The European Commission’s Digital Omnibus package may be the biggest rollback of digital fundamental rights in EU history. On its surface, the proposal appears to simplify regulations for AI companies, allowing them to focus on innovation rather than compliance. However, as we delve deeper, it becomes clear that the Omnibus is more than just a tidying of the regulatory desk. The proposal delays the AI Act’s core obligations for high-risk systems by up to 16 months, creates a new legitimate interest basis under the GDPR for companies training AI models on personal data, narrows the definition of personal data itself, and removes the obligation for AI providers and deployers to ensure staff AI literacy.
Dismantling the Rulebook: A Misguided Approach to AI Regulation
The assumption behind the Omnibus is that regulation is what holds Europe back in the AI race. However, this assumption is based on a flawed premise. Europe cannot compete with the United States and China in artificial intelligence if its companies are buried in compliance paperwork. But, as Columbia Law School professor Anu Bradford argued, the technological gap between the EU and the US cannot credibly be attributed to the stringency of European digital regulation.
The Real Causes of the Technological Gap
The causes of the technological gap are more foundational: the absence of a genuine digital single market, shallow and fragmented capital markets, punitive bankruptcy laws that discourage risk-taking, and an immigration system that makes it harder to attract global tech talent. Bradford’s argument dismantles the premise on which the entire Omnibus rests. Europe had virtually no meaningful tech regulation before 2010, the period during which Google, Meta, and Amazon built their global dominance. If light regulation were the key to tech success, Europe should have produced its own giants in those years. It did not.
The Numbers Tell the Same Story
According to the State of European Tech 2025 report, US startups attract funding at roughly 0.74% of GDP, compared with 0.35% for the UK and Ireland, the highest-performing European region. Nearly half of all late-stage funding for European deep tech spinouts still comes from outside Europe, predominantly from America. We previously reported that roughly 30% of Europe’s unicorns between 2008 and 2021 relocated abroad, mostly to the US. They were not fleeing the GDPR. They were chasing capital, customers, and a continent-sized market that Europe still does not convincingly offer.
The Structural Problem That No Omnibus Can Fix
Weakening the AI Act does not create a European capital markets union. Narrowing the definition of personal data does not give a startup in Tallinn frictionless access to customers in Lisbon. Delaying compliance deadlines does not persuade a pension fund in Amsterdam to put 2% of its assets into a European tech fund. These are structural problems that require structural solutions, not piecemeal regulatory tweaks.
A Misguided Approach to Competitiveness
The Commission’s approach to competitiveness is misguided. It focuses on removing regulatory hurdles rather than addressing the deeper structural issues that hold Europe back. The Omnibus is a Band-Aid solution that does not address the underlying causes of Europe’s technological gap. It is a short-term fix that will only lead to more problems in the long run.
The Verdict
The Digital Omnibus package is a misguided approach to AI regulation. It dismantles the rulebook without addressing the real causes of Europe’s technological gap. The Commission should focus on creating a genuine digital single market, deepening capital markets, reforming bankruptcy laws, and attracting global tech talent. Only then can Europe hope to compete with the US and China in AI.
Conclusion
The European Commission’s Digital Omnibus package may be the biggest rollback of digital fundamental rights in EU history, but it will not help Europe compete with the US in AI. The underlying structural problems that hold Europe back require structural solutions, not piecemeal regulatory tweaks. The Commission should focus on creating a genuine digital single market, deepening capital markets, reforming bankruptcy laws, and attracting global tech talent. Only then can Europe hope to close the technological gap with the US and China.
