Europe’s economy is a cause for concern, not panic

As Europe debated a single currency three decades ago, its politicians hoped to reverse a worrying trend: America’s economy was growing faster, poised to leave Europe in its wake. In 1994 the 27 countries now in the EU had a combined GDP just shy of their transatlantic rival’s, adjusted for purchasing parity. Two spurts of frothy growth in America followed by one spectacular bust in 2008 conveniently left the European economy back where it began—at around 97% of America’s size. More surprisingly, the protracted euro crisis culminating in the early 2010s, which hobbled Europe just as America discovered how to frack vast oil deposits, also did little to change the situation: by 2016 the ratio was still 97%. Surely the America-first bombast of Donald Trump, covid-era turmoil, the emergence of trillion-dollar tech firms in America and the return of war on the European continent (with an energy crisis to boot) would consign the near-parity to the annals of economic history? Not so. The EU finished 2022 with annual output a little over 96% of America’s. It is at the same level in the age of ChatGPT as it was at the time of cassette tapes.