Europe has long looked across the Atlantic at the US economy with a mixture of horror and awe. The EU population would not accept the health and social inequalities in America, but it wishes it could be as rich as the US. That tension was amplified in 2023 when the US economy grew 3.1 per cent in the year to the fourth quarter, dwarfing the 0.2 per cent the EU managed. As Americans revel in unexpected economic strength, France feels forced to cut back public spending and Germany frets about recession.
Over a longer period, European performance is both better and worse than people tend to think. It is not correct to say, as the European Council on Foreign Relations did last year, that the US economy is now more than 50 per cent larger than the EU’s economy, having been smaller in 2008. Those figures rely almost entirely on exchange rate movements. But it is true and fair to highlight 2008 as something of a turning point. Before then, the EU (excluding the UK) had a larger economy, and now it is about 10 per cent smaller.
But the reasons for this change are nuanced. Much of the difference before and since has come from a more rapidly rising US population. Real gross domestic product per head grew 53 per cent between 1995 and 2022 in the US, compared with 47 per cent in the EU.