Artificial intelligence is becoming one of the key drivers of global competitiveness, yet despite a strong research base and industrial potential, the European Union continues to fall behind the United States and China. This gap is largely the result of fragmented regulations and an excessive, hard-to-implement regulatory burden. While the European Commission has proposed the Digital Omnibus as a first step toward simplifying digital law, the technology sector argues that, so far, the changes are largely cosmetic.
The Digital Omnibus is the EU’s first comprehensive review package of digital regulations. Its goal is to streamline a regulatory system that has grown in layers over the years—from the GDPR on personal data protection, through the Digital Services Act (DSA) and the Digital Markets Act (DMA), to sector-specific rules on artificial intelligence, data, and cybersecurity. This fragmentation makes it difficult for European companies to innovate, generates high compliance costs, and causes many businesses—especially small and medium-sized enterprises—to abandon investments in new technologies.
“The Digital Omnibus presented by the European Commission is definitely a step in the right direction. Just a few years ago, there was no discussion in the EU about simplifying laws, let alone deregulating EU legislation. It is very encouraging that in the new Commission’s term this debate has begun, and that during its presidency Poland has initiated concrete efforts to simplify European law,”
said Dariusz Standerski, Deputy Minister for Digital Affairs, speaking to the Newseria news agency during the third edition of CEE Innovation Day, organized by Meta and the Digital Poland Association.
According to the Ministry, discussions on simplification must lead to a real change in the direction of Europe’s regulatory policy. Until now, the EU has been a pioneer in creating successive legal frameworks for technology, often without assessing whether their cumulative effect undermines the competitiveness of European companies.
“There is still a lot of work ahead of us, because there are many areas in the EU that need simplification. But this first important step has been taken, and it gives us a starting point,”
the Deputy Minister added.
Industry Pushes for Deeper Deregulation
Technology companies are also calling for far-reaching deregulation, arguing that the Digital Omnibus is not an adequate response to the need for changes that would genuinely foster innovation. In their view, Europe’s digital market is now one of the most heavily regulated in the world. The number of overlapping rules, requirements, and liabilities exceeds those in the US or Asia, slowing down innovation and discouraging investors from placing AI projects in Europe.
“For many years in Europe there has been a belief that regulation is what will make the EU a global leader—the so-called Brussels effect. We regulate first, and others follow. Artificial intelligence is a very good example. We have the AI Act, the world’s first regulation of this technology. Meanwhile, the United States and China are racing ahead in AI development, while Europe is lagging behind: it is not creating large language models and is not investing enough in AI. This is largely due to regulatory overload,”
explains Jakub Turowski, Director of Public Policy at Meta for Central and Eastern Europe.
With more than 100 digital regulations and 270 regulatory bodies, the EU remains one of the most complex legal environments globally. This fragmentation often leaves entrepreneurs uncertain about how to interpret new obligations, further hindering innovation.
“Entrepreneurs and start-ups simply do not understand these regulations. Their implementation is a challenge in itself, which is why simplification is absolutely crucial,”
Turowski adds.
Member States Echo the Call for Change
Governments in Central and Eastern Europe also point to the need for broader legislative reform. Latvia, for example, views the current proposal as only a first step that does not yet remove the most significant structural barriers.
“To unlock the benefits AI can bring to the European market, we need to adjust various regulations. The main problem with European legislation is that it is not sufficiently clear. Different Directorates-General work on different issues, while the topic itself is cross-sectoral. Even if we have good rules in one area, but another set of rules blocks innovation, we will not see results. That is why goal-oriented regulation is essential if the EU is to unlock its full potential,”
says Jurģis Miezainis, Parliamentary Secretary at Latvia’s Ministry of Economics.
Falling Behind Global Leaders
The growing pressure for deregulation reflects Europe’s widening technological gap with global leaders. Analyses of the implementation of recommendations from the Draghi report on EU competitiveness show that only one out of ten recommendations has been implemented after a year. Meanwhile, the US and China are rapidly developing their own AI models and ecosystems: over the past year, around 40 large AI models were created in the US and 15 in China, compared with just three across the entire EU.
Experts stress that reversing this trend will require more than regulatory change alone. Parallel investments in infrastructure, skills, and research capacity are essential. This is the aim of the European Commission’s new AI Apply Strategy, designed to accelerate the practical deployment of AI. It includes the development of European competence centers, support for AI model research, and the creation of so-called AI factories—specialized facilities capable of training and developing large language models and other AI systems within Europe.
“This is a good starting point, and we must build a comprehensive investment strategy on it. We already have 19 AI factories selected across the EU, including two in Poland. Next come the gigafactories—a project that could open a new chapter in investment in advanced technologies,”
notes Dariusz Standerski.
Between 2025 and 2026, at least 15 AI factories are expected to become operational. The network, spanning 19 locations in 16 EU countries, is intended to create a single, pan-European market for AI services.
Experts emphasize that the decision to simplify regulations, combined with parallel investment efforts, is only the beginning of a long process aimed at stopping the widening technological gap between the EU and global leaders.
“Thirty years ago, GDP per capita in the United States was on par with Europe’s; today it is twice as high. This clearly shows that Europe is falling behind. Technology and competitiveness are not ends in themselves—what is really at stake is European prosperity, which is Europe’s defining brand,”
argues Jakub Turowski.
The third edition of Meta CEE Innovation Day focused on the urgent need to harmonize and reform the legal frameworks governing new technologies, including AI. Policymakers and experts from across the region discussed how regulatory simplification could strengthen the EU’s competitiveness, unlock the innovation potential of Central and Eastern Europe, and enable countries in the region to use artificial intelligence effectively to build economic advantages.
