INSIGHTS | March 2025
Analysis of the Macroeconomic Situation in Europe
Europe urgently needs to implement important structural reforms to improve competitiveness and boost growth
Author
Dr. Philip Schnedler
At the Start Summit 2025 at the University of St. Gallen, our founder and CEO, Dr. Philip Schnedler, was invited by b2venture to give a presentation on «Analysis of the Macroeconomic Situation in Europe». The presentation analyzes how Europe has fared compared to the US over the past decades, the reasons for Europe's weak growth, and the levers Europe needs to pull to get back on track and increase its own competitiveness.
Summary
Europe has grown much more slowly than the US over the past twenty years. While the US has averaged real economic growth of 2.1% per year over this period, Europe has achieved only 1.3%, or 62% of US growth. In recent years, Europe's relative growth weakness compared to the US has actually increased. The presentation shows that Europe's lower growth has three main causes: i) lower productivity growth in Europe; ii) a stagnant or declining labour force in Europe, while it continues to grow in the US; iii) a more expansionary fiscal policy in the US, thus boosting growth through additional demand. The presentation also analyses how industrial production, which is important for Europe and Germany in particular, has developed and what this has to do with China's rapid rise in the production and manufacturing of industrial goods. In order to increase growth in Europe and improve Europe's competitiveness vis-à-vis the US and China, the following measures in particular are needed: raising productivity, increasing investment (including in better education, modern infrastructure and robust defence), reducing consumption-oriented government spending, increasing energy supply and thus reducing energy prices, and substantially reducing bureaucracy and over-regulation in Europe.
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