Europe’s economy is a cause for concern, not panic

As Europe debated EU GDP EU GPTEU EUa single currency three decades ago, its politicians hoped to reverse a worrying trend: America’s economy was growing faster, poised to leave Europe in its wake. In 1994 the 27 countries now in the had a combined just shy of their transatlantic rival’s, adjusted for purchasing parity. Two spurts of frothy growth in America followed by one spectacular bust in 2008 conveniently left the European economy back where it began—at around 97% of America’s size. More surprisingly, the protracted euro crisis culminating in the early 2010s, which hobbled Europe just as America discovered how to frack vast oil deposits, also did little to change the situation: by 2016 the ratio was still 97%. Surely the America-first bombast of Donald Trump, covid-era turmoil, the emergence of trillion-dollar tech firms in America and the return of war on the European continent (with an energy crisis to boot) would consign the near-parity to the annals of economic history? Not so. The finished 2022 with annual output a little over 96% of America’s. It is at the same level in the age of Chat as it was at the time of cassette tapes.The comparison is both worse and better than it looks for Europe. Its overall economic growth has been juiced by poor ex-communist countries such as Poland and Romania as they caught up with the rich world, while western European ones including France and especially Italy have flagged. The is home to many more people than America, so its citizens are on average about 30% worse off than New Yorkers or Texans. But as America’s population has risen by a quarter since 1994, while ageing Europe’s has grown far less, the two economies are in fact somewhat closer in terms of income per person than they were at the time of Bill Clinton and Jacques Delors. Factoring in working hours, which are both shorter and on a steady decline in the , leaves European workers with even less to blush about. Put very simply, the French and their neighbours toil a third less than Americans, earn a third less, and are a lot more tanned by the end of August.