Keeping Germany in the AI Race

With the AI Act and the Data Act, Europe has positioned itself as a pioneer in regulating artificial intelligence and the data economy. These frameworks are designed to create trust, ensure security, and strengthen competitiveness. But one year after the AI Act entered into force, the reality in German companies looks very different: unclear rules and legal uncertainties are slowing down projects, delaying investment, and driving innovation elsewhere.

The promise and the reality of European AI regulation

On 1 August 2024, the European AI Act came into force, representing a milestone in the global regulation of AI. Its ambition: to establish uniform rules across the European Single Market while combining innovation with ethical responsibility.

Yet in the year since, the reality in German companies looks different from what European policymakers envisioned. According to the eco Industry Pulse, 41 percent of IT decision-makers cite unclear regulation as the biggest hurdle to AI deployment – ahead of security concerns (40 percent) and skills shortages (30 percent). Investment is delayed, projects remain stuck, and innovation is being driven elsewhere.

The AI Act is in force, but its practical implementation remains unclear. Companies are confronted with obligations such as employee training, risk assessment, and system classification – but they lack concrete standards, clear guidelines, and reliable contact points. The missing integration with the General Data Protection Regulation (GDPR) and the Digital Services Act (DSA), and the absence of practical guidance are hampering companies’ willingness to innovate.

This creates a growing backlog of innovation and weakens Europe’s position in the global AI race.

The risk of falling behind

Germany cannot afford to be merely a user of AI – we must become shapers. Yet while other countries are pushing ahead rapidly, Germany remains hesitant. The digital divide within the country is widening: while more than 70 percent of companies in western Germany already use AI, the figure in the east is only around 52 percent.

This development jeopardizes not only digital participation, but also Germany’s economic unity. AI must not become a regional privilege. If we want “AI made in Europe” to succeed, the technology must be accessible to companies of all sizes, industries, and regions.

Five levers for Germany’s AI breakthrough

AI is already transforming entire industries and areas of life: from factories to medical devices to town halls. But while other countries are picking up speed and implementing solutions, Germany is losing valuable time and remains stuck in the role of observer.

The question is not whether we regulate AI, but whether we manage to enable innovation at the same time, and ideally even accelerate it. Germany needs an AI strategy that inspires excitement for the technological future instead of fueling fear of risks. For this, companies now need legal certainty, investment incentives, and a high-performance digital infrastructure.

Five key levers are now crucial for Germany as an AI location:

1. Legal certainty instead of legal uncertainty

Clear rules are the prerequisite for confident investment. Open questions in the AI Act must be clarified, overlaps with existing regulations resolved, and real-world laboratories launched to test innovative AI solutions in secure environments.

2. AI supervision with an understanding of business practice

Supervision must support innovation, not suffocate it in bureaucracy. The proposed German Federal Network Agency (BNetzA) as the central authority, supported by a permanent advisory board that involves all relevant stakeholders is the right approach. To avoid contradictory requirements, clear coordination between authorities is essential. SMEs in particular need straightforward points of contact, consistent processes, and practical guidance so that regulations are applied uniformly and effectively.

3. Unleash innovation

Germany needs investment incentives and funding that reach companies of all sizes. Tax advantages, smart funding programs, and AI skills development for the workforce will accelerate adoption and prepare employees for the future of work.

4. World-class digital infrastructure

AI requires robust foundations: high-speed networks, modern data centers, and affordable, reliable energy. Without these, even the best regulatory frameworks remain ineffective.

5. Administration as an AI pioneer

Public authorities must lead by example. By adopting AI in their own processes, they can set practical standards, act as anchor customers, and create a stable market for innovative AI solutions.

The urgency of these levers becomes even clearer when looking at the current growth prospects for Germany’s Internet industry.

Growth boom at risk

Based on a recent study by Arthur D. Little on behalf of eco, the Internet industry shows both the opportunities and the risks ahead. Revenues are forecast to rise from €245 billion in 2025 to €389 billion by 2030 – almost 10 percent annual growth. But this trajectory is at risk of stalling if Germany fails to deliver the necessary digital foundations. Demand for computing power and fast networks is set to triple over the next five years, while the IT connection capacity of German data centers will only grow by around 50 percent. Without reliable, affordable electricity, faster approvals, and coordinated investment in infrastructure, the industry risks a supply gap that could undermine AI adoption and weaken Germany’s digital competitiveness.

The Data Act: Opportunity and risk

While the AI Act focuses on the responsible use of artificial intelligence, the Data Act tackles the fuel behind it: access to and use of data. Together, they will decide whether Germany can both regulate and innovate at scale.

On 12 September 2024, the European Data Act was enacted, designed to boost Europe’s data economy through fairer access, stronger user rights, and more competitive data markets. Yet in Germany, national implementation remains pending. Without swift action, German companies risk losing ground. To avoid this, five similar core requirements need to be outlined:

• Streamlined supervision with BNetzA as the central authority, and the clear responsibility of the German Federal Commissioner for Data Protection (BfDI) for data protection issues related to companies.
• Sanctions with a sense of proportion: Differentiated and proportionate fines, clear distinction from the GDPR, and a possible moratorium for SMEs and start-ups at the beginning of the application period.
• Support, not just control: The public authorities should also act as a point of contact for companies and provide practical recommendations for action.
• Europe-wide legal certainty: Address overlaps with the GDPR and the Data Governance Act (DGA), develop guidelines and use the planned Data Code as a central solution.
• Dispute resolution: Establishment of independent dispute resolution bodies modeled on the Telecommunications Arbitration Board.

Without quick and coherent implementation, Germany risks missing out on the momentum the Data Act was meant to deliver.

From regulation to innovation

Europe has shown that it can set global standards. But frameworks alone will not secure our digital future. What matters now is the ability to act: clarity in regulation, speed in implementation, and the political will to support innovation.

Companies need legal certainty, modern infrastructure, and reliable points of contact in government. Otherwise, many will only react in “emergency mode” after threats or crises instead of being able to innovate strategically.

Germany must not become the place where strong European ideas fail in national implementation. Instead, we must seize the opportunity to shape the AI-powered future ourselves.

Conclusion: Act now

The convergence of AI adoption, distributed infrastructures, and emerging threats requires decisive action. The opportunities are enormous – AI is transforming entire industries and areas of life, from factories to doctors’ offices to town halls. But we can only seize these opportunities if we create the right conditions now.

Policymakers must cut complexity, provide clear guidance, and deliver the infrastructure that businesses – especially SMEs – need to compete. Legal certainty, innovation-friendly frameworks, strong infrastructure, and practical support are not optional: they are prerequisites for Germany’s digital future. Only if we reduce complexity, strengthen trust, and create AI-ready infrastructure will we be able to make “AI made in Europe” a genuine success story.

The time to act is now. Let us ensure that Germany does not remain an observer, but becomes a shaper of the AI-powered future. Let us make AI and automation the driver of competitiveness, digital sovereignty, and shared prosperity.

Oliver Süme is a partner and co-head of the international Technology Sector Group at Fieldfisher, specialising on Technology, Data Protection and IT Law. He has more than 25 years of experience in these areas, advising his clients in all legal areas covered by IT and digitalization, in particular in international Data Protection Law and in the area of Artificial Intelligence, IT contract law, as well as in legal issues relating to Cybersecurity, IT Security, and E-commerce. His clients include technology companies, the public sector and, in particular, international life science companies. Among other things, he recently advised the German Federal Ministry of Economics and Technology on the development of the European cloud and data project "Gaia-X". He is Chair of the Board of the eco Internet Industry Association and Chair of the Data Economy Committee of the European Internet Service Providers Association (EuroISPA) in Brussels.