Europe's AI Act Is Nearly Live, but Its Tech Sector Is Still Chasing Scale

The EU AI Act's headline obligations for general-purpose AI models are due to apply from 2 August. The argument around them is no longer about whether Europe should write AI rules. It is about what those rules cost, and who pays.

That argument surfaced in public at the TNW Conference in Amsterdam on 20 June. European Commission officials and tech executives shared a stage and, at times, plainly disagreed. The Commission's message was that the rules are still being finished, not abandoned. Eoghan O'Neill, a senior policy officer at the Commission's AI Office, said the Commission planned to finalise its rules for general-purpose AI models in July. The European Parliament would then adopt its position on the standards.

"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 described the drafting process as a broad code of practice exercise. Its members come from major 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 delay pressure is real. TNW reported 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. O'Neill addressed the delay question directly. He said the Commission still intended to finalise the GPAI rules in July.

For Europe's own AI companies, the timing is awkward. They are being asked to absorb a new compliance regime at the same moment they are trying to grow into global players, in a market where the numbers are already lopsided.

A scale problem, not just a rulebook problem

Fabrizio Del Maffeo, CEO of Netherlands-based chip company Axelera AI, put the regulatory complaint in blunt terms. "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 to create a standardised legal entity for startups that would make it easier to operate across EU member states. The idea would sit under the bloc's 28th regime, a pan-European legal framework designed to help startups expand throughout the union. In a speech at the Davos economic forum 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 fixation on launching new startups needs to be balanced against a focus on scaling existing ones. That, he said, requires capital more than policy.

The data he cited is stark. Europe accounts for just 8% of the world's scaleups, compared with 60% in North America. No EU-founded startup in the past 50 years has surpassed a €100bn valuation. Europe, in other words, is good at starting things and poor at keeping them.

"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."

Peter van der Putten, director of the AI Lab and lead scientist at software firm Pegasystems, made a similar point about investment. He said the EU needs to become more attractive for both domestic and international capital. The funding gap, as TNW reported it, is large: European startups raised about $52bn (€44bn) in venture capital last year, far less than the $209bn (€177bn) their US counterparts attracted.

"Investment could come from the EU, but also from the US," van der Putten said. "Regulations could be adjusted to make it easier and more attractive for funding that's leaving the US to flow into Europe."

That is a different framing from the one usually offered by the AI Act's defenders. It treats the regulation not as a safety floor to be defended at all costs, but as one variable in a competitiveness equation that Europe is currently losing.

The talent pitch, and the modesty problem

Europe's pitch to the AI industry has also leaned on people, not just rules. 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 a better 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.

De Reus also made a cultural argument that sits awkwardly with the push for more European champions. "We're also maybe a little bit too modest," she said. "We should measure happiness, not GDP, which is not a sustainable metric. I don't think we should copy and paste the American system."

That tension runs through the whole debate. The Commission says it wants to get the rules right. Executives say the rules, plus fragmented markets and thin late-stage capital, are making it harder to build companies big enough to matter. Both can be true. That is precisely why the August deadline matters less as a legal event than as a signal.

The AI Act's general-purpose AI obligations were always going to be the hardest part of the law to land, because they touch the models that everything else is built on. The Commission's July timetable, followed by Parliament's position on the standards, will determine how strict the first version is. Stakeholders who wanted a delay, including CCIA Europe and the executives named in TNW's report, will be watching whether the final text leaves room for model providers to operate across borders without treating each member state as a separate compliance exercise.

What is not in dispute is the gap in outcomes. Europe has the research base, the industrial customers and, in Del Maffeo's telling, world-leading positions in machine building and robotics. What it lacks, by its own figures, is the scaleup layer that turns those strengths into large private companies.

That is the context in which the AI Act will be judged. If the rules land in July and the standards follow through Parliament, Europe will have a regulatory framework that is, by international standards, unusually detailed. Whether it also has companies large enough to be regulated under it is a different question, and one the Act cannot answer.