EU AI Act Enters Force as Europe Weighs Its Competitiveness Gap

The EU AI Act's obligations for general-purpose AI models came into force on 2 August, according to The Next Web. The rules were meant to arrive with a July package finalised by the European Commission, after which the European Parliament was to adopt its position on the standards.

Months earlier, the same rules were the subject of an open lobbying fight. The Next Web reported on 2 July that calls to postpone the roll-out had intensified from stakeholders including Swedish Prime Minister Ulf Kristersson, Bosch CEO Stefan Hartung, and the tech lobbying group CCIA Europe, whose members include Alphabet, Meta and Apple. Eoghan O'Neill, a senior policy officer at the AI Office of the European Commission, addressed the delay question at the TNW Conference in Amsterdam on 20 June. He said the Commission planned to finalise its rules for general-purpose AI in July.

"This is a big, sophisticated technology, and we want to get it right," O'Neill said. "We need specific obligations to capture some of the most impactful or potentially harmful models under the AI Act."

O'Neill said the guidelines were drafted by a broad code of practice group, with members drawn from model providers, civic society organisations, NGOs, academics, AI safety experts, SMEs and European industrial giants. "It is a big tent with all of those voices from the stakeholder community", he said.

The gap is capital, not just rules

Not everyone in the room framed Brussels as the main obstacle. Fabrizio Del Maffeo, CEO of Netherlands-based chip company Axelera AI, told the conference that Europe's problem is structural. "Europe is not the United States," he said. "We have many languages, many markets, and many regulations, both European and local. And these are stifling growth because they create borders, making it difficult for companies to expand."

Del Maffeo said his company had signed the petition for EU Inc, a proposal for a standardised legal entity that would let startups operate more easily across member states. EU Inc would sit under the bloc's 28th regime, a pan-European legal framework. At Davos in January, Commission President Ursula von der Leyen said the rules would combine "corporate law, insolvency, labour law, [and] taxation" in "one single and simple framework".

But Del Maffeo stressed that regulation is not the only problem. He argued that Europe's focus on launching new startups needs to be balanced with scaling existing ones, which requires capital more than policy. The numbers back him. Europe accounts for just 8% of the world's scaleups, against 60% in North America, and no EU-founded startup in the past 50 years has passed a 100bn euro valuation, according to The Next Web.

"If you look at machine builders, we are leading the world," Del Maffeo said. "In automotive, we are great, but we are losing traction. In robotics, we do great, but we are also losing traction."

The funding gap is stark. European startups raised about $52bn (44bn euros) in venture capital last year, far less than the $209bn (177bn euros) their US counterparts attracted, the same report notes. Peter van der Putten, director of the AI Lab and lead scientist at software firm Pegasystems, said the EU needs to become more attractive for domestic and international investment. "Investment could come from the EU, but also from the US," he said. "Regulations could be adjusted to make it easier and more attractive for funding that's leaving the US to flow into Europe."

Talent flows both ways

Europe's pitch is not only about money. Elise de Reus, co-founder of Cradle, pointed to a growing trend of European engineers returning from Big Tech jobs in the US, drawn by purpose-driven work and quality of life. "We're welcoming European engineers who used to work at Big Tech companies like Facebook in the US to come back and contribute to solving societal and global problems such as climate change," she said.

She also made an argument that cuts against copying Washington. "We're also maybe a little bit too modest. We should measure happiness, not GDP, which is not a sustainable metric. I don't think we should copy and paste the American system."

The enforcement question is now live rather than theoretical. Recent headlines, which FLASH24 is not treating as sourced facts here, point to employer obligations under GDPR and the AI Act, product liability proposals floated by EU lawmakers, and complaints that Brussels is pushing to weaken privacy rules for AI. The direction of travel after 2 August will be decided less by the text than by how the Commission, Parliament and member states apply it.

For European founders, the trade-off is familiar. Rules written to capture the most capable models also raise compliance costs for everyone building on top of them. Whether that produces safer deployment or simply slower scaleups is the argument the next phase of the Act will settle.