Is Europe’s economy a case for concern, not panic? In 1994, when 27 European countries gathered and formed the EU, they had a big concern. The European economy was apparently glowing slower than the United States economy. They feared that this low growth would eventually diverge the size of the European economy more than that of the United States. And leave Europe like a third world region compared to the US.
However, 15 years later, two rounds of unbacked growth in the US, followed by the financial crisis of 2008, which impacted the United States harder, left Europe’s economy where it had begun, around 97 percent of the United States economy. More surprising, in the beginning of 2010s, as the United States started to drill out vast amounts of Shale oil, Europe experienced a currency crisis, but in 2016 the EU economy was still 97 percent of the US economy. And 6 years later, after the Donald Trump experiment, the rise of Mega tech companies In the United States and of course the Covid pandemic, the EU economy ended 2022 with 96 percent of the US economy.
The growth in the EU is not harmonized of course. The economic growth has been juiced by poor ex-communist countries such as Poland and Romania, while the rich countries like France and Italy have lagged behind. Europe is the home for more people so on average, europe citizens are on average 30 percent worse off than New Yorkers and Texan. However, since 1994, the United State’s population has grown 25 percent. On the other hand, the old population of Europe grew slower. Therefore, nowadays, the per capita income of European households is closer to that of the United States compared to 1994, when the union was founded. Accounting for working hours, the weekly work hours has been on decline and European workers currently work less hours compared to their American counterparts. French workers simply work a third less, earn a third less and spend a lot more time on the beach!
Despite all the doomsayers, the standard of living of Europeanworkers has been maintained in the last three decades and they also have much more free and leisure time compared to Americans. However, there are warnings for Europe, the aging population, the rise in the age dependency ratio has been increasing and in the coming years the old age population and pensions can cause serious problems. Besides that, if Russian cheap energy is gone forever, many energy intensive industries of Europe may never recover and this would definitely impact the economy in a negative manner.
Source: Economist
