Competition, Not Competitiveness, will Lead Europe Forward in AI

An Analysis of the Pitfalls of the EU’s Competitiveness Agenda

If you've been around Brussels lately, you’ll notice that the buzzword in the mouths of everyone from policymakers to tech lobbyists is “competitiveness.” Stemming from the influential report by former Italian Prime Minister Mario Draghi and reinforced by the launch of the European Commission’s Competitiveness Compass early this year, Europe seems to be singularly focused on regaining competitiveness — namely vis-a-vis the U.S. and China. And it seems to be laser-focused on boosting its digital economy, including its blossoming AI industry, as indicated by the European Commission’s digital package in its 2025 Work Programme, which intends to simplify and cut down on digital regulation.

While it’s clear that Europe needs to make big moves to catch up, the Commission’s proposed policy actions risk causing greater harm than good to Europe’s economy and society If the EU truly wants to develop a flourishing AI industry, it should focus on dismantling Big Tech monopolies and enabling and supporting new entrants in the AI market, not its current policies, which stand to only create European monopolies or further entrench the dominance of US Big Tech companies. In other words, it’s time for the EU to focus on competition, not competitiveness.

Massive cloud ambitions will inevitably boost US Big Tech dominance

The EU Cloud and AI Development Act, included in the Competitiveness Compass, is expected to propose private-public partnerships to “establish new AI Gigafactories specialised in training of very large AI models enabling key AI ecosystems throughout the EU.” While the need for European compute is vital to democratize access to key resources and reduce dependency on US actors, a partnership with the private sector to build computing infrastructure at scale risks reinforcing the dominance of the biggest players (including from the US and China) while shutting out European challengers.

Developing cloud infrastructure is enormously expensive, requiring up to one billion euros to build the largest data centers, and the advanced AI chips that would power AI data centers — for example, Nvidia’s Blackwell chips — can cost up to $70,000 each. In addition, Henna Virkkunen, the Commissioner for Tech Sovereignty, Security and Democracy signaled that it is “important to remain open to third-country providers,” stopping short of acknowledging that to execute her plan, US Big Tech companies would almost certainly need to be involved. Europe does not seem to consider this contradictory to its focus on sovereignty.

Both the Competitiveness Compass and the Work Programme’s digital package propose simplifying regulation, presumably to make it easier for businesses to comply with its patchwork of rules. While the practice of simplification could help level the playing field for startups and small and medium enterprises (SMEs), this is also a clear example of the Commission buying into Big Tech’s talking points. Tech industry association DIGITALEUROPE (whose members include Google, Amazon, Meta, Microsoft, and Nvidia) has argued for simplification and reduction of regulatory burden, but this is really about protecting their monopolies and preserving their unchecked ability to surveil and exploit individuals and businesses.

However, tech corporations may still fail to properly comply with the law, even if it is simplified. They will still continue to influence policy, fight enforcement actions, and ignore the consequences, while complaining about how EU fines are tantamount to tariffs. Any efforts to simplify regulation should focus on reducing compliance burdens for startups and SMEs while holding or even increasing regulation of dominant incumbents.

Furthermore, despite what Big Tech would have us believe, regulation is not the enemy of innovation. It can steer innovation towards the public interest while preventing harms and giving consumers confidence in using new technologies.

An unabashed attempt to build European champions will worsen market concentration

Furthermore, the Compass focuses on leveraging the Single Market, which is “critical to build continental size in a world of giants.” Proposals include reducing fragmentation and promoting integration across various sectors. However, the Compass has clearly set its sights on building larger European champions. The Draghi report laments that there are no large pan-EU platforms, citing that “only one EU-based company is designated as a gatekeeper under the Digital Markets Act and only four of the twenty Very Large Online Platforms designated by the Digital Services Act are EU companies,” as if this were something to be ashamed of.

While the Single Market is an important feature of the European Union that helps it implement policies smoothly, the intent should not be to build homegrown monopolies. Any European tech giants would likely behave just as anticompetitively and create as many obstacles to public interest AI as the US giants currently do.

Charting a new path forward

If the EU really wants economic growth, then instead of trying to compete with the US and China to build global technology corporations, it should focus on increasing innovation, promoting market diversity, and enabling new entrants to the market. Startups and SMEs create more jobs, drive more innovations, and lead to more competitive markets that decrease costs and increase consumer choice.

First, the EU should revise its Cloud and AI Development Act to formally give preference to smaller players over Big Tech. Without such rules, the initiative stands to follow in the fated footsteps of Gaia-X — the €1.7 billion Franco-German project to create a sovereign European digital infrastructure, which was infiltrated by US Big Tech corporations and eventually became a fragmented federation which many call a failure.

Second, competition policy, including enforcement of antitrust and digital laws, as well as pro-competition industrial policy, should be strategically leveraged by the Commission to create a fair, flourishing economy.

Europe should lean into its status as a regulatory superpower to rein in Big Tech’s power and level the playing field for smaller players, including many European alternatives. It already has the right tools in its toolbelt: antitrust rules and groundbreaking ex-ante digital regimes such as the Digital Markets Act (DMA), Digital Services Act (DSA), and the Data Act.

For example, the European Commission could use the powers conferred to it by the DMA to conduct market studies in AI; prevent anticompetitive behaviors by “gatekeepers,” such as self-preferencing; and restrict the use of user data for AI training and development. It could also leverage antitrust law to block mergers (including “partnerships,” such as the one between Microsoft and OpenAI, which should be seen as de facto mergers) and launch investigations into existing partnerships and anticompetitive practices. Finally, the Commission has the power to mandate structural remedies, such as divestment of a line of business from the rest of the company, which can be helpful in tackling concentrated tech power by removing incentives and conflicts of interest that cause them to behave anticompetitively. Making use of its suite of regulatory tools would allow the EU to make binding decisions on US tech companies that will have ripple effects throughout the world.

Last but not least, Europe should reshape its industrial policy to create a more open market in AI and enable the development of public interest AI. It can invest in initiatives such as EuroStack to build next-generation digital public infrastructure and provide viable alternatives to Big Tech’s services. It can invest in public AI, including actions to enable open-source AI (given it follows safety and ethical guardrails) and investments in public compute.

The stakes are higher than ever for Europe to get this right. So much is on the line — not just competitiveness and sovereignty, but also democracy and power. If Europe continues on its current path, it will only lead to further concentration of economic power, which we have seen leads to political power.

Europe must hold the line and resume the enforcement of regulations on Big Tech while at the same time promoting pro-competition policy in order to ensure AI is developed responsibly and democratically. By doing so, political power will stay in the hands of legitimate authorities, and Europe can secure the future it wants.

Disclaimer: The views expressed herein are those of the author and do not constitute the official position of The Brussels Effect, which maintains its commitment as a non-partisan, independent blog.