Earlier quoted context omitted.
i think the article is deliberately written to be confusing
Maybe, but maybe the legislation also is: "What if an open source project is used directly by consumers, and causes them harm? The public policy is clear: they must be compensated. Does it matter if they signed a license or didn’t pay someone? Their business is bankrupt, their files are in a hacker’s hands, or their own customers are suing them. Someone should be strictly liable. But who? The EU is grappling with tha…
I only skimmed the OP and doubt it's intentionally confusing, but it is confusing because its prediction of doom is wacky. Manufacturers (eg developers of IoT devices, the insecurity of a major impetus for the legislation, apps, etc) will need to adopt modern development practices such as updating their dependencies when a vulnerability is known -- and that includes manufacturers that wrap a mostly open source codebase in a final product or monetise an open source codebase in various ways called out in the legislation.
Yes if a consumer is harmed by a completely open source thing not placed on the market, say something in Debian, they will not be able to sue the developers, and the developers aren't subject to fines etc under the CRA. That's the balance intended by the legislation (after lots of attempts to get it right), to not wreck incentives to develop open source, but to make product developers more responsible. In other words, the public policy is not exactly as you state it. :)