Can the EU balance safety and innovation before it’s too late?

The EU is actively working to balance safety and innovation, but it faces a tight race against global competitors and internal challenges. Recent developments show progress, yet gaps remain that could jeopardize its edge if not addressed swiftly.

EU Efforts to Balance Safety and Innovation

1. AI Regulation (AI Act): The EU’s Artificial Intelligence Act, adopted in March 2024 and published in July 2024, is the world’s first comprehensive AI regulatory framework. It uses a risk-based approach, categorizing AI systems by risk levels (unacceptable, high, and low) to protect health, safety, and fundamental rights while fostering innovation. High-risk AI systems face strict requirements, but exemptions for open-source and research purposes aim to avoid stifling creativity. Critics, however, argue that ambiguous definitions and rigid rules could hamper innovation, particularly for general-purpose AI and healthcare applications. The European Commission can refine this through delegated acts and guidelines, but implementation clarity by August 2026 is critical.
2. Innovation Performance: The 2025 European Innovation Scoreboard (EIS) highlights the EU’s steady progress, with a 12.6% increase in innovation performance since 2018, led by countries like Sweden and Ireland. Regional innovation has also grown, with 233 of 241 regions improving. However, a 0.4-point decline between 2024 and 2025 signals a slowdown, driven by reduced SME collaboration and R&D investment in some states. The EU’s New European Innovation Agenda and Startup and Scaleup Strategy aim to close the innovation gap with global leaders like the US and Asia, but bureaucratic hurdles and regulatory complexity remain obstacles.
3. Defense and Security: The March 2025 White Paper on European Defense Readiness 2030 and the ReArm Europe Plan propose €800 billion in investments to boost defense capabilities, focusing on AI, quantum tech, and cybersecurity. The Defense Readiness Omnibus (proposed June 2025) simplifies regulations to accelerate defense innovation while ensuring security. These efforts aim to enhance competitiveness and resilience, but coordination among Member States and funding allocation need streamlining to avoid delays.
4. Digital Transformation: The EU’s Digital Decade objectives, supported by the DIGITAL Europe programme (€7.9 billion) and initiatives like the Chips Act and European Digital Innovation Hubs, promote digital autonomy and innovation in semiconductors, AI, and 5G. The Gigabit Infrastructure Act accelerates high-speed network deployment, but critics warn that overlapping regulations (e.g., AI Act, Data Act, DORA) could burden businesses, slowing innovation.
5. Product Safety and Modernization: The proposed revisions to the General Product Safety Directive (GPSD) address modern technologies like IoT and AI, ensuring safety while granting market access for novel products. These changes aim to balance consumer protection with innovation but face debate over enforcement and regulatory burden.
6. Green Transition: The REPowerEU plan, backed by €45 billion from the European Investment Bank, drives renewable energy innovation (e.g., wind and solar) to meet 2030 climate goals. However, scaling green tech requires massive investment (€600 billion for wind alone) and simplified regulations to avoid bottlenecks.

Challenges to Timely Success

• Regulatory Overreach: The AI Act’s broad scope and potential overlaps with GDPR, DORA, and other laws risk creating a complex compliance landscape, deterring startups and SMEs. A sector-specific, adaptive regulatory approach could better balance risk and innovation.
• Global Competition: The EU lags behind the US and Asia in scaling innovation, particularly in deep tech and AI. The European Innovation Council’s €10 billion budget is a step forward, but funding allocation and bureaucratic delays hinder rapid deployment.
• Regional Disparities: While Northern and Western Europe lead in innovation, Central and Eastern Europe are catching up. However, 82 regions saw declines from 2023 to 2025, signaling uneven progress that could slow EU-wide advancements.
• Implementation Gaps: Policies like the AI Act and Defense Readiness Omnibus require consistent enforcement across Member States. Delays in harmonizing standards or clarifying guidelines could undermine trust and innovation.
• Economic Constraints: Geopolitical tensions, inflation, and fiscal consolidation pressures challenge funding for innovation. The ReArm Europe Plan’s €800 billion relies on coordinated national spending, which may face resistance.

Can the EU Succeed in Time?

The EU has the framework and ambition to balance safety and innovation, but speed is critical. The global race for technological leadership is intensifying, with the US and China advancing rapidly in AI, quantum tech, and green energy. The EU’s strengths—robust research, regional collaboration, and a commitment to ethical regulation—position it well, but it must act decisively to:

• Streamline Regulations: Clarify and harmonize rules like the AI Act to reduce compliance burdens, especially for SMEs and startups.
• Boost Investment: Accelerate funding through the European Innovation Council and REPowerEU, prioritizing high-impact areas like AI and clean tech.
• Foster Collaboration: Enhance public-private partnerships and cross-border cooperation to scale innovations efficiently.
• Address Disparities: Target support for lagging regions to ensure inclusive growth and maximize EU-wide potential.

If the EU can refine its regulatory approach, align Member State efforts, and sustain investment momentum, it can lead in ethical and innovative technology. However, delays in implementation or failure to address bureaucratic hurdles could widen the gap with global competitors. The next 12–18 months, particularly with the AI Act’s enforcement deadlines and defense funding rollouts, will be pivotal. The EU’s ability to act swiftly and cohesively will determine whether it balances safety and innovation before falling behind.