By former U.S. Senators Kent Conrad and Saxby Chambliss
Europe stands at a crossroads. For more than a decade, the continent’s economy has stagnated while those of the United States and China surge ahead, especially in key emerging technologies such as artificial intelligence.
Europe has long struggled to produce leading digital businesses. While the United States and China have given rise to global tech titans such as Nvidia, Meta and Alibaba, the European Union’s contributions are scant. Of the world’s top 50 publicly traded tech companies, Europe, which accounts for approximately 15 percent of global gross domestic product, has produced just four.
This digital drought is a major contributing factor to the economic stagnation plaguing the continent. In 2008, the GDP of the United States was nearly equivalent to that of the eurozone. Today, the U.S. economy is approximately 75 percent larger, and the EU’s forward-looking GDP growth estimates suggest this troubling trend will continue.
This disparity isn’t due to a lack of talent among European entrepreneurs. Rather, it stems from a regulatory regime that suffocates innovation and deters risk-taking. The EU now has around 100 tech-focused laws and over 270 separate regulating bodies active in digital networks across all member states, creating a complex web of rules that make it difficult for startups to grow and compete globally.
The EU’s recent enforcement of its Artificial Intelligence Act places stringent regulations on AI practices and applications, threatening to further stifle innovation and deter investment in European startups competing in the AI race. Meanwhile, Chinese firms such as DeepSeek, Alibaba and others are rapidly advancing and rolling out efficient AI models that rival Western counterparts, including open-source models.
Sweeping regulations like the Digital Services Act (DSA), the Digital Markets Act (DMA) and the General Data Protection Regulation (GDPR) impose hefty compliance costs on businesses and undercut research-and-development spending.
The DMA adds insult to injury by empowering European bureaucrats to review all potential acquisitions by large “gatekeeper” tech companies, particularly those involving high-growth startups. Even European businesses are warning that the DMA threatens to stifle the growth of new enterprises and significantly slow digitalization across the eurozone.
The eurozone’s approach toward mergers and acquisitions further undercuts ingenuity. While the United States has long encouraged large companies to acquire promising startups — providing vital exit opportunities for venture capitalists and founders — Europe’s ambiguous “abuse of dominance” standards discourage such acquisitions. This leaves emerging businesses without potential buyers and deters new startups and the venture capital investment they need to thrive.