adding new layers of liability.
Good legislation should be proportionate and technology neutral. Rules should not be duplicated. Instead, AI-related provisions should be integrated into existing legislation to make the implementation of our digital legislation workable.
That will create predictability for businesses and people, ensuring that EU legislation is future-proof and does not stifle innovation.
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