The FT writes, the EU economy is in trouble, in large part because of continuingly lagging levels of competitiveness.
The headline numbers are stark. The European Union economy, in dollar terms, is 65% of the size of the US economy. That’s down from 91% in 2013. Per capita, US GDP is more than twice the size of the EU’s, and the gap is increasing.
Drill down into the details and the story is the same. Take the list of the global top 20 technology companies... or the world’s top universities... or semiconductor manufacturing capacity—Europe lags behind.
One big problem is that the outpouring of state aid and financial support from Brussels to European companies has radically altered the “level playing field” between countries and their businesses once guarded as the central pillar of the single market. To wit, EU state aid expenditure rose from €102.8bn in 2015 to €334.54bn in 2021. Between March 2022 and August this year, Europe approved €733bn in state support, according to unofficial commission figures seen by the FT.
That push has been exacerbated by a desire to speed up the continent’s green transition away from fossil fuels and to invest in new, low-carbon technologies. It is also a response to competing programmes such as Joe Biden’s $369bn IRA, and longstanding state support offered by Beijing to Chinese rivals.
One moment of truth for the EU was in the early 2000s, when the internet technology boom created dozens of major US conglomerates, but hardly any in Europe. In the decades since, EU companies have failed to come even close to the likes of Apple, Alphabet or Amazon, or challenge the scale of Chinese rivals such as Alibaba Group.
Now EU policymakers are very concerned that the next technology revolution—in artificial intelligence and quantum computing—will similarly pass Europe by and further widen the gulf with the world’s two economic superpowers.
Our Take: Some of the more savvy folks we follow recognized early on that the EU and UK effort to hype climate change—ie, the Paris accord—and then try to establish themselves as "world leaders" in all things green energy was rooted not so much in an altruistic motive to fix the climate but in a desperate effort to try to reverse the trends identified in this piece by the FT. Now that the bloom is falling off the energy transition rose, both the EU and UK are scrambling to catch up—after having fallen farther behind over the last several years chasing a green dream that was never meant to be.