For almost twenty years, Europe has been falling behind — not as the result of a temporary cyclical shock, but as the outcome of a cumulative and structural process. The comparison with the United States is now unambiguous: while the U.S. economy regained a sustained growth trajectory after the 2008 financial crisis, Europe appears stuck in a regime of persistently low growth, with lasting economic, social, and geopolitical consequences.
Since the global financial crisis, real U.S. GDP has grown at a markedly faster pace than that of the European Union. As a result, the American economy has expanded roughly twice as fast as Europe’s over the period, creating a gap of more than 20 percentage points in GDP.
Growth is not merely an economic variable. It determines fiscal capacity, investment in research, defense, and infrastructure — and therefore, in the long run, global power itself: the ability to protect living standards and uphold one’s values.
A Growing Productivity Divide
The divergence is also visible in GDP per capita. In the early 2000s, Europe stood close to U.S. levels. By 2024, GDP per capita in purchasing power parity terms reached roughly $75,000 in the United States, compared with around $55,000 in the European Union. This gap no longer stems primarily from differences in hours worked, which have remained broadly stable over the past two decades, but from a widening disparity in productive efficiency.
At the heart of Europe’s challenge lies insufficient productivity growth — more specifically, weak total factor productivity gains. These depend on incentives to innovate and take risks, on competitive market structures, and on the capacity to allow new firms to emerge while less efficient ones exit. In other words, on enabling “creative destruction” in the Schumpeterian sense, as formalized in modern growth theory.
Europe has suffered from a chronic deficit in these areas. Since the late 1990s, productivity growth has been significantly lower than in the United States, often close to zero in the euro area.
Innovation tends to be incremental rather than radical; markets remain fragmented; scale effects are limited; and incentives for risk-taking are insufficient.
The weakness of venture capital — particularly at the scale-up stage — combined with burdensome regulation and penalizing tax structures, leads many European start-ups either to sell prematurely or relocate abroad, fueling a silent outflow of technology and talent.
Structural Handicaps
These weaknesses are compounded by structural constraints: energy dependence, persistently higher energy prices than in the United States, critical dependence on rare earths, and chronic underinvestment in defense and key technologies.
The illusion of European “normative power” — the idea that Europe can shape global standards without sufficient industrial and technological leadership — collides with reality: standards ultimately follow market power.
The remedies are well known. They require acting more collectively and more swiftly. Institutional governance is at stake. They involve deepening the single market, particularly in capital, energy, and digital sectors; massively reducing intra-European regulatory barriers; and pursuing a more ambitious and risk-embracing innovation policy.
They also require faster reallocation of resources toward the most productive firms, greater labor mobility, and a decade-long investment effort spanning climate transition, defense, energy, and critical technologies — alongside a substantial upgrade in education and skills.
Ultimately, the issue is not merely economic; it is political. Without stronger and more durable growth — and therefore without the structural reforms that make it possible — neither Europe’s social model nor its ability to shape the global order can be preserved.