Issue #13 - December 18, 2025

Six Months That Reshaped EU Tech Policy: A Retrospective

I launched this newsletter in early July 2025. At this time, D. Trump was shaking up a decades-long consensus on global trade. But what was at stake for the EU was way more than a trade deal, it was the EU tech policy conducted over the past decade.

When the EU signed its trade deal with the United States on July 28, 2025, European leaders presented it as a victory—tariffs reduced from 30% to 15%, a trade war averted. But the terms told a different story: the EU committed $600 billion to the US economy and $750 billion in energy purchases, while US chip exports faced no tariffs. German Chancellor Merz called it "significant damage." French PM Bayrou termed it a "dark day."

Six months later, that assessment looks prophetic. What seemed like a one-time concession has revealed itself as the opening move in a sustained pressure campaign that has fundamentally altered the EU's approach to tech regulation. The second half of 2025 hasn't just been about policy adjustments—it's been about watching the EU's regulatory ambitions collide with geopolitical reality.

Theme 1: From Regulatory Sovereignty to Managed Retreat

The July trade deal was supposed to settle the question of EU regulatory autonomy. It didn't. Within weeks, Trump posted on Truth Social that countries with "Digital Taxes, Legislation, Rules, or Regulations" would face "substantial additional Tariffs" unless these "discriminatory actions are removed." The trade agreement, rather than providing stability, had established the EU's vulnerability to ongoing pressure.

The pattern that followed was remarkably consistent. In October, the European Commission announced preliminary findings that Meta and TikTok were in breach of DSA compliance. The EC's digital spokesman felt compelled to argue that "when accused of censorship, we prove that the DSA is doing the opposite." Europe was now justifying its own regulations rather than confidently enforcing them. Questions immediately arose about whether the EU would actually follow through with fines, given that doing so would reopen difficult trade negotiations.

By November, the European Commission revealed the Digital Omnibus package—probably the most consequential regulatory shift of the past decade. The package substantially weakens GDPR's constraints on AI by allowing legitimate interest instead of consent for training AI models. This means companies can use personal data without asking for permission, instead offering opt-out mechanisms. The change even extends to special categories of data—race, religion, sexual orientation—that were previously heavily protected. For Big Tech companies like Meta, Google, and Amazon already sitting on massive datasets, this represents an immediate competitive advantage. For EU startups, it provides regulatory relief. But the timing is telling: these are precisely the concessions US companies and the Trump administration had been demanding since summer.

The progression reveals a bloc no longer shaping the tech policy conversation but reacting to external threats, making concessions without extracting reciprocal commitments, and hoping each retreat will be sufficient to avoid the next escalation.

Theme 2: The Innovation-Regulation Paradox Deepens

September marked the one-year anniversary of Mario Draghi's competitiveness report. The report outlined €800 billion in annual investment gaps and called for the EU to take innovation far more seriously.

A year later, it remains difficult to cite any major recommendation being implemented. The contradiction has become acute: the EU is weakening its regulations under pressure while failing to build the innovation capacity that might actually restore competitiveness.

Consider the contrast. ASML's €1.3 billion investment in Mistral AI was celebrated as a major political victory—and it is significant. But Mistral's €11.7 billion post-money valuation exists in a different universe from OpenAI's $500 billion or Anthropic's $183 billion. Meanwhile, US tech companies plan to spend over $300 billion in capital expenditures in 2025 alone. NVIDIA's $100 billion commitment to OpenAI for data center capacity dwarfs Europe's entire AI infrastructure ambitions.

The gap isn't just financial—it's strategic. Marc Andreessen and David Sacks, prominent Silicon Valley VCs with direct influence on the Trump administration, now openly mock European tech policy. In a November podcast, they joked about the EU's approach: "They do everything they can to strangle them in their crib, and then if they make it through like a decade of abuse of small companies, then they're gonna give them money to grow." Sacks added Reagan's line: "if it moves, tax it, if it keeps moving, regulate it, if it stops moving, subsidize it. The Europeans are definitely at the subsidize it stage."

This isn't just trash talk—it's diagnostic of how influential US tech voices view Europe. A16Z has published tech policy principles that explicitly contradict EU approaches, starting with the precautionary principle. They advocate for minimal federal AI regulation and use the China threat to argue that EU rules prevent US companies from competing effectively. In this framing, Europe has become an annoying partner that handicaps the US's technology race with China.

The EU's response? The Digital Omnibus removes regulatory barriers but offers no corresponding innovation strategy. There's no coordinated compute infrastructure investment. No talent retention strategy when European AI researchers flee to San Francisco. No explanation for why European pension funds invest in US tech stocks instead of European startups, or why the EU has produced zero $100 billion tech companies in the past decade.

The dangerous part isn't that GDPR needed adjustment—it probably did. It's that the EU is giving away regulatory leverage without securing the innovation investments needed to actually compete. As one analysis put it: the omnibus is all stick removal, no carrot addition.

Theme 3: Youth Protection as Microcosm of EU Dysfunction

Perhaps no issue better illustrates the EU's structural paralysis than online youth protection. Denmark assumed the EU Presidency in July with explicit promises to make significant progress on protecting youth online. Six months later, the results are underwhelming—especially when compared to Australia's decisive action.

The contrast is stark. In December, Australia implemented one of the world's strictest social media bans: no user under 16 can open an account, with enforcement beginning immediately. The law forced platforms to finally implement facial age estimation and ID verification at scale, demonstrating that such technical measures are feasible when platforms face serious regulatory consequences.

Meanwhile, the EU remains fragmented. Denmark itself made more progress at the national level than through its EU Presidency, launching a legislative process to ban social media below age 15 with parental exemptions from age 13. At the EU level, Denmark secured the Jutland declaration—a text signed by most member states but empty of concrete measures. The declaration stresses the need for "more reliable age verification tools" and acknowledges the EU should explore whether measures are needed to complement the DSA, essentially admitting there's no clear legislative agenda with consensus.

The Danish Presidency, European Parliament, and Commission have floated the idea that the Digital Fairness Act—currently in consultation stage—could fill the gap. But if youth regulation is introduced through the DFA, enforcement is years away. An eternity given the stakes, especially as early research shows the deceptive impact AI chatbots can have on young users.

This pattern—member states pursuing national agendas because they don't believe the EU can succeed in the short term—confirms a broader dysfunction. The EU has responsibility to lead on cross-border digital issues, but member states won't cede the necessary authority. The result is a patchwork of national approaches that consistently fail to create effective pan-European legislation.

What the Next Six Months Require

The second half of 2025 revealed something fundamental: the EU's tech policy framework, carefully constructed over the past legislative term, is operating in a radically different geopolitical context than the one it was designed for. US pressure isn't going away. The innovation gap isn't closing. Member state fragmentation isn't resolving.

The question entering 2026 isn't whether the EU needs to change its approach—that's already happening. The question is whether those changes represent strategic repositioning or simply managed decline. The difference hinges on whether regulatory adjustment gets paired with serious innovation investment, whether member states can overcome national interests for EU-level solutions, and whether European leaders can articulate a coherent vision for technology governance that works in Trump's Washington.

Six months ago, the trade deal looked like a one-time accommodation. Today it looks like the beginning of a much longer renegotiation of what European tech policy can actually accomplish.