What if Europe’s fiscal largesse were as generous as America’s?

IT CAN BEGDPEUEUGDPEUEUGDP, easy to forget that Europe might reasonably be expected to outperform the American economy. True, population growth in the former is slower. But because Europe remains far less integrated than America—politically, economically and culturally—it has room to exploit efficiencies that the latter has already realised. And because parts of Europe remain economically underdeveloped (nominal per person in Bulgaria, the ’s poorest member, is roughly a quarter of that in Mississippi, America’s poorest state), the scope for rapid catch-up growth in poorer places is substantial. Yet Europe has struggled to realise its potential in the 21st century. Chronic underperformance is now more or less taken for granted; the experience during the pandemic, and the likely recovery from it, could reinforce its reputation for mediocrity. But a dose of American-style stimulus—more appropriate to economic conditions in Europe anyway—could change that. From 2000 to 2007 the ’s economy (excluding Britain) grew by a decent 2.1% per year, on average, while America’s grew by 2.5%. Alas, the comparison has never since so flattered the Europeans. They lost ground after the global financial crisis, having stumbled through a secondary debt crisis. On the eve of the pandemic, in the was only 12% above its 2007 level; American output was 22% higher. Then, in 2020, covid-19 took nearly 8% off the ’s almost twice the decline in America. Looked at in purchasing-power-parity terms, Europe’s economy was roughly the same size as America’s in 2000. It limped into 2021 7% smaller.