EU to Recalibrate AI Regulation Approach
But also — Trade, Ukraine, Germany, Austria
Hello! Today is February 19th, and here is your EU news summary for the week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and LinkedIn.
The Briefing
The United States Vice President, J.D. Vance, leveraged his inaugural international trip to articulate his vision of American technological supremacy, with a focus on AI.
AI SUMMIT • "To safeguard America’s advantage, the Trump administration will ensure that the most powerful AI systems are built in the US with American designed and manufactured chips," he declared last Tuesday at the AI Action Summit in Paris.
J.D. Vance highlighted the colossal investments undertaken across the Atlantic, notably the Stargate project, unveiled in the wake of Donald Trump's inauguration. This programme, set to mobilise $500 billion by 2029, unites OpenAI, Japanese conglomerate SoftBank, and cloud giant Oracle to construct cutting-edge AI infrastructure.
Concurrently, GAFAM investments in AI have skyrocketed, surging by 63% year-on-year to unprecedented levels. Microsoft, Alphabet, Amazon and Meta reported cumulative investments of $246 billion in 2024, dwarfing the $151 billion in 2023.
J.D. Vance cautioned that Europe would face a stark choice between adopting American technologies or turning to "hostile foreign adversaries" who weaponise artificial intelligence software to rewrite history and censor speech — a reference to China.
However, for Europe to fully align with the United States, it must, according to the former Ohio senator, streamline its regulatory framework.
"We want to embark on the AI revolution before us with the spirit of openness and collaboration. But to create that kind of trust, we need international regulatory regimes that foster the creation of AI technology rather than strangle it," insisted Donald Trump's right-hand man.
Washington, as well as London, have declined to sign the summit's final declaration, which advocates for "inclusive and sustainable AI".
REGULATORY CRITIQUE • The American Vice President was particularly critical of European digital rules, notably the Digital Services Act (DSA), which he accuses of forcing companies to "take down content and police so-called misinformation".
He also targeted the GDPR (General Data Protection Regulation), which, in his view, forces small businesses to "pay endless legal compliance costs or otherwise risk massive fines".
These criticisms emerge as the Commission embarks on a regulatory simplification project to bolster EU competitiveness. While the Commission does not envisage revisiting the DSA or GDPR, it appears ready to recalibrate some of its AI ambitions.
Among the notable adjustments, the proposed directive on AI liability has been withdrawn from the Commission's 2025 work programme (which can be found here), due to an absence of "foreseeable agreement," according to the Commission. It aimed to facilitate access to evidence for victims of AI-caused damages by establishing a "presumption of causality".
Similarly, the proposed ePrivacy regulation, aimed at strengthening online privacy protection — and replacing the ePrivacy directive — has been withdrawn from the Commission's work programme.
ADJUSTING • Henna Virkkunen, the Commissioner responsible for digital matters, has also hinted in a recent interview with the FT that further adjustments would follow. The AI code of practice, expected in April, should attenuate some of the reporting requirements compared to the obligations provided for in the AI Act.
Adopted in 2024 for application in 2026 (with some exceptions), the AI Act classifies technologies into three categories based on the risks they pose to human safety. The higher the risk category, the more stringent the obligations — particularly in terms of reporting — that AI companies must comply with.
On February 4, the European Commission also published guidelines for this regulation specifying AI practices prohibited in the EU, including social scoring systems, emotion recognition, and biometric categorisation, deemed to present "unacceptable risks" (the ban came into effect on February 2).
The Commission's objective is thus to maintain safety requirements in AI development while simplifying certain rules to enable Europe to close the gap.
"Around 70% of foundational AI models have been developed in the US since 2017 and just three US “hyperscalers” account for over 65% of the global as well as of the European cloud market," Mario Draghi recalled in his report on European competitiveness.
According to Mario Draghi, Europe should focus on certain strategic segments where its companies have the potential to become leaders. Mario Draghi particularly highlights autonomous robotics, where the EU holds 22% of global activity, as well as AI services, which account for about 17% of the market.
Inspired by these recommendations, the European Commission announced, as part of its "Competitiveness Compass," that it plans to implement a “AI Continent strategy”, aimed at grouping infrastructure, computing power, and technological expertise to foster the emergence of new AI models and applications. A specific regulatory framework for the European cloud should also see the light of day.
INVESTMENT • The Commission President, Ursula von der Leyen, announced at last week's summit a package of 200 billion euros to support AI in Europe.
In detail, 150 billion euros would come from the European AI Champions Initiative, a grouping of 60 European companies, including Spotify, Mistral, and Siemens. "This will be the largest public-private partnership in the world for the development of trustworthy AI," Ursula von der Leyen specified.
Of the remaining 50 billion, 20 billion would be allocated through a new programme, Invest AI, intended to finance four gigafactories dedicated to AI infrastructure in Europe. However, the actual share of public funding and the precise origin of these funds remain unclear.
For his part, Emmanuel Macron announced investments of 109 billion euros "in the coming years" in France, exclusively from private actors.
In Case You Missed It
TRADE • The Trump saga continues this week, with the EU in the crosshairs. On February 10th, Trump announced new 25% tariffs on aluminum and steel imports. This measure will take effect on March 12th.
On February 13th, Trump also announced a "reciprocal tariff" project, targeting trading partners with which the USA has a deficit in trade of goods: Japan, India, and the EU.
This measure seems surprising at first glance: average import tariffs to the US are 3.95%, surpassing the EU's 3.5% — applying strict reciprocity would not be in the US’ interest.
This is why Trump is not talking narrowly about reciprocity: the American administration also intends to reciprocate non-tariff trade barriers, such as the value-added tax imposed by the EU on goods sold in European territory, or the digital services taxes imposed by member states (which mainly affect tech multinationals).
These measures represent a turning point in US trade policy. While the United States has been moving away from WTO rules and paralyzing its dispute settlement body since 2019, the introduction of a general reciprocal tariff would be in marked opposition to the "most favored nation" clause.
This clause corresponds to the WTO's fundamental principle of non-discrimination, which requires states to apply the same tariff to all their trading partners — without necessarily offering them the same treatment as locally produced goods.
In response, the European Commission indicated in a statement that it would respond "firmly and immediately" to tariffs used to "challenge legal and non-discriminatory" European policies.
UKRAINE • On February 15th, during the Munich Security Conference, US Special Envoy for Ukraine and Russia Keith Kellogg stated that Europe would not participate in peace talks between Russia, the United States, and Ukraine.
This announcement comes as the United States unilaterally launched peace negotiations on the war in Ukraine, following a 90-minute phone call between Donald Trump and Vladimir Putin on February 12th. Neither Ukraine nor European leaders were consulted before this call.
Europe's exclusion from negotiations on ending the conflict in Ukraine has sparked strong reactions from European leaders.
Kaja Kallas, the European Union's High Representative for Foreign Affairs, insisted that no agreement concluded behind Europeans' backs can work. The President of the European Council and most European leaders, like Emmanuel Macron, expressed similar views.
The US has simultaneously sent a questionnaire to European capitals to assess the level of their contribution to security guarantees in Ukraine, particularly in terms of potential troop deployments on Ukrainian soil.
NATO Secretary General Mark Rutte stated for his part that Europeans must show their military and strategic capabilities if they want to have a say in negotiations.
As Ukrainian President Volodymyr Zelenskyy called for the creation of a European army to compensate for American disengagement, several European heads of state and government, as well as Ursula von der Leyen and Antonio Costa, met urgently on February 17th in Paris to discuss the strategy to follow regarding Ukraine.
Two main topics were discussed: sending European troops to Ukraine and increasing defence spending.
On the first initiative — initially proposed by Emmanuel Macron — Keir Starmer and Danish Prime Minister Mette Frederiksen showed openness. Conversely, the FT reports that Olaf Scholz declared it was an "incomprehensible" debate on the "wrong subject, at the wrong time" — a sentiment shared by Giorgia Meloni and Pedro Sánchez.
Regarding defense spending, however, a consensus seems to be emerging.
American and Russian representatives started face-to-face negotiations yesterday in Riyadh, the capital of Saudi Arabia, without European representatives.
After the first round of talks took place, Donald Trump called into question Zelenskyy’s legitimacy during a press conference, saying that it has been a “long time since we’ve had an election [in Ukraine]”. He also called into question Zelenskyy’s handling of the war, going as far as saying that Ukraine “should have never started [the war]”.
GERMANY • Friedrich Merz, president of the CDU — and expected to become German Chancellor following the legislative elections — has declared that he was open to reforming the country's debt rules.
During a TV debate, he acknowledged that the "debt brake" enshrined in the German Constitution — which limits annual structural budget deficits to 0.35% of GDP — could be subject to reform.
He also indicated that, under pressure from Donald Trump, defense spending of Europe's largest economy would likely reach 3% of GDP.
AUSTRIA • On February 12th, far-right party FPÖ acknowledged the failure of coalition negotiations with the conservatives. The main disagreements concerned relations with the EU, Russia, and international cooperation in intelligence matters. Such negotiations had already failed in early January.
Two options are now available to the Austrian president: organize new elections — where the FPÖ should strengthen its lead, according to polls — or a new attempt at a coalition between conservatives, liberals, and socialists.
What We’ve Been Reading
In the FT, John Paul Rathbone covers the International Institute for Strategic Studies’s finding that Russia’s military budget now oustrips Europe’s total (at purchasing power parity). Sylvia Pfeifer, Clara Murray, Silvia Sciorilli Borrelli, Leila Abboud, and Patricia Nilsson report on the challenge of scaling up the European defence industry.
This edition was prepared by Augustin Bourleaud, Nathan Munch, Antoine Langrée, Solène Cazals, Matteo Matuszewski, and Maxence de La Rochère. See you next week!
EU needs to learn to fight its own wars and defend itself. https://tinyurl.com/3j2swude