It is a different approach to the biz class ("First" in the US). Then again, the market is different.

- In the US there are FAR MORE commuters than in Europe. Lots of consultants traveling Sun/Mon and back on Thu/Fri. A lot of these consultants are not allowed to book F; the clients make them buy Y. In order to get the loyalty of these consultants (many of which flying a RT pretty much weekly, and some of these trips can be coast-to-coast) airlines offer them free UGs, subject to availability. Europe does not have a significant market of traveling consultants that fit this pattern; there is little need to entice frequent flyers with upgrades.
- There aren't a lot of direct flights in the US. Yes, there are hubs, but not that many of them. In Europe there are far more direct flights. A lot of the intra-EU flying is between capitals, and since most countries have some national airline then it follows that there is a direct flight option. In many cases biz travelers will take the direct flight. Less choice means less motivation to entice elites with upgrades.
- Upgrades to intra-EU biz are hardly and upgrade. As far as the flight itself all you get a slightly better meal. First class in the US has better seats. In Europe you get lounge access; not in the US. So the airlines in the US offer a better flying experience by offering upgrades at little marginal cost. In Europe, the flying experience would not be significantly better, and there would be additional cost because of the lounge access.
- I don't think that US airlines present a desirable model when it comes to domestic UGs. Very few people actually buy domestic F; most elites expect to get upgraded.