EUROPE-UNITED STATES: THE GREAT DIVIDE

As the suspense of the U.S. elections draws to a close, Europe’s challenges are just beginning. Regardless of who occupies the White House, the question remains: how can Europe halt its alarming drift from the U.S.? How can it assert influence in world affairs? How can it escape the 21st-century fate of being merely the battleground for the U.S.-China trade war?

A few figures are enough to highlight the now-gaping chasm across the Atlantic. In 2008, U.S. GDP stood at roughly $14.8 trillion, compared to $16.2 trillion for Europe, positioning Europe as the leader. But fifteen years later, the EU’s GDP (including the U.K.) has made little headway, reaching $19.8 trillion, while the U.S. has surged to $26.9 trillion—nearly double. Meanwhile, the average salary in 2023 is $52,800 in Europe compared to $77,500 in the U.S.

Europe is declining, while America, despite deficits (6%) and a towering $33 trillion debt (120% of its GDP, potentially reaching 200% by 2032), continues to grow three times faster than Europe. The dollar, the Pentagon, and America’s boundless research and innovation capabilities make the difference.

Yet, in 2000, the European Union set a lofty goal through its "Lisbon Agenda" to become “the world’s most dynamic and competitive knowledge economy” by 2010. A quarter-century on, the reality is grim: the American tech giants, or GAFAM, lead with towering market capitalizations—about $2.8 trillion for Apple, $2.4 trillion for Microsoft, and $750 billion for Meta or Tesla—compared to Renault’s $12 billion. The investment gap in artificial intelligence is stark: €1.7 billion in France in 2022 versus $47 billion in the U.S. Europe’s semiconductor production has also plummeted, from 44% of its needs in 1990 to just 9% today. In space technology, once Europe’s pride, it now lags behind SpaceX’s reusable rockets, which also dominate the low-earth satellite market—a strategic shift Europe failed to follow.

In response to similar shocks—the subprime crisis, then the pandemic—the U.S. emerged stronger each time, while Europe lagged behind. This has been intensified by protectionist measures initiated under Trump and expanded under Biden, notably with the Inflation Reduction Act of August 16, 2022: a $370 billion, ten-year tax credit package for the energy transition, which has drawn European companies to the U.S., where energy costs four times less than in Europe.

Brussels’ fervor for a rapid “greening” of Europe’s economy—positioning the EU as a global model—has only furthered its decline. Today, 90% of solar energy components and most wind turbine parts are made in China, as are electric vehicles that, while blocked by U.S. tariffs, are now flooding into Europe. As a result, Volkswagen is closing three plants in Germany, laying off 120,000 workers.

Germany, along with the rest of Europe, is sitting on a social time bomb but continues to look the other way. There is no indication that Brussels’ policies, which have failed for 15 years, will be enough to prevent the looming systemic crisis...

Pierre Lellouche
Opinion – VA – 10/30/24