28 January 2025

This European Internet Forum (EIF) debate, chaired by MEP Brando Benifei, examined the current landscape of AI regulation and investments in Europe, focusing on the EU’s AI Act, innovation strategies, and the role of SMEs and industry leaders in shaping AI development. Discussions addressed balancing regulation with competitiveness, ensuring trustworthy AI, and fostering an investment-friendly ecosystem.

AI regulation and investments in Europe – the state of play

Brando Benifei MEP opened the discussion by emphasizing the need to align Europe’s regulatory ambition with AI-driven competitiveness. He noted that while the AI Act is a crucial step toward shaping a human-centric and rights-based approach to AI, it must be complemented by stronger financing, legal certainty, and research collaboration to bridge the EU’s innovation gap. Referring to the Draghi report, he stressed the importance of a unified European approach to AI, warning that fragmented efforts could hinder the EU’s ability to compete globally. He called for closer cooperation between policymakers and industry to ensure that AI regulation fosters, rather than stifles, innovation.

Lucilla Sioli, Director at the European Commission, highlighted the EU’s commitment to becoming a leader in AI by investing in infrastructure and talent. She pointed out that despite rapid AI advancements in the US and China, Europe remains competitive if it leverages its expertise and supports innovation-friendly policies. She detailed ongoing EU initiatives, including the development of AI factories and upgrades to supercomputers, which aim to provide researchers and startups with the necessary computational power to train AI models. Sioli also announced the upcoming AI strategy and public consultation, designed to foster AI adoption across key industrial sectors, emphasizing that building trust in AI through responsible regulation is essential for increasing AI uptake among European enterprises.

Peteris Zilgalvis, Judge and AI Management Board Member at the Court of Justice, framed AI as a fundamental technological shift comparable to past industrial revolutions. He argued that while AI has the potential to boost productivity and creativity, its development must be carefully managed to avoid overreliance and systemic risks. Speaking from his experience at the Court of Justice, he discussed how AI is being integrated into judicial processes and how regulatory sandboxes in the AI Act can help fine-tune legal applications of AI. He also highlighted structural challenges in Europe, such as limited access to computing power and the impact of US export controls on chip availability, which have left some EU countries at a competitive disadvantage. While acknowledging the potential of smaller AI models and European unicorns, he warned that AI governance must evolve alongside the technology to ensure transparency, traceability, and data security.

Margarete Rudzki, representing SMEs United, argued that Europe’s AI strategy must prioritize SMEs, which form the backbone of the European economy. She pointed out that while larger companies receive significant AI-related attention, smaller enterprises face numerous obstacles to AI adoption, including regulatory complexity, lack of digital infrastructure, and concerns about data security. She called for a tailored approach to AI support, recognizing that micro-enterprises, mid-sized businesses, and tech startups have different needs. She also underscored the importance of investment in digital infrastructure, particularly for public sector digitalization, which she identified as a bottleneck for businesses. She proposed local AI models and European data sovereignty measures as solutions to address SMEs’ concerns, urging policymakers to ensure that AI-related bureaucracy does not hinder innovation.

Marco Leto Barone, Policy Director at ITI, raised concerns that regulatory complexity is discouraging AI investments in Europe. He cited reports showing that Europe is falling behind in AI adoption and that some companies are choosing not to release AI products in the EU due to legal uncertainties. He emphasized that while AI regulation is necessary, the overlapping digital laws, fragmented enforcement mechanisms, and inconsistent national implementations create an unattractive business environment. To address this, he recommended regulatory simplification, legal certainty, and a more coordinated AI strategy across EU institutions. He also stressed the need for investment in infrastructure, talent development, and cross-border cooperation to create a more dynamic AI ecosystem. He concluded by urging policymakers to embed competitiveness into AI policy discussions, ensuring that Europe remains a desirable destination for AI innovation and investment.

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