Now or never for Europe’s IT sector (again)

After much fuss, speculation, and leaks, the European Commission presented its new proposals on simplifying regulations in the digital area last week. The package is a small buffet of measures, with the most notable ones being changes to the EU’s controversial AI regulation and amendments to the GDPR.

The background is of course the strong concern that the EU is falling behind in the global tech rally, with reduced innovation and competitiveness as a result. A concern that is justified, given that just a year ago former ECB President Mario Draghi presented his horror report on the situation in the EU, which became a blowtorch. During the Commission’s press conference for last week’s proposal, Draghi was referred to several times.

“It’s now or never, Mario Draghi said in his report a year ago. Now it’s even more now or never,” said Tech Commissioner Henna Virkkunen at the press conference.

Despite the rhetoric, the new measures may not offer the turnaround for the EU one might expect. Most legislation remains in place. A heavy part of the AI ​​regulation concerning so-called high-risk AI is being postponed for at least a year, but that creates more uncertainty rather than less. The GDPR is being amended to make it clear that personal data can be used to train AI, but according to the Commission, this is only in line with what the European Court of Justice has already stated. (The Swedish Authority for Privacy Protection (IMY) calls the changes “substantial.”)

Added to this are measures such as simplified data rules, simplified cybersecurity reporting, and a digital corporate wallet that will reduce administration for companies that want to operate in several EU countries. And there will be fewer cookie pop-ups on the web, something that will certainly please many citizens but that will not have a significant impact on the EU’s competitiveness.

The proposals have of course already attracted criticism. The EU is giving in to “big tech,” it has been said. Yet it didn’t take many seconds after the announcement before an email from the lobby group CCIA, which represents Google, Amazon, Apple, and Meta, came in, saying the measures were far too weak. 

“There will be many stakeholders who say this is not enough, and some may say it is too much, so I think we have a balanced package,” Henna Virkkunen said at the press conference.

A broader crisis for EU tech

I personally find it interesting to read the Commission’s new proposal in parallel with another report that came out this week, the annual State of European Tech from Niklas Zennström’s venture capital company Atomico. A report that this year has turned into something of a political rallying cry in addition to the interesting statistics about the European startup sector it always contains.

Atomico’s most important points for building a stronger tech ecosystem are not at all about legislation at the AI ​​Act or GDPR level. The concrete legislation most in demand is the more or less promised “28th Order” that simplifies rules and administration for startups and makes it less risky for innovative companies to fail.

Data and AI regulatory burden is far down the list of obstacles startup stakeholders note when polled by Atomico. Things like market fragmentation, tax regulations, access to capital, and labor regulations all rank higher. And for investors, there is of course the limited opportunities to make an exit.

Focusing too much on “tech-specific” legislation as a cure for EU digital competitiveness is a risk when there are so many other issues that have at least as much impact.

One such issue that Atomico highlights, and which I have written about before, is Europe’s low self-confidence. Despite the continent’s tech scene being stronger than ever and the optimism in the tech community being at its highest in a decade, there are still too few who believe in a thriving tech future for Europe.

“This is a sign of something structural. Europe has yet to fully convince its own stakeholders — founders, investors, and public and private financiers — that it is the best place to build world-leading companies. Collective self-confidence is essential, and without it, even the most audacious ambitions can only go so far,” writes Atomico.

I don’t know if the Commission’s new package will do much to change that. But of course, you have to start somewhere.