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In 2023 the US economy posted a very strong growth of 2.5% to reach 21.50 trillion $ in Real GDP. On the other hand the Eurozone economy narrow expanded by 0.2% while the German economy actually shrank by 0.3% due to the massive decline of the industrial production and simultaneously they face a 18 billion € budget deficit for the first time in many years. The same story is going to take place this year as the IMF predicts that the American economy is on track to expand by another 2.1% but the Eurozone economy will have another weak year with just a 0.7% Real GDP progress. At the same time the UK economy has never recovered since the 2020 as their economy is going to stagnate for second consecutive year with just a shy 0.4% growth. Many economists believe that European economy could suffer from lost decades similar to Japan during 1992-2012 era
To have a better eye in 1990 the Eurozone / USA real GDP ratio was at 87% but in 2023 this ratio has dropped to just 61% as the Euro area has never fully recovered since the 2009-2014 crisis and at the same time they suffer so hard due to the energy crisis which started almost two years ago after the Russian invasion in Ukraine.
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I've trimmed back my international allocation a couple yrs ago. Will reconsider, as USA enters a new term (2025), and nothing significant to building our business economy has been implemented or considered. But the over burdensome regs will kill the profitability and investment growth of many employers in the coming yrs.
One big issue is the cost of doing business in the EU - the regulatory framework employed there tends to make it more expensive to do business and to give fewer degrees of freedom for the business to develop & execute plans.
Take Italy. At the end of any employment contract, even for just cause and resignations, employers in Italy must pay the “Trattamento di Fine Rapporto” which is a severance pay of an employee's all-time received salary divided by 13.5. It is an extra cost to the employer of ~7% per month.
The added costs of doing business in the EU, at the margin, discourage large employers from investing. Lower investment means lower long term productivity and lower long term GDP.
Very true. The US innovates, China replicates and the EU regulates.
I have not seen the EU chart of GDP to Gov't spending, but I'm pretty sure its worse.
I bet if you find a list of government spending as % of GDP most of the lower values will be from very poor countries that are not recognized for innovation or strength of private industry.
The divergence looks a bit different if you look at Purchasing Power Parity and output per hour worked. As others have noted, population growth helps skew the US numbers.
We do have some advantages in the US which include a large single market of over 330 million people and a large pool of capital to fuel our tech sector. We also have vast internal sources of energy and do not have to worry about the Russian bear getting in the way like the EU countries do.
Last edited by Astral_Weeks; 02-12-2024 at 11:36 PM..
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